Online-instruction leader to make key changes

Stocks tumbled across the sector, led by Apollo, which dropped $11.50, or 23 percent, to $38. Education Management Corp., DeVry Inc., Corinthian Colleges Inc., ITT Educational Services Inc., Career Education Corp., and Strayer Education Inc. all fell by double-digit percentages. Shares of newspaper publisher Washington Post Co., which gets the majority of its revenue from the Kaplan school chain, slumped 9 percent.

Apollo, the first of the sector to report quarterly results, also warned that it is close to maxing out how much revenue it can receive from federal financial aid resources.

Industrywide, for-profit schools get about 83 percent of their revenue from government-backed loans and federal Pell Grants, which go to lower-income students. Federal regulations cap that amount at 90 percent. If a school exceeds that limit for two years in a row, it might lose access to federal financial aid.

Apollo said it expects to top that level in 2012. Because the government only covers a certain amount of tuition, Apollo said it might have to raise tuition to reduce the percentage of aid it receives and stay within the 90-10 requirement.

That scares Joslin Jade Ellis, a stay-at-home mom from Prince George’s County, Md., and a student in the University of Phoenix’s online college classes. Her tuition is now covered entirely by a federal Pell Grant and other financial aid.

“It’s important for anyone who wants to go to college to at least have that shot,” said Ellis, who is taking health administration courses. “A lot of families can’t afford to send their kids to college, at least in this economy. And now, no one will even look at your resume unless you have some sort of college background or a degree.”

Former University of Phoenix student Glenn Moscoso finds the prospect of tuition increases alarming.

“In this economy and job market, isn’t raising tuition adding debt to a no-guarantee job market?” said Moscoso, who in April earned a master’s degree in education.

Moscoso, 40, said he chose the school because it didn’t require him to take the Graduate Record Examination, or GRE. He said he took out $19,000 in federal student loans and so far has not found a job—in part, he said, because of limited opportunities in his field, adult education.

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