Washington Post 2015 Annual Report Download - page 40

earnings metric. If a program fails the test two times within three years, it will become ineligible for Federal aid
Title IV participation for a period of three years. If a program fails the test or is in the zone for four consecutive
years, it will become ineligible to participate in the Title IV programs for a period of three years. In addition, the
regulation requires an institution to provide to current and prospective students prescribed warnings of the
potential ineligibility of the program in any year for which the program could become ineligible based on a rate
for the next year that is in the zone or failing.
The ultimate outcome of the GE regulations and their impact on Kaplan’s operations are still uncertain. Although
Kaplan is taking steps to address compliance with GE regulations, there can be no guarantee that these measures
will be adequate to prevent a material number of programs from either failing the debt-to-earnings rates or being
put on warning status. This has caused Kaplan to eliminate or limit enrollments in certain educational programs
at some or all of its schools, which may result in the loss of student access to Title IV programs and could have a
material adverse effect on KHE’s operating results. The ED has indicated that the first debt-to-earnings rates to
be calculated under the new regulations are expected to be issued first in draft form in 2016 and then in final
form later in 2016 or in early 2017.
The regulations also contain requirements related to public disclosure of program information and outcomes,
reporting data to the ED, including the debt-to-earnings rates, and certification requirements. On October 9,
2015, Kaplan University received a letter from the ED indicating that it had failed to report data on a significant
number of programs that were listed as active in the ED’s system. The letter stated that until this issue is
resolved, Kaplan University cannot start any new programs and failure to resolve the issue could result in
material administrative actions. Kaplan University has corrected the issue, but no assurances can be made that the
ED will accept those corrections, will not find additional issues, or will not take further action against Kaplan
University.
• Congressional Examination of For-Profit Education Could Lead to Legislation or Other
Governmental Action That May Materially and Adversely Affect Kaplan’s Business and Operations
There has been increased attention by Congress on the role that for-profit educational institutions play in higher
education, including their participation in Title IV programs and tuition assistance programs for military service
members attending for-profit colleges. Beginning in June 2010, the HELP Committee held a series of hearings to
examine the for-profit education sector and requested information from various for-profit institutions, including
KHE institutions. In July 2012, the majority staff of the HELP Committee issued a final report to conclude the
review. The final report included observations and recommendations for Federal policy. The implications of the
HELP Committee review to the operation of KHE’s institutions remains unknown.
Other committees of Congress have also held hearings into, among other things, the standards and procedures of
accrediting agencies, credit hours and program length and the portion of U.S. Federal student financial aid going
to for-profit institutions. Several legislators have requested the U.S. Government Accountability Office to review
and make recommendations regarding, among other things, student recruitment practices; educational quality;
student outcomes; the sufficiency of integrity safeguards against waste, fraud and abuse in Title IV programs;
and the percentage of proprietary institutions’ revenue coming from Title IV and other U.S. Federal funding
sources. This increased activity, and other current and future activity, may result in legislation, further
rulemaking and other governmental actions affecting participation in Title IV programs or the amount of student
financial assistance for which Kaplan’s students are eligible. In addition, concerns generated by congressional or
other activity, or negative media reports, may adversely affect enrollment in for-profit educational institutions.
Kaplan cannot predict the extent to which these activities could result in further investigations, legislation or
rulemaking affecting its participation in Title IV programs, other governmental actions and/or actions by state
agencies or legislators or by accreditors. If any laws or regulations are adopted that significantly limit Kaplan’s
participation in Title IV programs or the amount of student financial aid for which Kaplan’s students are eligible,
Kaplan’s results of operations and cash flows would be adversely and materially impacted.
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