Bridgepoint Education shares gain as loan default rates not as bad as expected

Bridgepoint Ed shares gain on loan default data

NEW YORK — Shares of Bridgepoint Education Inc. rose Wednesday after the online education company announced three-year cohort default rates for its schools that were not as bad as investors feared.

On Tuesday, San Diego-based Bridgepoint said the preliminary three-year cohort default rates for its Ashford University division were 8.8 percent in 2005, 6.1 percent in 2006 and 17.4 percent in 2007.

The Department of Education released the cohort default rates — the percentage of a school’s borrowers who default on federal student loans in the two years after the borrowers were meant to start repaying the loan — on Monday.

Investors were expecting the 3-year rates to double the 2-year rates released in September.

The 2-year cohort default rate for Ashford in 2007 was 13.3 percent — so the jump to 17.4 percent was better than the 26.6 percent expected, said Wedbush Morgan analyst Ariel Sokol.

Schools can lose access to federal student loan programs if the 2-year rates rise above 25 percent for three years straight or if they rise above 40 percent for one year.

The Department of Education will not release the 3-year rates officially until 2012, and will not impose sanctions on 3-year rates until 2014.

Shares in Bridgeport rose 86 cents, or 5.9 percent, to $15.45 in afternoon trading.