Friday, November 12, 2010

Washington Post is an education company

The above link is to a NY Times article on the Washington Post Company. According to the article most of the companies profits come from its Kaplan subsidiary. Most of you probably associate Kaplan with its SAT prep courses. It also runs an online college and most of the growth in Washington Post Company profits comes from the online college. It turns out that only 28% of the students who matriculate at Kaplan pay back their government subsidized student loans. This is well below the 44% rate that is expected from the government subsidized student loan program. The Department of Education has proposed changes in the program that would essentially close the Washington Post Company's profit engine. In response to this problem the Post has spent $350 million lobbying Congress to protect its financial interests in Kaplan. Apparently, the effort has been successful in winning support from influential GOP members of Congress.

Although there is nothing wrong with a newspaper owning an online college, and there is no law against lobbying Congress, I find this troubling. The Post is one of our most widely read newspapers, and it is regarded as one of the most influential papers in the country because of its access to political leaders in the capital. It strikes me as a potential conflict of interest for the Post to be lobbying Congress on behalf of its subsidiary. It also seems like a bad investment for the taxpayer and for the students who enroll in Kaplan. We are subsidizing a program that turns out students who lack the skills needed to acquire a job that would permit repayment of their loans. I wonder how the Tea Party crowd would react to GOP support for using taxpayer dollars that primarily benefit the Washington Post Company.

I was surprised to learn that the total amount of money flowing into student loans exceeds the dollar value of residential mortgage loans. Colleges like Kaplan may be analogous to sub prime mortgage lending. Unlike mortgages, however, which are non-recourse, it is very difficult for those without the ability to pay to get rid of their student loan obligation.

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