Washington Post 2010 Annual Report Download - page 47

available to Kaplan’s schools. An educational program that fails to meet one or both benchmarks could lose its Title IV
eligibility, be placed on restricted status, be required to provide annual employer affirmations that the program aligns with
recognized occupations at their businesses and that there are projected job vacancies or expected demand for those
occupations at those businesses, be subject to limits on enrollment of Title IV recipients, and/or be required to provide
disclosures and warnings to current and prospective students that they may have difficulty repaying loans obtained for
attending that program. An institution with one or more ineligible programs or programs on restricted status would be
subject to provisional certification.
The Company cannot currently predict with reasonable accuracy the impact the proposed regulation would have on its
program offerings if it were enacted in its current form, nor can it predict with reasonable accuracy the final form or
impact of the final regulation. The proposed regulations are not final and remain subject to further review and change.
However, the implementation of the regulation as proposed, or any other changes the Department of Education may
implement, would require Kaplan to eliminate or limit enrollments in certain educational programs at some or all of its
schools and would have a materially adverse effect on the rate at which students enroll in programs at its schools and on
business and operations.
• Congressional Examination of For-Profit Education Could Lead to Legislation or Other Governmental Action That May
Materially and Adversely Affect Kaplan’s Business
There has been increased focus by the U.S. Congress in 2010 on the role that for-profit education institutions play in
higher education, including regarding participation in Title IV programs and U.S. Department of Defense oversight of
tuition assistance for military service members attending for-profit colleges. Since June 2010, the Health, Education, Labor
and Pensions Committee of the U.S. Senate (“HELP Committee”) has held hearings to examine the for-profit education
sector. As part of the HELP Committee’s review, investigators from the U.S. Government Accountability Office (GAO)
performed undercover tests at 15 for-profit higher education institutions, including 2 campuses of KHE. In August 2010,
the GAO issued a report that was critical of the recruiting tactics at several schools, including the 2 Kaplan campuses.
The GAO subsequently revised its report.
On August 5, 2010, the HELP Committee sent a document request to numerous for-profit schools, including Kaplan. The
information requested covered a broad range of business activities, including detailed information relating to financial
results, management, operations, personnel, recruiting, enrollment, graduation, student withdrawals, receipt of Title IV
funds, accreditation, regulatory compliance and other items. The HELP Committee indicated that it is interested in
investigating the receipt and use of federal student loan funds at for-profit higher education institutions and, potentially,
proposing additional legislation related to the sector. Kaplan has completed its response to the document request;
however, at this time, the Company cannot predict the ultimate impact that the investigation may have on Kaplan Higher
Education, or the likelihood of or content of any future legislation.
Other committees of the U.S. Congress have also held hearings into, among other things, the standards and procedures of
accrediting agencies, credit hours and program length, and the portion of federal student financial aid going to for-profit
institutions. A number of legislators have variously requested the GAO to review and make recommendations regarding,
among other things, recruitment practices; educational quality; student outcomes; the sufficiency of integrity safeguards
against waste, fraud and abuse in Title IV programs; and the percentage of proprietary institutions’ revenue coming from
Title IV and other federal funding sources. This increased activity may result in legislation, further rulemaking affecting
participation in Title IV programs and other governmental actions. In addition, concerns generated by congressional or
other activity, or media reports, may adversely affect enrollment in for-profit educational institutions.
Kaplan cannot predict the extent to which these activities could result in further investigations, legislation or rulemaking
affecting its participation in Title IV programs, other governmental actions and/or actions by state agencies or legislators
or by accreditors. If any laws or regulations are adopted that significantly limit Kaplan’s participation in Title IV programs
or the amount of student financial aid for which Kaplan’s students are eligible, Kaplan’s results of operations and cash
flows would be adversely and materially impacted.
• Kaplan Commitment Is Expected to Materially Impact Operating Results
In the fourth quarter of 2010, Kaplan Higher Education phased in a new program, the Kaplan Commitment. Under this
program, students of Kaplan University, Kaplan College and other KHE schools enroll in classes for several weeks and
assess whether their educational experience meets their needs and expectations before incurring any significant financial
obligation. Kaplan also conducts academic assessments to help determine whether students are likely to be successful in
their chosen course of study. Students who choose to withdraw from the program during this time frame (“risk-free period”)
and students who do not pass the academic evaluation do not have to pay for the coursework. In general, the risk-free
period is approximately four weeks for diploma programs and five weeks for associate’s and bachelor’s degrees.
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