Capella plans layoffs as falling enrollment cuts into bottom line

graduation.jpg
j.o.h.n. walker
Enrollment is off at Capella
Capella Education stock is taking a beating on the news that the Minnesota-based for-profit online education company is predicting a 35 percent drop in enrollment for the coming quarter.

That means 125, or 8 percent, of its nonfaculty employees are going to lose their jobs.

That's just business at Capella, part of a booming business trend in which students and their degrees are treated as clients and products, and managed with a cold eye on the bottom line.

Capella is also part of an industry whose operations have come under scrutiny for signing students up for federal student loans to maximize shareholder value, then producing graduates who flail around in the lousy economy and end up defaulting on the loans.

A Department of Education study earlier this month showed that Capella graduates had a 7.5 percent default rate. That's not great, but it's better than Duluth Business University, where more than one in four students has defaulted. At Brown College and the Minnesota School of Business, it's a 15 percent rate. At Rasmussen it's about 13 percent. By comparison, the University of Minnesota's Twin Cities' default rate is under 2.5 percent.

Capella CEO Kevin Gilligan promised his shareholders better value down the road.

"We are taking decisive action to respond and manage through these challenging conditions," he said. "This includes shifting our marketing mix to more effective channels, continuing to emphasize new product introductions, and investing in Capella's core strength and points of differentiation."

That's someone's education he's talking about.

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4 comments
Leroy
Leroy

very sad to see that a ceo making over 500 million needs to cut 8% of their employees to save 12 million...

EB
EB

It is important to note that NEW enrollment is projected down, not overall enrollment. Those numbers are two very different things! Their overall enrollment will be up. Please, either understand your information or present it correctly.

Frank Guzz
Frank Guzz

They should start with their HR management. Who announces lay off's 10 days in advance? That leaves the staff a lot of time to wait, worry, and give themselves an ulcer. It's a nightmare from a security standpoint. It leaves way too much time to plot and plan revenge.

Johnny
Johnny

I wonder what the grade rates and default rates at places like Academy College and Globe College/MSB are. The bottom feeders need to be looked at just as seriously as the 'big names'.

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