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Publishing

UPDATE 1-Senators seek probe into education rule leak

(Adds TICAS comment)

BANGALORE, Nov 19 (Reuters) - Two Republican senators have asked the U.S. Education Department to investigate the alleged leaking by department officials of proposed rules aimed at tightening regulation of the industry.

In a letter to Kathleen Tighe, the department’s inspector general, Senators Richard Burr and Tom Coburn said publicly available documents show the department may have leaked the proposed ‘gainful employment’ rules to short sellers and others who support the department’s position.

Education Department spokesman Justin Hamilton said the department has operated with “transparency and integrity” throughout the rule making process.

The for-profit education sector, a major recipient of taxpayers’ money, has been criticised for failing to prepare students for job and leaving them with big debts.

(For a TAKE A LOOK on the industry: [ID:nSGE67G0IH])

The gainful employment rules call for schools to prove their ex-students are either paying back loans or are capable of doing so. If not, the schools will lose access to federal student aid.

In a letter dated Nov. 17, the senators cited a Freedom of Information Act request by Citizens for Responsibility and Ethics in Washington seeking details on communication between department officials and external individuals and organizations.

The department had not yet replied to that request, which was filed in July, the senators said.

They said The Institute for College Access & Success (TICAS), a higher education advocacy group, received on June 15 information about the proposed rules, which they forwarded to a group of individuals.

“This appears to be an attempt to deflect attention from the urgent need to curb waste, fraud and abuse in the for-profit sector,” TICAS President Lauren Asher said in an e-mailed statement, regarding the letter.

According to the department, TICAS did not get the information directly from the department, but received it through journalists, who had been given a copy of the rules under embargo.

Some reporters had contacted external sources for comment prior to the public release, according to the department.

Education stocks .15GSPEDUS have dropped 45 percent since late-April when the government first signalled its intent to put the industry under closer scrutiny.

Short positions in the stocks are high -- more than a quarter of the share float of Corinthian Colleges COCO.O, Strayer Education STRA.O and ITT Education ESI.N are shorted. (Reporting by A.Ananthalakshmi and Megha Mandavia in Bangalore, Editing by Ian Geoghegan)

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