Washington Post 2013 Annual Report Download - page 21

Title IV programs encompass various forms of student loans and non-repayable grants. In some cases, the U.S. Federal
government subsidizes part of the interest expense of Title IV loans. Subsidized loans and grants are only available to
students who can demonstrate financial need. During 2013, about 80% of the approximate $819 million of Title IV funds
received by KHE came from student loans, and approximately 20% of such funds came from grants.
Title IV Eligibility and Compliance With Title IV Program Requirements. To maintain eligibility to participate in
Title IV programs, a school must comply with extensive statutory and regulatory requirements relating to its financial
aid management, educational programs, financial strength, administrative capability, compensation practices,
facilities, recruiting practices and various other matters. In addition, the school must be licensed, or otherwise legally
authorized, to offer postsecondary educational programs by the appropriate governmental body in the state or states
in which it is physically located or is otherwise subject to state authorization requirements, be accredited by an
accrediting agency recognized by the ED and be certified to participate in the Title IV programs by the ED. Schools
are required periodically to apply for renewal of their authorization, accreditation or certification with the applicable
state governmental bodies, accrediting agencies and the ED. In accordance with ED regulations, some KHE schools
operate individually while others are combined into groups of two or more schools for the purpose of determining
compliance with certain Title IV requirements, and each school or school group is assigned its own identification
number, known as an OPEID number. As a result, as of the end of 2013, the schools in KHE have a total of 25
OPEID numbers. No assurance can be given that the Kaplan schools, or individual programs within schools, will
maintain their Title IV eligibility, accreditation and state authorization in the future or that the ED might not successfully
assert that one or more of such schools have previously failed to comply with Title IV requirements.
The ED may place a school on provisional certification status under certain circumstances, including, but not limited to,
failure to satisfy certain standards of financial responsibility or administrative capability or upon a change in ownership
resulting in a change of control. Provisional certification status carries fewer due process protections than full certification.
As a result, the ED may withdraw an institution’s provisional certification more easily than if it is fully certified. In addition,
the ED may subject an institution on provisional certification status to greater scrutiny in some instances, for example, when
it applies for approval to add a new location or program or makes another substantive change. Provisional certification
does not otherwise limit access to Title IV program funds by students attending the institution. As of December 31, 2013,
no KHE OPEID is provisionally certified.
In addition, if the ED finds that a school has failed to comply with Title IV requirements or improperly disbursed or retained
Title IV program funds, it may take one or more of a number of actions, including fining the school, requiring the school to
repay Title IV program funds, limiting or terminating the school’s eligibility to participate in Title IV programs, initiating an
emergency action to suspend the school’s participation in the Title IV programs without prior notice or opportunity for a
hearing, transferring the school to a method of Title IV payment that would adversely affect the timing of the institution’s
receipt of Title IV funds, requiring the submission of a letter of credit, denying or refusing to consider the school’s
application for renewal of its certification to participate in the Title IV programs or for approval to add a new campus or
educational program and referring the matter for possible civil or criminal investigation. There can be no assurance that
the ED will not take any of these or other actions in the future, whether as a result of a lawsuit, program review or
otherwise. This list is not exhaustive. There may be other actions the ED may take and other legal theories under which a
school could be sued as a result of alleged irregularities in the administration of student financial aid. See Item 1A. Risk
Factors, including Failure to Comply With Statutory and Regulatory Requirements Could Result in Loss of Access to U.S.
Federal Student Loans and Grants Under Title IV, a Requirement to Pay Fines or Monetary Liabilities or Other Sanctions.
Student Default Rates. A school may lose its eligibility to participate in Title IV programs if student defaults on the
repayment of Title IV loans exceed specified rates, referred to as “cohort default rates.” The ED calculates a cohort default
rate for each of KHE’s OPEID numbers. The schools in an OPEID number whose cohort default rate exceeds 40% for any
single year lose their eligibility to participate in the U.S. Federal Pell Grant and Direct Loan programs for at least two
fiscal years, effective 30 days after notification from the ED, except in the event of a successful adjustment or appeal. The
schools in an OPEID number whose cohort default rate equals or exceeds 25% for three consecutive years lose their
Title IV eligibility to participate in the U.S. Federal Family Education Loan (FFEL), Direct Loan and U.S. Federal Pell Grant
programs effective 30 days after notification from the ED and for at least two fiscal years, except in the event of a
successful adjustment or appeal. The schools in an OPEID number whose cohort default rate equals or exceeds 25% in
any one of the three most recent fiscal years for which rates have been issued by the ED may be placed on provisional
certification by the ED.
The enactment in August 2008 of the U.S. Federal Higher Education Opportunity Act (HEOA), which reauthorized the
Higher Education Act, changed the methodology used to calculate cohort default rates. Under the revised law, the period
of time for which student defaults are tracked and included in the cohort default rate calculation is being increased from
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