Capella plans layoffs as falling enrollment cuts into bottom line

Enrollment is off at Capella

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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