For-profit crackdown may hurt WaPo

Bob Moon Aug 6, 2010
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For-profit crackdown may hurt WaPo

Bob Moon Aug 6, 2010
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Kai Ryssdal: Remember that riddle from when you were a kid — what’s black and white and red all over? The answer, if you spell red R-E-A-D, is — everybody now — a newspaper. Funnily enough, if you spell R-E-D today, it’s also newspaper. The share price of the Washington Post Company tumbled deeply into the red — R-E-D — today down almost 8 percent. The losses came despite huge gains in quarterly profits for the big publishing and TV company. It’s all about plans to limit the growing amount of federal financial aid that’s paid out to for-profit colleges. Confused?

Here’s the explanation from our senior business correspondent Bob Moon.


Bob Moon: This might come as news to all but the savvy investor: Most of the Washington Post Company’s earnings in recent years have come from its for-profit higher education unit, Kaplan.

Trace Urdan is senior research analyst at Signal Hill Capital Group. He says that’s why the Washington Post warned today the ongoing congressional focus on for-profit colleges could really hurt its bottom line.

Trace Urdan: More and more, it’s becoming an education company as the newspaper business is becoming a smaller piece of the pie.

Kaplan University and several other schools were recently investigated by the Government Accountability Office. And the agency’s Gary Kutz told a Senate hearing this week the industry needs to clean up its act.

Gary Kutz: Representatives from 13 colleges gave our applicants deceptive or questionable information about graduation rates, guaranteed jobs or they exaggerated future earnings.

Lawmakers are proposing a tighter rule on aid to profit-making schools. Analyst Trace Urdan says they’d have to meet certain graduation percentages, and tie the likely earnings of a graduate to their loan amount.

Urdan: In the case of Kaplan, they could both be having to raise their admission standards, at the same time that they may have to be lowering their prices.

Urdan says that’s bound to cut admissions, and he questions the end result.

Urdan: It’s one thing to say the for-profit schools have been sort of preying on these people. But the reality is that there’s no other place for them to go. If you would have them go to community colleges, the problem there is, instead of the student being on the hook, the taxpayer’s on the hook, right?

Urdan says community colleges are subsidized by state and municipal taxes, and he points out they’re all out of money.

I’m Bob Moon for Marketplace.

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