The Washington Post Co. took a hit Monday on news that for-profit colleges run by the company’s cash cow, Kaplan Inc., would face severe restrictions under new rules from the Department of Education.
Kaplan, responsible for 67 percent of the Post Co.’s $92 million in second-quarter earnings, runs dozens of for-profit colleges nationwide, as well as pricey test-preparation classes and books.
The company’s colleges — as well as hundreds of others throughout the nation — are under fire from the Department of Education for saddling students with debt loads without concern about whether they will be able to pay it back.
Shares of the Post tumbled 8 percent to $315.65 on the news as stocks of for-profit colleges nationwide plunged. Strayer Education Inc., an Arlington for-profit university, dropped 18 percent to $163.26.
The Department of Education estimated that only 28 percent of former Kaplan students are repaying their loans, compared with 36 percent at for-profit colleges nationwide and 54 percent at public universities nationwide.
Arlington-based Strayer University had a repayment rate of 25 percent. Devry University, with several campuses in the Washington region, inched near the average with 35 percent.
Under the new rules, most schools that fail to have 45 percent of their former students in repayment would not be fully eligible for federal funds. They would be subject to limits on enrollment growth and would need to demonstrate employer support for their academic programs.
Officials at the for-profit colleges called the Department of Education’s numbers inconsistent with the universities’ figures and based on data that was hidden from the institutions.
The data “appears to us to be inaccurate … and potentially based on entirely arbitrary and, at least to me, not a sensible interpretation of its own draft regulations” with regard to loans, said Robert Silberman, chief executive officer of Strayer.
Silberman accused the Department of Education of unfairly penalizing for-profit institutions by not counting as “in repayment” loans that have been consolidated.
“It’s the Department of Education’s own website which encourages loan consolidation,” he said.
A statement from the Post Co. said the department’s proposed rules “disproportionately [impact] schools with students from low socio-economic backgrounds. … Borrowers who are meeting their legal obligations but are not currently repaying principal — such as those who are paying interest only or those whose loans are in deferment or forbearance — would not be considered to be in repayment.”
News of the potential restrictions came amid a wash of bad news for Kaplan and other for-profit colleges.
Earlier this month, Post Co. restricted admissions at two Kaplan colleges after a report by the Government Accountability Office found shady enrollment practices.
Neither have the schools had great luck selling themselves on student success. According to the National Center for Education Statistics’ “College Navigator,” only 23 percent of first-time students graduate from Kaplan University. At Devry’s Arlington Campus, about 21 percent graduate. Strayer bottomed out the trio with only 14 percent of first-time students making it to graduation.
