Say this for Washington Post: When reality hit regarding the impact of changes in rules that relate to for-profit education and its Kaplan Higher Education unit, the company wasted little time getting ahead of the curve.
Like many for-profit schools, Kaplan has been under fire for taking students it shouldn’t have. To counter the criticism but also to ensure it can remain eligible for federal loans, Kaplan in recent months rolled out a program that lets prospective students do a trial run for free. The idea is to let them see if they can hack it, before they commit to a loan.
The results, disclosed today along with fourth-quarter profits: Twenty-eight percent of the students on the trial program in the quarter dropped out, but mostly because Kaplan kicked them out because of their “lack of academic progress during the period.”
The impact can be seen on new student enrollments, which fell by an astonishing 47 percent in the quarter from a year earlier. Part of that decline, the company said, is the result of dropouts; the rest is tied to changes in marketing and admissions practices stemming from new Education Department rules.
Either way, the bottom line is this: Operating income for Washington Post’s Education segment tumbled by 18 percent in the quarter, but was down just 3 percent for the company as a whole.
The quarter, in an odd way, was saved by the TV broadcasting and beleagured newspaper divisions, which performed substantially better than expected, with puffed-up profits from cost-cutting (in newspapers) and improved advertising (in broadcasting).
My take: This hard reset is what happens when a company takes the bitter pill. In for-profit education, that means off-the-cliff new enrollments. Washington Post is not the only company to do something like this, but it still remains more the exception than the rule.
Where Other For-Profits Stand:
Education Management Corporation
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