Minneapolis-based Capella Education expects 35 percent enrollment drop

Capella Education, which operates a for-profit online university headquartered in Minneapolis, expects new student enrollments will drop 35 percent for the current quarter.

Capella said it also will cut 125 jobs, about eight percent of its workforce, a move that will save as much as $13 million a year. The firm says no instructors will be terminated. J. Kevin Gilligan, Capella's CEO, said the economy worries prospective students.

"At the present time, consumers are more apprehensive to make significant investments in higher education, in light of prolonged unemployment combined with lingering sensitivity of our job stability for those who are working," Gilligan said. "This is a dynamic that we believe exists for public and private, proprietary and not for profit universities serving working adults."

Gilligan saidthe lousy economy is the big factor behind the coming enrollment dip.

"The biggest competition we have is convincing a learner that it makes sense to enroll," he said. "Our real challenge is convincing learners that they can confidently make their decision to enter our program and be successful."

Depending on the degree sought and prior education of a student, Capella saida graduate degree from the school typically costs between $25,000 and $30,000.

At of the end of December, Capella had about 39,000 students. Capella said it expects total enrollments for the first quarter to grow 4.5 percent to 6.5 percent, less than what Wall Street has been expecting. Capella's stock was down as much as 18 percent Tuesday.