Washington Post 2011 Annual Report Download - page 15

state and agency grant programs and corporate reimbursement under tuition assistance programs accounted for most of
the remaining 2011 KHE revenues. The significant role of Title IV funding in the operations of KHE is expected to
continue.
The U.S. Federal student financial aid programs created under Title IV of the U.S. Federal Higher Education Act (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 2011, about 69% of the approximate $1,110 million of Title IV
funds received by KHE came from student loans, and approximately 31% 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 has students, be accredited by an accrediting agency recognized by the DOE and be certified
to participate in the Title IV programs by the DOE. Schools are required periodically to apply for renewal of their
authorization, accreditation or certification with the applicable state governmental bodies, accrediting agencies and
the DOE. In accordance with DOE regulations, some KHE schools operate individually or 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, the schools in KHE have
a total of 32 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 DOE might not
successfully assert that one or more of such schools have previously failed to comply with Title IV requirements.
The DOE 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 DOE may withdraw an institution’s provisional certification more easily than if it is fully certified. In
addition, the DOE 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.
Currently, one KHE OPEID, which had 539 students at the end of 2011, is provisionally certified.
In addition, the DOE may fine a school, require a school to repay Title IV program funds, limit or terminate a school’s
eligibility to participate in the Title IV programs, initiate an emergency action to suspend the school’s participation in the
Title IV programs without prior notice or opportunity for a hearing, transfer a school to a method of Title IV payment that
would adversely affect the timing of the institution’s receipt of Title IV funds, deny or refuse to consider a 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, refer a matter for possible civil or criminal investigation or take other enforcement measures if it finds
that the school has failed to comply with Title IV requirements or improperly disbursed or retained Title IV program funds.
There can be no assurance that the DOE 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 DOE 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 DOE 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 Family Education Loan (FFEL) and Direct Loan
programs effective 30 days after notification from the DOE 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% for
three consecutive years lose their Title IV eligibility to participate in FFEL, Direct Loan and U.S. Federal Pell Grant
programs effective 30 days after notification from the DOE 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 DOE may be placed on provisional
certification by the DOE.
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