Washington Post 2015 Annual Report Download - page 24

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 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 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 May 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. The ED paused the negotiated rulemaking process without publishing
new regulations on this topic. The ED may resume this process in the future and publish new distance-education
state authorization requirements that may require Kaplan University 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. The
Higher Education Act was reauthorized through September 2014 and has continued to receive annual
appropriations. 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.
U.S. Senate Committee Review. In the summer of 2010, the Chairman of the HELP Committee commenced an
industry-wide review of for-profit higher education institutions. The institutions owned and operated by KHE
9 GRAHAM HOLDINGS COMPANY