The move fit with Graham’s overarching corporate strategy, he says now.
“The challenge of a company is what you do with the money you make,” he says.
The Post Co.’s investments in Kaplan proved astute and timely. In 2001, its newspaper revenue declined year over year for the first time in at least a decade as advertising began to migrate to new, online competitors.
A new administration
The Kaplan push into higher-education programs also coincided with a fortuitous political sea change in Washington.
In the 1990s, the government barred for-profit education companies from paying recruiters based on the number of students they enrolled. The idea was to discourage misleading promotion tactics. Fearing the schools could become diploma mills, the government also required schools to offer half their courses on physical campuses.
But Republican George W. Bush appointed a new team at the Education Department. One of its key players was Sally Stroup, assistant secretary for postsecondary education, who had been a lobbyist for the biggest for-profit education company, Apollo Group. Soon the agency eased regulations, allowing companies to reward recruiters based in part on the number of students enrolled, or as one government report later called it, “asses in classes.” Like others, Kaplan made enrollment incentives one element of employees’ compensation. Stroup did not respond to request for comment.
Congress also made a change that helped spur enrollment. In 2006, Rep. John A. Boehner (R-Ohio) — then House majority leader and a major ally of for-profit education companies — pushed through legislation that lifted federal loan restrictions for online-only schools.
For Kaplan and other for-profit educators, the federal money soon came in torrents. By 2009, students at for-profit education companies received $26.5 billion through these loans, more than five times the amount they collected in 2000. At Kaplan, Title IV revenue soared from $101 million in 2001 to $1.46 billion in 2010, when the money accounted for 82 percent of the company’s higher-education revenue. Government education grants and loans to veterans who were enrolled provided still more.
The Post Co. realized there were risks attached to being dependent on federal dollars for revenue — and that it could lose access to that money if it exceeded federal regulatory limits.