More Selective For-Profits

For-profit colleges have had a rough year. Strengthened federal regulations, bad press and a slumping economy have led to steep declines in new student enrollments at most of the publicly traded institutions — a dip of 47 percent for Kaplan Higher Education, for instance, compared to last year.

Revenues are also mostly down — way down. And the industry probably has yet to hit bottom, according to recently released corporate earnings statements. But observers said a few for-profits that have taken the biggest hits, particularly Kaplan and the University of Phoenix, have done so at least somewhat voluntarily, and could be in better shape down the road than a few of their peers that are sticking to established business models.

Kaplan and Phoenix are trimming back their incoming classes to become more selective. Both institutions recently began new programs that make it easier for unprepared students to leave without taking on debt, and for the universities to show them the door.

"It has cost us some financially," Matthew Seelye, Kaplan's chief financial officer, said of the institution's debt-free trial period, which is called the Kaplan Commitment. "We ultimately do believe it will be a differentiating factor."

Financial analysts and even critics of the for-profit industry praised the Kaplan Commitment, as well as the free, three-week student orientation Phoenix began as a pilot last year and later put in place for large numbers of students.

Jerry R. Herman, who analyzes the for-profit-college sector for the investment firm Stifel Nicolaus, said the two companies had taken an innovative approach to improving student outcomes. He said other for-profit institutions have begun programs with similar retention goals, and that the enrollment shake-up could be good for the industry.

“This is in some ways a very painful process,” he said, “but a very helpful one as well.”

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