Washington Post 2014 Annual Report Download - page 23

Although Kaplan endeavors to comply with the administrative capability requirements, Kaplan cannot guarantee that it will
continue to comply with the administrative capability requirements or that its interpretation or application of the relevant
rules will be upheld by the ED or other agencies or upon judicial review.
State Authorization. Kaplan’s institutions and programs 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. State laws may establish standards for instruction, qualifications of faculty, location and nature of facilities, financial
policies and responsibility and other operational matters. Institutions that participate in Title IV programs must be legally
authorized to operate in the state in which the institution is physically located or is otherwise subject to state authorization
requirements.
Some states have sought to assert jurisdiction over online educational 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
unclear in some states and are subject to change. If KHE is found not to be in compliance with an applicable state regulation
and a state seeks to restrict one or more of KHE’s business activities within its boundaries, KHE may not be able to recruit or
enroll students in that state and may have to cease providing services and advertising in that state.
The ED regulations that became effective on July 1, 2011, expanded the requirements for an institution to be considered
legally authorized in the state in which it is physically located for Title IV purposes. In some cases, the regulations required
states to revise their current requirements and/or to license schools in order for institutions to be deemed legally authorized in
those states and, in turn, to participate in the Title IV programs. If a state’s requirements are found not to be in compliance
with these ED regulations or if KHE institutions do not receive state approvals where necessary, the institutions could be
deemed to lack the state authorization necessary to participate in the Title IV programs and be subject to loss of Title IV
eligibility, repayment obligations and other sanctions. Due to an exemption, Kaplan University’s home state of Iowa does not
require Kaplan University to be registered in Iowa. However, to comply with the law, Kaplan University was granted
affirmative registration in Iowa. Kaplan believes that all of Kaplan University’s and KHE’s campuses currently meet the ED
requirements to be considered legally authorized to provide the programs they offer in the states in which the campuses are
located. The ED has stated that it will not publish a list of states that meet, or fail to meet, the state authorization requirements,
and it is uncertain how the ED will interpret these requirements in each state.
In addition, the ED regulations that took effect on July 1, 2011, required institutions offering postsecondary education to
students through distance education in a state in which the institution is not physically located, or in which it is otherwise
subject to state jurisdiction as determined by the state, to meet any applicable state requirements for it to be legally offering
postsecondary distance education in that state. In June 2012, the U.S. Court of Appeals for the District of Columbia vacated
the regulations with respect to distance education. Between February and April 2014, the ED convened a negotiated
rulemaking committee to develop proposed regulations on a variety of topics that included state authorization for programs
offered through distance education or correspondence education. While no new regulations have been issued, we believe
that this process will ultimately result in new distance-education state authorization requirements that may require Kaplan
University and Mount Washington College to be registered in additional states. If Kaplan is unable to obtain the required
approvals for distance-education programs, then Kaplan students residing in the state for which approval was not obtained
may be unable to receive Title IV funds, which could have a material adverse effect on Kaplan’s business and operations.
Congressional Reauthorization of Title IV Programs. All of the Title IV programs are subject to periodic legislative
review and reauthorization. In addition, while Congress historically has not limited the amount of funding available for the
various Title IV student loan programs, the availability of funding for the Title IV programs that provide for the payment of
grants is primarily contingent upon the outcome of the annual U.S. Federal appropriations process. Congress also can
make changes in the laws affecting Title IV programs in those annual appropriations bills and in other laws it enacts
between Higher Education Act reauthorizations. In 2008, the Higher Education Act was reauthorized through September
2014. The Senate Health, Education, Labor and Pensions Committee (HELP) and the House Education and the Workforce
Committee have held a series of hearings on reauthorization of the Higher Education Act, but it is not known when
Congress will make changes to that statute or to other laws affecting U.S. Federal student aid.
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 within KHE to maintain eligibility to participate in Title IV programs, a material
reduction in the amount of Title IV financial assistance available to the students attending those schools could have a
material adverse effect on Kaplan’s business and operations. In addition, any development that has the effect of making
the terms on which Title IV financial assistance is made available materially less attractive could also have a material
adverse effect on Kaplan’s business and operations.
2014 FORM 10-K 7