How Team Obama is Wreaking Havoc on The Washington Post

The Obama administration is cracking down on for-profit colleges for tempting students into taking (and defaulting on) student loans. One company that's suffering is The Washington Post Company, whose profits have long been coming from its Kaplan educational unit, not the newspaper. In the Business section of Sunday's Post, reporters Steven Mufson and Jia Lynn Yang explored the tension, but the real grist came at paragraph 13 (inside the section's front page):

One past director of The Post Co.’s board said that members were better versed in media than education but that the lure of big profits was hard to resist.

Another, Dick Simmons, president of the company when it acquired Kaplan, said, "At a time when the largest part of The Washington Post Company, the....newspaper, was sinking, sinking, sinking, and here this relatively new player...was growing, growing, growing — how do you think anybody would react to that?"

The Post Co. reacted the way many companies do when things are going well: by doubling down, and then doubling down again, ramping up the number of students enrolled in Kaplan.

Along the way, The Post Co.’s reliance on federal student loan money grew. 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.

Public money means public accountability, and critics said Kaplan fell short. Two-thirds of Kaplan’s students drop out before graduating. In Kaplan’s largest unit, nearly one-third default within three years of leaving the school. But Kaplan notes that only a small percentage of its graduates default.  

Now, the story revealed, there are seven Kaplan employees for every newspaper employee. Paragraph 10 explained "The company was snared in a government sting that found Kaplan employees pushing students to take on loans without regard to whether they could afford them. It has been hammered by congressional critics, sideswiped by hedge fund investors and investigated by journalists. In the end, The Post Co. reluctantly conceded it would have to revamp Kaplan’s business model and turn away many prospective low-income students it once wooed. "

Mufson and Yang see a role for ideology in government as a part in both Kaplan's boom and bust. Lobbyists for for-profit colleges worked in the Bush administration; anti-profit watchdogs were brought on in the Obama administration for a crackdown. All this made Post Company executive Donald Graham look like a corporate lobbyist against the liberals, quite a change from this mother's crusade against Nixon:

Graham has taken part in a fierce lobbying campaign by the for-profit education industry. He has visited key members of Congress, written an op-ed article for the Wall Street Journal and hired for The Post Co. high-powered lobbying firms including Akin Gump and Elmendorf Ryan, at a cost of $810,000 in 2010. The Post has also published an editorial opposing the new federal rules, while disclosing the interests of its parent company.

One person sent by The Post Co. in the late 1980s to scout for higher education companies to buy — he recommended against making any acquisitions — said the idea was “to avoid these types of conflicts.”

But Graham sees no conflict between his public rallying for Kaplan and the mission of the newspaper he inherited. He says he’s defending Kaplan just as his company — and his mother, Katharine Graham — went to bat for the newspaper when it pursued the Watergate scandal or printed the Pentagon Papers, the top-secret history of the Vietnam War. 

The only giggle in this long article was Don Graham trying to assure people that large compensation packages at Kaplan weren't out of the corporate mainstream, and then Graham insisted on his modest compensation:

“Companies across the United States, including Yahoo and AOL, were offering enormous amounts to talented young people,” Graham says. In contrast, while Graham receives millions in dividends from his Post stock holdings, he drives a Buick and has drawn an annual salary of $400,000 for the past 20 years.  

That's not exactly a farmboy's wages.

Tim Graham's picture

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