Washington Post 2012 Annual Report Download - page 15

The U.S. Federal student financial aid programs created under Title IV of the 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 2012, about 70% of the approximate $882 million of Title IV funds received by
KHE came from student loans, and approximately 30% 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 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 30 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. As of
December 31, 2012, one KHE OPEID, which had 482 students, is provisionally certified.
In addition, if the DOE 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 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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