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Higher-education stocks pared earlier gains Friday after the U.S. Department of Education said it is seeking public suggestions to revise regulations, which may pressure recruiting and employment policies at for-profit schools.

During a conference call Friday, Deputy Undersecretary Robert Shireman said he's seeking input on whether a planned committee should change regulations on the way incentive compensation for recruitment officers operates.

Shireman also said another interest of the committee is to redefine its regulation on gainful employment and recognized occupation, which both call on for-profit institutions to find employment for a certain percentage of their graduates in the area in which they were trained.

The conference call comes after the Office of Postsecondary Education at the Department of Education on Tuesday announced in The Federal Register that it intends to convene a committee to revise regulations to maintain or improve a program that covers the administration of the federal student financial aid programs. It also announced that the committee will meet in three locations in June and will "begin negotiations in September 2009."

In a research note published before the DOE's call, Wedbush Morgan analyst Ariel Sokol said he believes that investors are mostly concerned with potential changes to the incentive compensation of enrollment counselors. He added some investors are concerned that market-funded postsecondary institutions may not be able to sustain current growth rates if enrollment counselors are no longer incentivized to achieve new start thresholds. The call was also seen to give investors some insight regarding the Obama administration's stance on market funded post-secondary institutions.

On Friday, shares of Apollo Group Inc. (APOL) rose 4.7% to $59.10, after earlier rising as much as 6%. Shares of the company, which has a market capitalization of $9.3 billion as of Thursday's close, have fallen 18% in the last three months as investors have grown concerned the Obama administration wants to impact the regulations that govern the educational sector.

Other education stocks also pared their gains. Shares of Strayer Education (STRA) ended up 2.7% to $184.27, and Career Education Corp. (CECO) added 2.9% to $20.08. DeVry Inc. (DV) shares rose 3.5% to $43.57.

Signal Hill Group analyst Trace Urdan said the earlier gains in education stocks Friday were short covering as investors jumped ahead to buy shares before Shireman gave his position about for-profit education institutions. He added investors, for the most part, have been concerned about Shireman, as many have perceived him to be this "bad guy who is out to get the for-profit [schools]."

Shares of education stocks pulled back from their earlier gains as Shireman didn't give a clear position on for-profit education stocks, and instead gave a "nuance answer" by saying that there are good and bad guys in every sector, said Urdan, recalling the conference call.

He also said that investors appear concerned about the numbers of pauses Shireman took after each analyst's question. "The fact that he hit the mute button, which is not a normal practice in earnings calls, I think kind of really alarmed people," said Urdan, who added, at one point, he thought the call was disconnected.

Meanwhile, Sokol said Apollo shares rose earlier above its competitors "because the liquidity in the stock tends to be the vehicle to play the education space," adding people very much view Apollo almost as if it is an exchange-traded fund. He also said that education stocks have been trading down substantially in the last couple of days on fears of the regulatory environment.

Over the past several months, there has been much speculation regarding the potential for the introduction of damaging regulatory changes to the industry, particularly after the Obama administration sought to end the Federal Family Education Loan Program, or FFELP, said Sokol.

-Aja Carmichael, Dow Jones Newswires; 201-938-5218; aja.carmichael@dowjones.com