The Washington Post vs. The Education Department

The Washington Post (WPO) couches it in investor-relation-press-release language, but there it is: The Obama Education Department, at the behest of short-sellers, is getting ready to punish for-profit colleges (including the Washington Post Company's Kaplan University) whose students take advantage of the Obama administration's own debt forbearance programs:

The Company's public comments will include, among other technical concerns, its belief that the currently proposed Gainful Employment NPRM is drafted in such a manner that it disproportionately impacts schools with students from low socio-economic backgrounds. For example, the proposed regulation defines repayment to include only payments of loan principal made by students during the last fiscal year. Borrowers who are meeting their legal obligations but are not currently repaying principal – such as those who are paying interest only, or those whose loans are in deferment or forbearance – would not be considered to be in repayment. Further, students who have consolidated their loans are counted as a negative in this calculation of "repayment." This narrow definition of repayment also penalizes schools whose students are participating in the income-based-repayment plans championed by the Obama administration.

The Company estimates that Kaplan's institutional repayment rates would be roughly 20 to 30 percentage points higher if it were not penalized for student participation in these government-sponsored debt management programs.

In a sense, the Washington Post is just getting what it asked for when it editorialized in favor of the federal takeover of student loans as part of health care "reform." The newspaper said then:

It's no government takeover. Opponents would make it appear as though Democrats want bureaucrats to destroy a functioning private market for federally backed student loans. In fact, the only reason any private company is in the business of originating such loans is because of government support, and propping up that artificial market is expensive. In the end, it's a better deal for taxpayers to have the government lend money directly to students.

Post Company board members, who include Warren Buffett, Melinda Gates, and Columbia University's Lee Bollinger, should ask the author of that editorial whether he or she really thought that the government would take over the student loan business without using the opportunity to impose onerous conditions on the colleges that educate the students financed by the loans.

Talk about bureaucrats destroying a functioning private market, look at what has happened to Washington Post Company stock, which was trading above $500 a share in May, and now, mainly because of the proposed Department of Education regulations, has declined to about $315 a share. Anyone who shorted it made a lot of money, but it's a scary thing when some bureaucrat's proposed regulations, along with short-seller-generated press coverage, can shave nearly 40% off the value of a serious publicly traded company like the Washington Post.