Kaplan higher-education division will close nine campuses and consolidate four others into existing nearby locations, the company said in a Securities and Exchange Commission filing.
The company, owned by the Washington Post, said it would stop new enrollments at the nine campuses it is closing, but that it would continue teaching the students currently enrolled there.
Kaplan's decision comes only a month after Everest College announced that it would close its Milwaukee campus less than two years after it opened. Everest's job placement rate in Milwaukee was a dismal 5% and its drop out rate over 50%. Everest has agreed to pay off the federal loans of all of its Milwaukee students who dropped out without completing their program of study.
Kaplan's parent company did not give a reason for its decision to close the campuses or identify them, but in an Aug. 7 SEC filing it disclosed that an accrediting commission had warned three campuses (in Baltimore, Indianapolis and Dayton, Ohio) that they could lose accreditation “for failure to meet certain student achievement threshold requirements” and had asked for the school to respond by September.
The loss of accreditation would mean the Kaplan campuses would no longer be eligible for Title IV loans from the Education Department, the source of nearly 90 percent of Kaplan higher-education revenue.
Kaplan was still a test-prep company when the Washington Post Company bought it in 1984, after Richard D. Simmons, the president, convinced Katharine Graham of its potential for expansion and profits.
Over the last decade, Kaplan has moved aggressively into for-profit higher education, acquiring 75 small colleges and starting the huge online Kaplan University. Now, Kaplan higher education revenues eclipse not only the test-prep operations, but all the rest of the Washington Post Company’s operations.
The Washington Post's Company chairman, Donald Graham, has emerged as the highest-profile defender of for-profit education.
Together, Kaplan and the Post Company spent $350,000 on lobbying in the third quarter of 2010, more than any other higher-education company. And Mr. Graham has frequently gone to Capitol Hill to argue against the regulations in private visits with lawmakers, the first time he has lobbied directly on a federal issue in a dozen years.
His newspaper, too, has editorialized against the regulations.
Four whistle-blower suits against Kaplan under the federal False Claims Act have been made public in the last few years, all making accusations that the company used deceptive practices in its quest for profits, including enrolling unqualified students and paying recruiters for each student enrolled, a practice forbidden by federal law.
In addition, the suits allege, Kaplan kept students on the books after they dropped out, inflated students’ grades and manipulated placement data to continue receiving financial aid.
Three of the suits, from Pittsburgh, Milwaukee and Miami, have been consolidated for trial in Miami. A fourth, from Las Vegas, is pending there.
The company said revenue at the campuses to be closed represent approximately 4 percent of total revenue for Kaplan higher education and 2 percent of the total Kaplan division, which includes other educational operations. The Post Co. said Kaplan expects to incur an estimated $18 million in restructuring costs, a portion of which would be recorded in third-quarter earnings, with the remainder recorded through the end of 2013.
Kaplan has about 70 campuses, and about a third of the division’s 67,605 students as of June 30 were on Kaplan higher-education campuses, with most of the rest of them studying through online programs.