"There has been a squeeze on student loan lending, especially from these non-bank lenders," said Mark Kantrowitz, president of MK Consulting Inc., publisher of the student aid information websites FinAid and EduPASS. "Corinthian has a disproportionate amount of low-income borrowers, which have a greater tendency to default."
Investors brushed off the news, sending Corinthian's shares up 40 cents over the last two days to $8.19. Analysts said shareholders were encouraged by the company's assurance that Sallie Mae's decision wouldn't hurt earnings.
"We are confident we can arrange financing for the vast majority of incoming students," Corinthian spokeswoman Anna Marie Dunlap said in a statement Tuesday. The company declined requests for further comment.
Some Wall Street analysts agreed that the credit squeeze was surmountable because other factors were helping Corinthian and other commercial educators.
"If the job market is good, these people can work. If it isn't, they need to go back to school and get the skills necessary," said BMO Capital Markets analyst Jeffrey M. Silber. "This should be a great time for this company in this period of economic uncertainty."
Financial analysts said that some companies would be hit harder than others. The University of Phoenix, Strayer College and Capella University were expected to weather the change well because "they have very few sub-prime students. Their students are typically working adults. They have less exposure," said Amy Junker of Robert C. Baird & Co.
On Tuesday, DeVry Inc. said it had selected six financial services companies to make loans to its students and that it hadn't seen a "material impact" on enrollment.
"We are confident that these lenders not only provide superior products and services for our students, but also have the capacity to withstand the current credit and liquidity issues that are affecting some student-loan providers," DeVry Chief Executive Daniel Hamburger said in a statement.
Lynne Baker, spokeswoman for Career Education Corp., said that the company was sticking with a plan outlined Thursday, when Chief Financial Officer Mike Graham said it intended to finance some student loans on its own.
Student aid expert Kantrowitz said that no student should accept a private loan without first exhausting every other option for federal aid or grants.
He described private loan rates as "better than credit card debt, but not by much."
