Washington Post 2011 Annual Report Download - page 46

The two-year cohort default rate for Kaplan University (which comprises 68.1% of KHE’s revenue) for the U.S. Federal
fiscal year periods 2009, 2008 and 2007 were 17.3%, 17.2%, and 13.3%, respectively. The cohort default rates for
the remaining KHE reporting units for those U.S. Federal fiscal year periods ranged from 9.8% to 23.9%, 5.8% to
25.7%, and 7.8% to 28.7%, respectively.
For the 2009 cohort year, no reporting unit had a cohort default rate of 25% or more, and none had two or more years
above 25%. Two-year cohort default rates for the 2010 cohort year and three-year cohort default rates for the 2009
cohort year will be issued in final form by the DOE in September 2012. The loss of Title IV eligibility by either (1) the
single OPEID unit that includes Kaplan University or (2) a combination of two or more other OPEID units would have a
material adverse effect on Kaplan’s operating results.
• Loss of Eligibility to Participate in Title IV Programs If Title IV Revenues Exceed U.S. Federally-Set Percentage
Under regulations referred to as the 90/10 rule, a KHE OPEID unit would lose its eligibility to participate in the Title IV
programs for a period of at least two fiscal years if it derives more than 90% of its receipts from the Title IV programs for
two consecutive fiscal years, commencing with the unit’s first fiscal year that ends after August 14, 2008. Any OPEID
reporting unit with receipts from the Title IV programs exceeding 90% for a single fiscal year ending after August 14,
2008, would be placed on provisional certification and may be subject to other enforcement measures. The enactment of
the U.S. Federal Ensuring Continued Access to Student Loans Act of 2008 increased student loan limits and the maximum
amount of Pell Grants, which could result in an increase in the percentage of KHE’s receipts from Title IV programs. These
increases, and any future increases or changes in the 90/10 calculation formula, make it more difficult for institutions to
comply with the 90/10 rule. HEOA has provided temporary relief from the impact of the loan limit increases by treating
as non-Title IV revenue any amounts received between July 1, 2008, and June 30, 2011, that are attributable to the
increased annual loan limits. Absent relief from the loan limit increases, Kaplan University would have a 90/10 ratio of
82.4% in 2011, and the remaining KHE OPEID numbers would have 90/10 percentages ranging between 74.2% and
91.4%. The loss of Title IV eligibility by either (1) the single OPEID unit that includes Kaplan University or (2) a combination
of other OPEID units would have a material adverse effect on Kaplan’s operating results.
• Failure to Maintain Institutional Accreditation Could Lead to Loss of Ability to Participate in Title IV Programs
KHE’s online university and all of its ground campuses are institutionally accredited by one or another of a number of
national and regional accreditors recognized by the DOE. Accreditation by an accrediting agency recognized by the
DOE is required for an institution to become and remain eligible to participate in Title IV programs. The loss of
accreditation would, among other things, render the affected Kaplan schools and programs ineligible to participate in
Title IV programs and would have a material adverse effect on its business and operations.
• Failure to Maintain Programmatic Accreditation Could Lead to Loss of Ability to Provide Certain Education Programs
and Failure to Obtain Programmatic Accreditation May Lead to Declines in Enrollments in Unaccredited Programs
Programmatic accreditation is the process through which specific programs are reviewed and approved by industry- and
program-specific accrediting entities. Although programmatic accreditation is not generally necessary for Title IV eligibility,
such accreditation may be required to allow students to sit for certain licensure exams or to work in a particular profession
or career. Failure to obtain or maintain such programmatic accreditation may require schools to discontinue programs that
would not provide appropriate outcomes without that accreditation or may lead to a decline in enrollment in programs
due a perceived or real reduction in program value.
• Failure to Maintain State Authorizations Could Cause Loss of Ability to Operate and to Participate in Title IV
Programs in Some States
KHE’s ground campuses and online university are subject to state-level regulation and oversight by state licensing
agencies, whose approval is necessary to allow an institution to operate and grant degrees or diplomas in the state.
Institutions that participate in Title IV programs must be legally authorized to operate in the state in which the institution is
physically located. The loss of such authorization would preclude the campuses or online university from offering
postsecondary education and render students ineligible to participate in Title IV programs. Loss of authorization at those
state campus locations, or, in states that require it, for Kaplan University online, could have a material adverse effect on
KHE’s business and operations.
Some states have sought to assert jurisdiction over online education institutions that offer education services to residents in the
state or to institutions that advertise or recruit in the state, notwithstanding the lack of a physical location in the state. State
regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or
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