Obama Approves Restricted Growth at For-Profit Colleges (EDMC, COCO, DV)

The Obama administration Thursday approved regulations restricting incentive-based sales practices at for-profit colleges in the U.S. "These new rules will help ensure that students are getting from schools what they pay for: solid preparation for a good job," Education Secretary Arne Duncan said in a statement.According to a Bloomberg report, "The rules, published online today, ban colleges from paying recruiters on the basis of the number of students they sign up, establish guidelines for course credits, and require schools to notify the government of new job-training courses, the U.S. Department of Education said yesterday in a statement. The package affects for-profit and nonprofit universities, and is scheduled to take effect in July."Shares of for-profit education companies are up broadly today. Education Management Corp. (NASDAQ: EDMC) is up 4%, to $12.17, Corinthian Colleges, Inc. (NASDAQ: COCO) is up 1.7%, to $5.41, and DeVry Inc. (NYSE: DV) is up 2.2%, to $46.75.The rule package "closes the Bush-era loopholes that allowed this industry to expand predatory recruiting practices that mislead students, and is an important first step toward protecting the billions of taxpayer dollars invested in for- profit colleges," said Iowa Democratic Senator Tom Harkin, in an e-mailed statement. Harkin heads the Senate education committee and called for the GAO investigation.The Bloomberg report notes that "The new rules include the definition of a credit hour, which the government will use to determine how much financial aid students are eligible for. The definition is based on a measurement known as a Carnegie Unit, and calls for a credit hour to represent at least one hour of class time and two hours of homework a week."