Feb 19 (Reuters) - Shares of ITT Education Services Inc ESI.N fell 17 percent Thursday, a day after the education company said its default rates will increase due to a change in laws governing federal student loans.
If default rates continue to rise, schools run the risk of losing their eligibility to participate in certain federal loan programs.
According to a regulatory filing, ITT Education reported that its Federal Family Education Loan (FFEL) or Federal Direct Loan (FDL) student loan default rate range for 2007 was 9.7 percent to 15.3 percent, compared with 5.5 percent to 12.9 percent in 2006.
2007 is the most recent year for which the U.S. education department has published preliminary cohort default rates. It was.
Student loan or cohort default rate is the percentage of school’s borrowers who enter repayment on certain FFEL or FDL loan programs during a federal fiscal year and default or meet other specified conditions prior to the end of the next fiscal year.
Paul Foster, options strategist at the website theflyonthewall.com, said other stocks in the sector are also likely down “possibly on the same theme.”
Shares of the ITT Education, which competes with companies such as Corinthian Colleges Inc COCO.O and Apollo Group Inc APOL.O, were down $17.33 at $107.00 late Thursday afternoon on the New York Stock Exchange.
The S&P Education Services Index .15GSPEDUS was down 8 percent. (Reporting by Amulya Nagaraj in Bangalore and Doris Frankel in Chicago; Editing by Amitha Rajan)