i bought quite a bit of this at 55 and i agree the risk reward is in the longs' favor but I think your reasoning is over simplified.
The fear is a far more than 25% hit to earnings. If ESI is forced to cut tuition cost by 15% to give students a better value that 93.2 million (MRQ) in income is reduced by 60 million to 33.2 million. The problem with dropping tuition is fixed cost remain the same but revenue drops. This equates to a new EPS/year of ~ $3.95. At a traditional P/E of 15x (which is about right going forward since growth is slowing) that gives you a price of $59; that efficient market is a cruel lady isn't she?
The market has prices in a revenue drop of 15% and cost remaining fixed. As a value investor you have to ask yourself, is this reasonable or overblown. Everything I have read about the company suggests the 90-10 ratio is going to remain in the 70's and the company is going ahead business as usual.
I'm not too worried about ESI because unlike Apollo with 95%+ government backed loans ESI stays in the 70% range and finances through their own financial institution. The company has also realized very little detriment to business as a result of the bad press. I'm willing to bet ESI will continue as usual and should be valued at 15x eps.