Washington Post 2004 Annual Report Download - page 29

online courses from the 50% rules and certain other existing requirements if various other conditions set forth in such
legislation or to be specified in future Department of Education regulations were satisfied and also would have extended
authority for the distance education demonstration program through at least 2010. A bill has already been introduced in
the new Congress that would similarly exempt online courses from the 50% rules and extend authority for the distance
education demonstration program. However, the Company cannot now predict whether any such legislation will eventually
be enacted into law and whether Kaplan University will be able to satisfy whatever conditions may ultimately be imposed
on the availability of Title IV funding for online programs.
As a general matter, schools participating in Title IV programs are not financially responsible for the failure of their students
to repay Title IV loans. However the Department of Education may fine a school for a failure to comply with Title IV
requirements and may require a school to repay Title IV program funds if it finds that such funds have been improperly
disbursed. In addition, there may be other legal theories under which a school could be subject to suit as a result of alleged
irregularities in the administration of student financial aid.
Pursuant to Title IV program regulations, a school that undergoes a change in control must be reviewed and recertified by
the Department of Education. Certifications obtained following a change in control are granted on a provisional basis that
permits the school to continue participating in Title IV programs but provides fewer procedural protections if the Department
of Education asserts a material violation of Title IV requirements. Most of the schools owned by Quest Education
Corporation at the time of Kaplan's acquisition of Quest in 2000 have now been fully certified. The remainder of those
schools as well as most of the schools subsequently acquired by Kaplan's Higher Education Division are continuing to
operate on the basis of provisional certifications.
No proceeding by the Department of Education is pending to fine any Kaplan school for a failure to comply with any
Title IV requirement, or to limit, suspend or terminate the Title IV eligibility of any Kaplan school. However no assurance can
be given that the Kaplan schools currently participating in Title IV programs will maintain their Title IV eligibility in the future or
that the Department of Education might not successfully assert that one or more of such schools have previously failed to
comply with Title IV requirements.
In accordance with Department of Education regulations, a number of the schools in Kaplan's Higher Education Division are
combined into groups of two or more schools for the purpose of determining compliance with Title IV requirements.
Including schools that are not combined with other schools for that purpose, the Higher Education Division currently has 38
Title IV reporting units, the largest of which in terms of revenue accounted for approximately 24% of the Division's 2004
revenues. If the Department of Education were to find that one reporting unit had failed to comply with any applicable
Title IV requirement and as a result limited, suspended or terminated the Title IV eligibility of the school or schools in that unit,
that action normally would not affect the Title IV eligibility of the schools in other reporting units that had continued to comply
with Title IV requirements. For the most recent year for which data is available from the Department of Education, the cohort
default rate for the Title IV reporting units in Kaplan's Higher Education Division averaged 9.8%, and no unit had a cohort
default rate of 25% or more. In 2004 those reporting units derived an average of less than 81% of their receipts from
Title IV programs, with no unit deriving more than 88.2% of its receipts from such programs.
All of the Title IV financial aid programs are subject to periodic legislative review and reauthorization, and the next
reauthorization is scheduled to take place during the current Congressional term. In addition, the availability of funding for
the Title IV programs that provide non-repayable grants is wholly contingent upon the outcome of the annual federal
appropriations process.
Whether as a result of changes in the laws and regulations governing Title IV programs, a reduction in Title IV program
funding levels, or a failure of schools included in Kaplan's Higher Education Division to maintain eligibility to participate in
Title IV programs, a material reduction in the amount of Title IV financial assistance available to the students of those schools
would have a significant negative impact on Kaplan's operating results.
Magazine Publishing
Newsweek
Newsweek is a weekly news magazine published both domestically and internationally by Newsweek, Inc., a subsidiary of
the Company. In gathering, reporting and writing news and other material for publication, Newsweek maintains news
bureaus in 8 U.S. and 11 foreign cities.
The domestic edition of Newsweek includes more than 100 different geographic or demographic editions which carry
substantially identical news and feature material but enable advertisers to direct messages to specific market areas or
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