Capella Education Company is cutting 125 positions, or about 8 percent of employees, from its non-faculty work force, the online university said Tuesday.

Minneapolis-based Capella wouldn't provide many details about the cuts, but spokesman Mike Buttry said that the process of laying off employees is expected to be completed by February 25.

“This is an opportunity to reduce areas where we have excess capacity due to declining enrollment and take a look at areas where we could operate in a more streamlined fashion,” he told Twin Cities Business on Tuesday.

Capella announced the staff cuts in conjunction with its fourth-quarter and fiscal 2010 financial results-both of which were positive. For the full year, revenues increased 27.3 percent to $426.1 million last year and net income grew 43.6 percent to $61.3 million. And for the fourth quarter, revenue increased 21.3 percent to $114.7 million and net income increased 20.3 percent to $18.1 million.

However, Capella faces uncertainty in light of proposed U.S. Department of Education regulations that would require it to better prepare students for employment or risk losing access to federal loan programs for financial aid for students.

Part of the proposed regulations require schools to demonstrate that they ready students for “gainful employment”-a comparison of the debt students incur and their incomes after program completion, and the rate at which all enrollees repay their loans on time.

In October, the Department of Education outlined its proposed rules. In August, Capella contested a government report that said that only 40 percent of the school's former students are repaying loans-a statistic that could prevent it from receiving federal funds.

Although Capella's new enrollment grew 24.4 percent in 2010, students now seem to be displaying concern about the possibility of losing access to financial aid: New enrollment growth decreased 10.7 percent in the fourth quarter of 2010.

On November 1, following the release of the Department of Education's proposed rules, Capella's stock plummeted to close at $53.94-down $13.24, or nearly 20 percent, from the previous day's closing price.

Mid-morning on Tuesday, shares were trading down about 15 percent at $53.87.

“While Capella produced strong full year 2010 results, we are now operating in an uncertain environment,” Chairman and CEO Kevin Gilligan said in a statement. “The current uncertainty is driven by weaker demand for higher education, regulatory uncertainty, and increased competition for the high-quality learners that have historically been attracted to Capella's academic rigor and graduate focus.”

Gilligan added that Capella is navigating through the “challenging conditions” by shifting its marketing mix to “more effective” channels, emphasizing new product introductions, and investing in Capella's differentiating attributes.

Capella employs roughly 1,800 and is among Minnesota's 60-largest public companies based on revenue.