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If the U.S. debt limit is not increased by Congress, the troubled for-profit education industry would be among the first to take a hit.
Standard & Poor's warned Thursday that Kaplan higher education, a unit of Washington Post , could temporarily lose revenue from federal student loans if there’s no agreement on the $14.3 trillion debt ceiling by the August 2 deadline.
“We see the near-term risk that federal student-loan disbursements would not be processed. The end result would be that Kaplan’s higher-education business potentially might not receive revenue for an interim period,” said S&P in a report.
And that’s not a small matter. In 2010, Kaplan indirectly received about 82 percent of revenue from government-sponsored financial aid to its students.
The impact would be felt by other for-profit schools, as well. Like Kaplan, most finance their operations primarily with public dollars coming by way of federal student aid.
The consensus view is that the debt ceiling will be raised, but the question is what type of budget cuts are made in a final deal between congressional Democrats and Republicans. S&P said that a compromise that involves significant cuts to federal student loans and grants could negatively affect educational for-profits.
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