Nearly 400 students who had hoped to enroll in a Minnesota online school are getting rejection letters because of state budget cuts.

Minnesota Virtual Academy attracted strong interest—especially from home schoolers—with its promise of a tuition-free education and curriculum directed by former U.S. Education Secretary William Bennett.

But the state's new education bill limits online enrollment for students not previously in public school to about 200. That shut out many who wanted to attend Minnesota Virtual Academy, a partnership between Bennett's Virginia-based company K12 Inc. and the small southeastern Minnesota...

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