College Guide

Blog

April 11, 2011 5:59 PM Kaplan Excuses

By Daniel Luzer

Money2.jpg

Oh, Washington Post, this Kaplan thing is getting a little awkward, isn’t it? Now the paper finally addresses it, almost.

In 1985 the Washington Post Company bought Kaplan, then a test-preparation company, for about $40 million. Since then Kaplan has mushroomed into an education company with a huge for-profit college, Kaplan University. Some 87.5 percent of Kaplan University’s revenue comes from federal financial aid. In 2009 Kaplan, Inc. accounted for 58 percent of the Washington Post Company’s revenue.

Kaplan is also a profit line with some rather questionable practices. More than 30 percent of former Kaplan students default on federal student loans.

Florida began investigating Kaplan for deceptive financial aid practices and misleading statements by recruiters. Former students and employees sued the school, arguing that the school was deceptive and engaged in legally questionable activities. In November journalists uncovered a Kaplan manual instructing admissions personal to enroll students by exploiting their “fear, uncertainty, [and] doubt.”

The Post, someone understandably, wasn’t all that eager to investigate this story, though in August the Post Company’s Donald Graham began to lobby Congress to try to prevent it from instituting a rule to prevent for-profit schools from saddling students with high debt.

“They aimed at the bad actors and they wound up scoring a direct hit on schools that service low-income students. That cannot be what the Obama administration wants,” Graham complained.

But now, apparently, this is getting too big to ignore. On Sunday the paper published a story about the trouble the Washington Post is having lately with Kaplan. The 5200-word article by Steven Mufson and Jia Lynn Yang looks into the business side of Kaplan.

By the end of 2010, more than 90 percent of revenue at Kaplan’s biggest division and nearly a third of The Post Co.’s revenue overall came from the U.S. government.
Despite the slowdown, Kaplan remains the largest part of The Post Co.’s business. Its operating income in 2010 was up 70 percent, to $330.9 million, compared with 2009. But its profits will fall steeply and abruptly this year.

But the Post Company doesn’t seem terribly eager to make major changes or admit wrongdoing. According to the article:

“If we were guilty of anything, it was excessive optimism,” one senior Post executive said of Kaplan. “Did they sail too close to the wind? I think the wind was just blowing so incredibly strongly in their direction.”

Whoa, that sailing metaphor really puts things in context, doesn’t it? No, that’s not what you’re guilty of. “Sailing too close to the wind” isn’t actually an error.

The company is guilty of exploiting a rule about federal financial aid that allows it to legally funnel hundreds of millions of taxpayer-funded educational dollars into a relatively unprofitable media corporation. That’s what you did. And that’s what you’re continuing to do, because it’s a financial model that still works.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer