Greenberg: Using Apollo as a Window into Washington Post
Earnings Wednesday from University of Phoenix parent Apollo Group
could be provide a peek at what make be at stake for Washington Post’s investors in few weeks.
It’s unclear, of course, what the companies will report, but this much we know:
As controversy at for-profits schools accelerates, some are taking proactive steps to weed out students most likely to dropout.
This fall University of Phoenix rolled out a three-week orientation program to roughly half its new enrollees. So far the company says, 20 percent of the students in the orientation don’t enroll in classes. The impact, so far, has been lower guidance on 2011 margin.
Washington Post’s Kaplan Higher Education has taken the idea one step further, letting students attend actual classes and withdraw after three to five weeks for any reason.
This is a big deal for the Washington Post because Kaplan Higher Education represents 39 percent of Washington Post’s revenues and 80 percent of its operating profit.
“During that time period a student may withdraw for any reason,” Kaplan CEO Jeff Conlon says. Students won’t be charged tuition or submit financial aid paperwork until after the trial period, at which point Kaplan will also assess if they are school-worthy. “We want to measure everything to see what’s working and what’s not working, including whether they’re attending classes, “keeping up with assignments, active with online chats, doing the working and turning it in on time.”
In an 8-K filing, Washington Post said this change “will likely have a significant impact on the future operations of Kaplan Higher Education, including student enrollment and retention and the associated tuition revenue.”
How significant? “Short term,” Conlon told me, “it will have a drop-off in student enrollments. We’re basically giving students an incentive to withdraw.”
If all goes well, he says, this should ultimately (whenever that is!) lead to more enrollments as students opt for schools with trial. “We truly be differentiated in the marketplace,” he says.
He went so far as draw a distinction between Kaplan’s trial and Apollo’s orientation. At Kaplan, he said, the students will be “in credit earnings courses as opposed to the University of Phoenix, where it’s an introduction class.”
The upshot, he says, should eventually be significantly lower default rates. “Our defaulters are students who drop,” he says. “Students who graduate pay back their loans.”
The industry, no doubt, will be watching. So will investors.