RPT-UPDATE 3-Corinthian profit misses, shares slump on aid woes

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* Q4 EPS $0.38 vs est $0.39

* Revenue $482.7 mln vs est $477.1 mln

* Sees Q1 EPS $0.38-$0.41 vs est $0.45

* Sees Q1 pro-forma student growth 0-2 pct

* Shares drop 16 pct to 10-year low (Adds details from conference call)

Aug 20 (Reuters) - Corinthian Colleges Inc COCO.O, reeling under high student loan default rates, posted lower-than-expected quarterly profit and indicated some of its colleges might lose federal aid, sending its shares to their lowest in a decade.

The company’s weak results come amid the Obama administration’s call for a broad overhaul of the for-profit education sector, criticized for turning out poorly prepared and debt-heavy students.

Earlier this week, the U.S. Department of Education’s data on student loan repayments showed most for-profit schools, including Corinthian, could lose federal aid, spooking a sector already concerned about increased regulatory scrutiny.

Stung by the impact of the proposed regulations, the company said it was no longer enrolling students who have a greater chance of defaulting on their loans at some of its colleges.

Such students accounted for nearly 15 percent of its total student population of 110,580 during the fourth quarter.

On a conference call, Corinthian said the move would reduce its fiscal 2011 full-year revenue by about $120 million -- about 6 percent of the projected total of $2.02 billion.

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Corinthian, which operates the Everest Colleges, has been slowing student enrollments as a result of rising defaults and bad debt expenses and said it expects first-quarter pro-forma new student growth of less than 2 percent.

This is a far cry from the 20-25 percent new student enrollment growth the company saw during the recession as people returned to school for better degrees.

Bad debt expense was 5.1 percent of revenue for the fourth quarter.

Shares of the Santa Ana, California-based company, which have tanked about 73 percent since their year high in September 2009, plunged as much as 17 percent to $4.46 on Nasdaq, a 10-year low.

Shares of bellwether Apollo Group fell more than 2 percent, mirroring a similar drop in the broader S&P 1500 Education Services sub-index .15GSPEDUS.

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Corinthian, which offers diploma and associate degree programs in fields such as healthcare and business, said cohort default rates have increased “substantially” for its 2009 batch of students.

Cohort default rate is the percentage of a school’s students who default on their loans within the second year of starting their federal loans repayment program.

The company said up to three of its 49 colleges would exceed the 25 percent federal loan default threshold for three consecutive years, thus losing Title IV student loan entitlements for three years.

For the fourth quarter ended June 30, Corinthian reported earnings of 38 cents a share on revenue of $482.7 million. Analysts were expecting earnings of 39 cents a share and revenue of $477.1 million.

Enrollment of new students in the fourth quarter rose 18.2 percent to 34,486.

For the first quarter, the company expects to earn 38-41 cents a share on revenue of $492-$502 million. It expects new student enrollment growth of 11-13 percent.

Analysts, on average, had forecast first-quarter earnings of 45 cents a share on revenue of $491.2 million, according to Thomson Reuters I/B/E/S. (Reporting by Megha Mandavia in Bangalore, Editing by Ian Geoghegan)