Bridgepoint Education Shares Dropped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of for-profit education company Bridgepoint Education (NYS: BPI) were getting schooled by the bears today as they fell as much as 10% in intraday trading on more dour regulatory news.

So what: Bob Dylan's cold black cloud has been coming down on the for-profit education sector for some time now as the U.S. government has started cracking down on abuses of government education funding. Late yesterday, the U.S. House of Representatives proposed a cut in funding for federal Pell Grants, which provide funding for lower-income students. The proposal would stop funding for Pell Grants for students going to school on less than a half-time basis as well as students who don't have a high school diploma.

Now what: That the government was previously funding higher education for students without a high school diploma is, well, interesting. Notably, a proposal is obviously not the final word, so it's quite possible that Pell Grant funding won't actually be cut. However, the proposal does remind investors that the government is serious about cracking down on education-funding issues and that the publicly traded for-profit education companies will have to find their footing in a world where school funding doesn't flow like wine at an Italian wedding.

Does that mean you should rush to sell? I'm not so sure that it does. With shares trading at less than six times trailing earnings, investors have obviously priced in significant risk already.

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At the time this article was published The Motley Fool owns shares of Bridgepoint Education. Motley Fool newsletter services have recommended writing puts in Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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