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ITT suffers tough quarter on enrollment drop, loan losses

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ITT Educational Services Inc. swung to a loss in the fourth quarter as it recorded $71 million in charges related to private loans that students are struggling to repay. The poor quarterly results sent shares tumbling early Thursday morning, but they rebounded strongly later in the day.

The Carmel-based operator of for-profit colleges lost $9.5 million in the three months ended Dec. 31, or 41 cents per share. In the same quarter a year ago, ITT Educational earned $76 million, or $2.89 per share.

Revenue in the quarter plunged 18 percent from a year ago, to $300.8 million. That total badly missed the projections of Wall Street analysts, who predicted ITT would post revenue of $313.6 million, according to a survey conducted by Thomson Reuters.

Shares of ITT Educational plummeted early in the day, then shot back up into positive territory.

Shares fell as low as $11.69 each in the morning, their lowest intraday price since Jan. 26, 2001. They closed at $16.85, up 17.7 percent.

The shares closed Wednesday at $14.32 apiece, down 78 percent over the past 12 months.

The revenue declines were driven by falling enrollment. Enrollment has been hammered across the entire for-profit college industry over the past two years after the Obama administration and Senate Democrats scrutinized the industry and whether its high tuition costs pay off with good jobs for students.

ITT Educational's new student enrollment fell 11.4 percent in the most recent quarter to 13,398.

ITT has helped students afford its high prices—about $47,000 for a two-year associate's degree—by partnering with private lenders to give students even more loans on top of the federal loans they also use to enroll. ITT guaranteed repayment on thsoe private loans, and now that commitment is coming back to bite the company.

Earlier this month, ITT agreed to pay $46 million to Virginia-based student lender SLM Corp. to settle a legal dispute over the losses in a $180 million loan portfolio. ITT recorded $21.8 million of those charges in the fourth quarter.

But the bigger charges were for other private loan programs ITT set up in 2009 and 2010, which total about $441 million. The company said it set aside reserves for those programs of $66.1 million, on top of $20.1 million the comapny already had reserved to cover losses in the loan programs.

The charges confirmed the fears of analysts, several of whom downgraded the company's stock in the wake of its settlement with SLM.

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  • student loans
    Student debt is stunting the growth of the economy. Student loans have increased by 500% over past decade. As the next generation graduates from college, they are plagued by insurmountable debt that places demands on their income, limiting their ability to spend their earnings in ways that stimulate the economy. http://www.youtube.com/watch?v=mRA9ndc1pCM
  • ITT is the new IWHO
    When the words "for profit" and "college" are strung together in the same sentence, somebody is about to get fleeced.
  • ITT Qualifcations
    We have interviewed a couple dozen ITT "grads" over the years and found them to come up way short on being ready to employ. I an shocked to hear that it costs so much to go there for two years. The CA Comm College system is a much better model for advanced two year education at a fraction of this ITT cost.
  • Accountable
    The educational experience was always secondary to ITT making lots of money. Maybe this will help ITT focus more on the students actually graduating and finding gainful employment. Keep in mind ITT is one of the biggest players in "private" education. Think of all the smaller players, including beauty schools, that have used student loans to make a bunch of money in the past. These days may well be over, or at least drastically changed. Cracking down on these "for profit" schools is good for taxpayers.

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