by Aaron Klemz

Jul 30, 2012, 2:33 PM

Capella University CEO gets paid while public money burns

Last week, CEO of Capella University Kevin Gilligan was rated the 4th most overpaid CEO in Minnesota for the mismatch between the financial performance of Capella University and his 2011 compensation of $2.5 million. If you factor in other aspects of performance like student loan repayment rates and the efficient use of public higher education funds, the real picture is even worse.

Like the rest of the for-profit college sector, Capella has taken a public relations hit as Sen. Tom Harkin and others have delved deeply into the financial and student performance of for-profit colleges. Monday, Harkin’s HELP committee released detailed data about 30 for-profit colleges, including data on Minnesota-based for-profits Capella, Walden and Rasmussen. There are hundreds of pages of detailed analysis to parse. When combined with other data, such as Capella’s own SEC filings and compensation figures for their executives, you get a pretty dismal picture of the social value of the for-profit college sector.

And now, a “Harper’s Index style” rundown of Capella’s vital numbers:

79%: Portion of Capella’s revenue that comes from federal student aid programs

$2.5 million: CEO Kevin Gilligan’s 2011 compensation

-35%: the percentage decrease from his 2010 compensation of $3.85 million

$1.26 million: CFO Steven Polacek’s 2011 compensation

+126%: the percentage increase from his 2010 compensation

$1,650: the amount Capella spent per student in 2009 on instruction (via IPEDS report from the Department of Education)

$4,538: the amount Capella spent per student in 2009 on marketing

$2,912: the amount Capella made in profit per student in 2009

$4.50: the amount Capella spent on marketing and made in profit per dollar spent on instruction in 2009

37,704: the number of 2011 Capella University students

$66.31: the amount per Capella student paid toward CEO Gilligan’s compensation

$99.72: the amount per Capella student paid toward the CEO and CFO’s compensation in 2011

63,933: the number of Spring 2012 University of Minnesota students (system wide)

$610,000: University of Minnesota President Eric Kaler’s 2012 compensation

$9.54: the amount per University of Minnesota student paid toward President Kaler’s compensation

approximately 200,000: the number of credit earning students in the Minnesota State Colleges and Universities system

$316,000: Minnesota State Colleges and Universities Chancellor Steven Rosenstone’s 2012 compensation

approximately $1.58: the amount per credit earning MnSCU student paid toward Chancellor Rosenstone’s compensation

I wrote last week about the release of the gainful employment data that looks at loan repayment rates and overall loan loads for specific programs. Capella appears to be very good in overall loan repayment rates as measured by 3 year cohort default rates. However, as the HELP report notes, a significant part of the “success” in avoiding defaults come from aggressive outreach to ensure that Capella students are using deferments and forbearances to avoid default. This is better for students than falling into default, but these students are not actually repaying their loans and these loans continue to accumulate interest.

When you look at the repayment rate for Capella students in different degree programs, their “success” is much more suspect. The data below is from the Department of Education. When you look at these loan repayment rates, keep in mind that graduate students are the most likely to repay student loans. According to the most recent figures, only 6% of student loan dollars lent to graduate students go into default during the life of the loan.

After years of operating without clear oversight, for-profit colleges are finally being forced to produce data documenting their stewardship of public education dollars. It’s still nothing compared to the level of transparency that public colleges and universities provide for their spending, but it’s a start. What the state and federal governments do with this data to hold the for-profit college sector accountable is the important question.

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