PERDOCEO EDUCATION Corp

OVERVIEW

Perdoceo’s accredited academic institutions offer a quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs. The Company’s academic institutions – Colorado Technical University (“CTU”), the American InterContinental University System (“AIUS” or “AIU System”) and University of St. Augustine for Health Sciences ("USAHS") – provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. USAHS is among the nation's reputable universities offering graduate health sciences degrees, primarily in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Perdoceo's academic institutions are committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

When used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries.

Our reporting segments correspond to our accredited institutions.

CTU

CTU is committed to providing industry-relevant higher education to a diverse student population, including non-traditional adult learners seeking career advancement and the military community. CTU utilizes innovative technology and experienced faculty, enabling the pursuit of academic and professional goals for learners. CTU offers academic programs in the career-oriented disciplines of business and management, nursing, healthcare management, computer science, engineering, information systems and technology, project management, cybersecurity and criminal justice. Additionally, CTU also offers non-degree and professional development programs.

Discussion of business operations, trends and key drivers of operating results will primarily focus on CTU’s degree programs, which represent a majority of CTU’s operations and the CTU segment.

AIUS

AIUS is committed to providing industry-relevant higher education opportunities for a diverse student population, including non-traditional adult learners and the military community. AIUS places emphasis on the educational, professional and academic growth of each student. AIUS offers academic programs in the career-oriented disciplines of business studies, information technologies, education, behavioral sciences and criminal justice. AIUS also provides non-degree and professional development programs.

AIUS is comprised of three universities: the American InterContinental University ("AIU"), Trident University International (“Trident” or “TUI”) and California Southern University ("CalSouthern"). The AIUS structure provides a framework for all three universities to continue to serve their unique student populations while benefitting from one university system. Although all universities operate under a shared governance structure and have a common mission, the system structure allows each to retain its name and customize its programs and instructional and student service models to the needs of its unique student populations.

Discussion of business operations, trends and key drivers of operating results will primarily focus on AIU and Trident, which represents a majority of the AIU System and AIUS reporting segment. Specific references will be made to the other universities when material to the disclosure or necessary to understand the overall discussion.

USAHS

USAHS is among the nation's reputable universities offering graduate health sciences degrees, primarily in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Founded in 1979, USAHS educates students through its network of campuses in San Marcos, California; St. Augustine and Miami, Florida; and Austin and Dallas, Texas; and through its online programs. USAHS focuses on developing professional healthcare practitioners through innovative and personalized classroom learning and robust clinical opportunities.

Student Enrollments Statistics

Total student enrollments as of December 31, 2024 and 2023 were approximately 41,400 students and 34,500 students, respectively, with approximately 90% enrolled in our institutions’ fully-online academic programs for each of the years ended December 31, 2024 and 2023. Substantially all of the students attending our institutions reside within the United States of America. Total student enrollments and student enrollment statistics stated above and presented below do not include learners pursuing: a) non-degree and professional development programs, and b) degree seeking, non-Title IV participating, self-paced programs at our universities. Additional student enrollment demographic information for our institutions as of December 31, 2024 and 2023 was as follows:

Student Enrollments by Age Group

Student Enrollments by Core Curricula

Student Enrollments by Degree Granting Program

GUIDING PRINCIPLES AND STRATEGIC PRIORITIES

To compete successfully in today’s demanding economy, people benefit from higher education that provides a foundation of knowledge and skills they can use in the workplace and to build meaningful careers. We aim to become a leading provider of online postsecondary education to non-traditional students, including adult learners. The core guiding principles we focus on in our pursuit of this goal are:

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enhancing academic outcomes;

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further elevating academic quality and integrity; and

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complying with regulations.

Our strategic priorities that we believe will support our goal to become a leading provider of online postsecondary education to non-traditional students and position the Company for long-term sustainable and responsible growth are:

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optimize student enrollment processes;

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enhance student retention and engagement;

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use technology as a differentiator;

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leverage efficient and effective scalable shared services to support organic growth at our universities and as a key enabler for inorganic growth strategies; and

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invest in student-serving processes that support our overall academic operations.

OUR BUSINESS

Through our three accredited academic institutions, we offer quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs, with the health sciences degree programs at USAHS having a strong clinical component. We pursue a student-first mindset in our efforts to provide support throughout the academic life cycle, from enrollment and orientation through ongoing coaching and learning leading up to graduation, which we believe enhances overall student learning experiences and academic outcomes. We are committed to investing in our academic institutions, including through course curriculum development and student support technology, which we believe enables our support teams to provide customized service that contributes to positive student experiences. Technology is a key enabler for us, and we are continuing to expand the use of artificial intelligence ("AI") and machine learning to additional areas of the student academic life cycle. We believe that our technology innovations provide students with tools that enable them to focus on educational content in a manner that is best suited to their personal learning style.

Marketing, Student Recruitment and the Student Enrollment Process

Our academic institutions seek motivated students with both the desire and ability to complete their academic programs of choice. To promote interest among potential students, our institutions develop and engage in a variety of marketing activities which build awareness of our academic programs and universities among prospective students. Aided by data analytics, our marketing programs are designed to focus on enrolling students who we believe will be more likely to succeed at one of our academic institutions and eventually complete their degree of choice.

Perdoceo primarily serves a non-traditional and diverse student population, including adult learners. Our students have a broad range of educational and employment experiences which contributes to their college-level readiness. Each of our universities has an admissions function responsible for interacting with prospective students interested in applying to an institution after they have expressed interest in learning more about our academic institutions and programs. Generally, to be qualified for admission to an undergraduate program at one of our universities, an applicant must have received a high school diploma or a recognized equivalent, such as a General Education Development certificate. Our graduate programs require applicants to hold a bachelor's degree and some have additional program specific admissions requirements.

We leverage predictive analytics to help us identify and focus on prospective students who are more likely to succeed at one of our universities. Our prospective student outreach process uses technology to provide a more customized approach to enable us to more effectively provide prospective students with relevant information to help them make more informed academic decisions.

Perdoceo has continued to test and adopt machine learning and AI technology in an effort to streamline operations for both students (current and prospective) and staff. Perdoceo was an early adopter of virtual assistants ("chatbots") that lead to efficiencies in both the attraction and servicing of students. These virtual assistants were recently upgraded to the latest Large Language Models ("LLMs"), as well as generative AI technology. The upgraded chatbots are more responsive to student queries, as well as reduce the time and effort to train the chatbots on information students are requesting. In addition, the new virtual assistants give staff increased visibility into what information is important to students as they progress in their academic journeys.

Our technology enhancements enable our admissions staff to customize their prospective student outreach and engagement strategies based on students’ prior educational experience, degree and area of program interest, thus providing a more meaningful and relevant interaction with the prospective student. We believe prospective students have an improved overall experience in communications with our admissions personnel due to these enhancements.

Admissions advisors serve as one of the prospective students’ primary contacts, providing information to help them make informed enrollment decisions and assisting them with the completion of the enrollment process. The admissions advisors also have a responsibility to provide guidance and support through the enrollment application process and student orientation as well as assist each student as they transition into their first class.

Once a decision has been made to enroll at one of our academic institutions, the financial aid team works with the prospective student, providing them with necessary information, including about various loans and grants available to finance their education. The focus is on getting these students financially prepared for school in a timely manner so that they can focus on their academic activities.

At AIUS and CTU, every enrolled student is offered an orientation that is designed to prepare them to begin classes at our institutions. This orientation process also provides the opportunity for students to understand our academic and support services. We believe completion of these activities better prepares a student to make an informed decision about pursuing their education as well as allows them to be more successful as it simulates their classroom experience both online and in a campus-based environment. Completion of orientation does not financially obligate students, nor does it require students to continue their education with the university.

Additionally, first-time undergraduate students who attend online programs at AIUS and CTU and do not want to continue have 21 days after the start of their program to notify the university of their intention to withdraw. Students who notify and withdraw from the university within 21 days will not be responsible for any tuition-related expenses and are refunded any amounts they have paid in tuition and other institutional fees.

USAHS is a traditional university which offers three academic terms each calendar year, Spring, Summer and Fall, with breaks between academic terms. Prospective students are generally required to have an undergraduate degree and go through a comprehensive application and admissions process which has allowed USAHS to maintain strong academic outcomes and student experiences while also maintaining program level academic outcomes as required by various programmatic accrediting bodies.

Employer Supported Students

CTU and AIUS have focused on collaborating with certain employers that support their workforces through education benefits such as tuition assistance programs. During 2024, both academic institutions continued to focus on engaging with large companies, including some Fortune 500 companies. We expect this continued engagement and collaboration to result in new student interest through increased awareness of our institutions by the employees of these employers. Engaging with these employers provides us with an opportunity to connect with and educate a population of students, we believe, we would otherwise not likely have access to. Students from these employers who attend our institutions are awarded grants from the applicable university to partially offset their tuition costs, the amount of which can vary and depend on the employer’s approach to supporting the educational pursuits of its workforce. Although the amount paid by these students results in lower revenue per student due to the grants awarded from the applicable university, the recruiting, marketing and support costs associated with these students are relatively lower as well and most of these students are able to graduate from their chosen program of study with little or no debt. As of December 31, 2024, approximately 36.5% and 7.0% of total student enrollments at CTU and AIUS, respectively, attend pursuant to these employer sponsored engagements.

Student Retention and Academic Outcomes

Our institutions focus on improving student retention and enhancing academic outcomes. Investments in student serving processes, including the use of technology, remains a key focus to support these efforts. Our faculty and student advisors provide frequent assistance and feedback to students during their course of academic study. We support increased communication between our faculty and students by providing faculty with various technology enablers such as a two-way messaging platform and enhanced data reporting and analytics to help them provide meaningful academic support and information. As is the case at any postsecondary educational institution, a portion of our students withdraw from their academic programs for a variety of academic, financial or personal reasons, and these efforts are designed to help our students remain in school and succeed in their academic program.

Our student advising model at AIUS and CTU promotes collaboration between faculty and student advisors, which we believe enhances effectiveness and provides students with consistent support and communication. Student advisors continue to work with students throughout their academic program to provide relevant and specific feedback and guidance as they progress through their classes. Additionally, a team of staff members from advising, admissions and financial aid works directly with each new student creating a student-service atmosphere and encouraging quality interactions.

Coupled with the student advising model, our academic institutions continually review and update course content and sequencing to ensure workload levels build gradually as students develop skills and acclimate to course expectations, which we believe improves academic outcomes. In general, our courses are designed to accommodate skill development holistically, which we believe will further support learning.

AIUS' student-centric framework focuses on having students interact with their admissions advisor from enrollment through the end of their first academic session and be subsequently supported by student advisors. We believe this structure, along with faculty engagement, improves overall student experiences and retention. This cross-functional strategy is aimed at improving student engagement throughout the student’s academic life cycle, with particular emphasis on the important onboarding phase and first academic term as the students adjust to their academic program. In 2023, AIUS launched a "Ready" course, which allows students to experience and explore the classroom atmosphere weeks before classes begin.

CTU leverages data analytics to provide proactive outreach and personalized advising to improve student retention and academic outcomes. This approach is intended to help us reach the right student at the right time with the right support, which we expect will increase learning and course completion by our students. CTU continues to refine the data analytics process to enable its student advisors to be more effective in their student engagement efforts.

USAHS' student support processes for prospective students span prior to the start of their academic program all the way through graduation, yielding positive academic outcomes through a robust support system that integrates academic advising, tutoring, writing assistance and professional mentorship. A dedicated team of program directors, faculty advisors, student success advisors, and a dedicated student services department offer academic advising, professional development, tutoring, writing support, accessibility accommodations and financial aid assistance, that includes individualized support, student success strategies, and student outreach. These teams prioritize student retention and academic success with a core value of ‘students first’ and through a comprehensive approach to student support, data analysis, and program and institutional review. Each student is assigned a dedicated faculty advisor and a student success advisor. Faculty advisors provide academic guidance and professional development and mentorship in the profession.

Given the nature of USAHS' advanced degree levels, students enrolled in these academic programs are more likely to persist in their program through completion. USAHS’ strong retention rate, coupled with strong program tenure and job placement rates creates a network effect that continues to attract quality prospective students.

Curriculum and Program Development

Our universities develop and deliver a variety of academic programs resulting in the award of credentials ranging from certificates to doctoral degrees in career-oriented programs of study in core curricula areas of business studies, information technology and health sciences.

Our curricula, instructional delivery tools and experienced faculty comprise the learning experience that provides our student population with a unique opportunity to develop the knowledge, skills and competencies required for specific careers. The curriculum development process focuses on desired career needs, while considering relative competencies necessary to achieve these career needs, as well as any applicable recommendations set forth by advisory boards, programmatic accrediting agencies and industry standards. Subsequently, learning objectives are identified and courses are developed which foster student engagement in activities and optimally result in the attainment of program learning outcomes.

The acquisition of USAHS in December 2024 meaningfully expanded our academic offerings in the graduate health sciences field with programs such as physical therapy, occupational therapy, speech-language pathology and nursing degrees. These programs have a strong clinical component which provides students with real-world, hands-on experience in their relevant field of study, allowing them to apply theoretical knowledge to patient care and develop essential clinical skills.

Additionally, our institutions also offer non-degree professional development programs. These online courses offer upskilling and reskilling opportunities where one can develop skills and knowledge in a specific endeavor or area of interest.

Instructional Delivery

Our instructional delivery is based on the belief that learning depends on instructional methodologies that involve and efficiently effectuate student engagement with the instructor, with other students and with the course content. This engagement is fundamental to student learning outcomes, regardless of whether instruction occurs within a physical or virtual classroom. We continue to focus on innovation in our delivery of online education to enhance the learning experience for students.

In 2024, we expanded our student technology infrastructure at AIUS and CTU by implementing faculty and student-requested enhancements to our virtual campus and mobile platforms. This included the addition of dark mode for the mobile app, updates to the roster interface, and the introduction of an interactive rubric that our faculty and student support teams can potentially use to better serve and educate students throughout their academic journey. These upgrades are designed to enhance the student experiences, particularly for our non-traditional adult learners, while also improving operational efficiency.

USAHS primarily provides instructional delivery onsite at its various locations in California, Texas and Florida. These campus locations include learning centers designed to simulate clinical and home settings, with real medical equipment and high-fidelity, interprofessional environments. USAHS also offers anatomy education in both 2D and 3D for an interactive experience. Additionally, 3D printers and virtual headsets provide students with immersive learning experiences that enable students to see, interact with, experience diverse clinical and patient settings.

Learning Management System

Construction of, and ongoing enhancement to, a virtual campus that engages online students with their instructor, peers and content is critical to the achievement of student learning outcomes. CTU and AIUS’ online instructional delivery is accomplished using innovative, student-focused learning management systems. While online content delivery is very common today, our course content delivery systems have several features that make them distinctive. Designed around students, our course content delivery systems allow for a rich, engaging student experience that represents innovative online methods of delivering content.

CTU and AIUS have implemented the use of sophisticated personalized learning technologies through our virtual campus that provide intelligent, adaptive systems to power the delivery of personalized learning. We have a perpetual license to this technology and our personalized learning content was developed by teams of our own instructors and has been integrated across many of our curricula.

USAHS utilizes Blackboard, which is a web-based learning management system, that enables instructors and faculty to efficiently manage course content, deliver assignments, facilitate online discussions, grade student work, track course attendance, and provide students access to various learning resources - all in one centralized platform. It is designed to allow students and faculty to participate in classes delivered online or to use online materials to complement face-to-face learning.

Mobile Applications

Students at CTU and AIU have access to a mobile application and two-way messaging platform which were created to complement students’ mobile-centric lives. During 2024, we introduced new features, such as the highly requested dark mode and enhanced analytics. Approximately 95% of our students within these universities have opted in for the mobile application and to receive mobile notifications. Our students and staff are using the messenger application due to its ease and simplicity. The student benefits of these technological innovations include the ability to connect with their university in a different way, communicate efficiently with faculty, upload required documentation, track grades and degree progress in real-time and participate in courses from the palm of their hand, all of which contribute to increased student engagement. CTU and AIU also have a faculty mobile application which provides informative dashboards, the ability to complete tasks on the go and enhanced outreach and communication capabilities that we believe make teacher-student interactions easier and more effective.

Additionally, USAHS offers a mobile application to its students which provides information and resources, including campus virtual tours and maps, faculty information, access to Blackboard and library resources, and news and social media feeds.

Faculty

Our institutions employ credentialed, geographically dispersed, full-time, and part-time (i.e., adjunct) faculty who facilitate learning in our classrooms and virtual classrooms. Our faculty are hired, assigned, developed, and evaluated in accordance with current accepted higher education practices and in accordance with state, institutional accreditation, and programmatic accreditation standards.

Faculty Competencies

With the input of faculty and academic leadership at our universities, we have developed a set of instructor competencies that we believe are critical to student success and institutional effectiveness. These competencies provide the basis for faculty recruitment, hiring, orientation, evaluation, and development. Faculty hired by our academic institutions are evaluated for proficiency in the following competencies:

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communication;

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assessment of student learning;

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instructional methodology (pedagogy);

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subject matter expertise;

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utilization of technology to enhance teaching and learning;

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acknowledgement and accommodation of diversity in learners;

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student engagement;

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promotion of active student learning;

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compliance with academic institution policy; and

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demonstration of scholarship.

Seasonality and Fluctuations in Results

Our quarterly net revenues and income may fluctuate primarily due to total student enrollments during any given quarter. As a result, changes in the academic calendar may have an impact on quarterly comparability as each quarter may have non-comparable revenue-earning days because the academic calendar may align differently with each calendar year and the quarters therein. While most of the operating costs for our institutions do not fluctuate significantly on a quarterly basis, we may see variability within our marketing spend based on the back to school season and prospective student interest levels at any given time.

Human Capital

As of December 31, 2024, we had approximately 5,690 employees, of which approximately 1,894 work for CTU, approximately 1,430 work for AIUS and approximately 1,579 work for USAHS, with the remainder being corporate-level employees in areas such as marketing, information technology, financial aid, accounting, human resources, legal and compliance.

The human capital objectives that we focus on reflect the nature of our business, our regulated industry and our guiding principles and strategic priorities discussed above under the heading “Guiding Principles and Strategic Priorities.”

We focus on achieving results in a compliant and ethical manner. New employees in student-serving functions such as admissions and financial aid participate in multi-week training programs, and our compliance monitoring programs and other ongoing compliance efforts in these and other areas are robust. The Compliance and Risk Committee of our Board of Directors regularly reviews the results of our compliance monitoring programs and matters reported through the Company’s internal system for reporting compliance concerns in order to monitor the effectiveness of these programs.

We use technology to support students and enhance learning. Therefore, it is imperative that our employees in student-serving functions are trained to use our technology and systems for the benefit of our students. This includes our faculty members who must be proficient in using our online learning management system, personalized learning technology and mobile applications. We also focus significant human capital resources on protecting our technology infrastructure and the personal information maintained therein regarding applicants, our students, their families and our alumni. The Compliance and Risk Committee and the full Board of Directors regularly review information security matters given their importance to the Company.

Our goal is to deploy resources in the most effective and efficient manner that we believe will lead to increased stockholder value while supporting and enhancing the academic quality of our institutions. This philosophy applies to our human capital resources as well. Significant management attention is focused on where to add human capital and other resources to grow responsibly, while at the same time monitoring human capital costs and promoting operating efficiencies. Employee turnover impacts human capital costs and operating efficiencies, and as a result, we have in the past seen improved operating results associated with improved tenure within student-serving functions. The Audit Committee of our Board of Directors regularly reviews information about employee turnover within the Company.

We are committed to a policy of equal employment opportunity. We value diversity and strive to create an atmosphere that supports the students and communities that we serve. Inclusivity is important in our approach to achieving a dynamic culture. We are committed to fostering an environment where differences are respected and valued and where employees feel empowered to share their experiences and ideas. The self-identified ethnicity or race of our full-time employees, including full-time faculty members, is approximately 53% White, 23% Black or African American, 12% Hispanic, Latinx or Spanish origin, 7% Asian, 1% American Indian or Alaskan Native and less than 1% Native Hawaiian or Other Pacific Islander, and our full-time employees are approximately 34% male and 66% female. The self-identified ethnicity or race of our part-time non-student employees, who are primarily part-time adjunct faculty members, is approximately 62% White, 17% Black or African American, 9% Hispanic, Latinx or Spanish origin, 6% Asian, 1% American Indian or Alaskan Native and less than 1% Native Hawaiian or Other Pacific Islander, and our part-time employees are approximately 40% male and 60% female.

INDUSTRY BACKGROUND AND COMPETITION

The domestic postsecondary education industry is highly fragmented and competitive, with no one provider having a significant market share. The Higher Education Act of 1965, as amended and reauthorized (“Higher Education Act”), and the related regulations govern all higher education institutions participating in federal student aid and loan programs under Title IV of the Higher Education Act (“Title IV Programs”). According to the National Center for Education Statistics (“NCES”), there were approximately 5,700 postsecondary education institutions eligible for federal student aid in the United States for the academic year 2023-24, including approximately 2,100 for-profit schools; approximately 1,900 public schools which include state universities and community colleges; and approximately 1,700 private non-profit schools. According to the U.S. Department of Education (“ED” or the “Department”), over the 12-month period for academic year 2022-23, approximately 24.9 million students were enrolled in postsecondary institutions.

The domestic postsecondary degree-granting education industry was an approximately $993 billion industry for academic year 2021-22, according to National Center for Education Statistics. We compete in this industry primarily with other degree-granting institutionally-accredited colleges and universities, both for-profit institutions like ours and public and private non-profit institutions. In particular, there is growing competition from online programs at these institutions as they increase their online offerings in response to growing prospective student interest.

Postsecondary institutions are subject to significant regulations which provide for an oversight triad by mandating specific regulatory responsibilities for the accrediting agencies recognized by the Department, the federal government through the Department, and state higher education regulatory bodies.

Extensive and increasingly complex Department regulations governing postsecondary institutions have been enacted, including regulations applicable only to for-profit institutions. These regulations, coupled with the increased focus by the U.S. Congress on the role that for-profit educational institutions play in higher education, as well as the evolving needs and objectives of students and employers, economic constraints affecting educational institutions and increased focus on affordability and value, may contribute to continued changes in business operating strategies. We have also recently been operating with dramatic shifts in regulatory approaches across different presidential administrations, resulting in a significant number of regulations being adopted, subsequently rescinded or revised, then re-adopted. We cannot predict the specific actions that the new Administration or Congress may take or their effect on the higher education sector, however the prior Trump administration focused significantly on a de-regulatory agenda and recent 2025 executive orders similarly call on all federal agencies to prioritize rescinding costly and burdensome regulations over the adoption of new regulation. We anticipate a number of regulatory changes may be forthcoming reflecting the priorities of the new administration.

Although competition exists, for-profit educators serve a segment of the market for postsecondary education that we believe has not been fully addressed by traditional public and private universities. Public and private non-profit institutions can face limited financial resources to expand their offerings in response to growth or changes in the demand for education, due to a combination of state funding challenges, decreased enrollment, increased expenses, significant expenditures required for research, and the professor tenure system. Institutions may also limit student enrollments to preserve the perceived prestige and exclusivity of their degree offerings. For-profit providers of postsecondary education offer prospective students the greater flexibility and convenience of their institutions' programmatic offerings and learning structure and an emphasis on applied content and the use of technology in the delivery of the education. At the same time, the share of the postsecondary education market that has been captured by for-profit providers remains relatively small. As a result, we believe that in spite of regulatory and other challenges facing the industry, for-profit postsecondary education providers continue to have significant opportunities to address the demand for postsecondary education.

The majority of our degree-seeking students today have one or more non-traditional characteristics (e.g., did not enroll immediately after high school graduation, work full-time, are financially independent for purposes of financial aid eligibility, have dependents other than a spouse or are single parents). These non-traditional students typically are looking to improve their skills and enhance their earning potential within the context of their careers or in pursuit of new careers. As the industry has shifted to more students with non-traditional characteristics, an increasing proportion of colleges and universities are addressing the needs of working students. This includes colleges and universities with well-established brand names that were historically focused on traditional students.

ACCREDITATION, STATE REGULATION AND OTHER COMPLIANCE MATTERS

Institutional Accreditation

In the United States, accreditation is a process through which an institution subjects itself to qualitative review by an organization of peer institutions. Accrediting agencies primarily examine the academic quality of the instructional programs of an institution, and a grant of accreditation is viewed as confirmation that an institution’s programs meet generally accepted academic standards. Accrediting agencies also review the administrative and financial operations of the institutions they accredit to ensure that each institution has the resources to meet its educational mission.

Pursuant to provisions of the Higher Education Act, the Department relies on institutional accrediting agencies recognized by the Department to determine whether institutions’ educational programs qualify the institutions to participate in Title IV Programs. The Higher Education Act and its implementing regulations specify certain standards that all recognized accrediting agencies must adopt in connection with their review of postsecondary institutions.

All of our institutions are accredited by accrediting agencies recognized by ED. AIUS had a comprehensive evaluation in 2024, during which the Higher Learning Commission ("HLC") found that AIUS continued to meet HLC’s criteria for accreditation, with its next reaffirmation of accreditation scheduled for 2033-2034. CTU is scheduled for reaccreditation by HLC in 2032-2033. In addition, on December 2, 2024, we acquired USAHS. USAHS is accredited by the Western Association of Colleges and Schools Senior College and University Commission (“WSCUC”). USAHS’ next reaffirmation of accreditation is scheduled for 2027.

Institutional Accreditation Table

(1) Additional locations as defined by accreditors are in parenthesis.

(2) Status as of February 18, 2025.

Programmatic Accreditation

In addition to the institutional accreditation described above, PEC institutions have specialized programmatic accreditations for particular educational programs. Many states and professional associations require professional programs to be accredited at a program level, and require individuals who must sit for professional license exams to have graduated from accredited programs. Programmatic accreditation does not satisfy the Department requirements to confer Title IV Program eligibility; however, it does provide additional academic quality review by peers in a given field and may enable or assist graduates to practice, sit for licensing or certification exams (in some cases) or otherwise secure appropriate employment in their chosen field. In addition to programmatic accreditation, some states have licensing boards which regulate who in a state is licensed to practice in a given profession.

Our universities pursue programmatic accreditation if that accreditation is required by employers or licensing bodies in order for a graduate to practice the profession or if it is required in order for a graduate to sit for a licensing or certification exam in order to practice or advance in the profession. In some cases, programmatic accreditation is sought because it is desired by employers and may enhance the ability of our graduates to compete for employment in their field.

Programmatic accreditation has been granted by the following accrediting agencies for the following degree program areas offered by our institutions.

Programmatic Accreditation Table(1)

(1)

Status as of February 18, 2025.

(2)

See the institutional website for a list of programs included in the approval.

State Regulation

State approval agencies are responsible for the oversight of educational institutions, and continued approval by such agencies is necessary for an institution to operate and grant degrees or certificates to its students. State laws establish standards for, among other things, student instruction, qualifications of faculty, location and nature of facilities, and financial policies. State laws and regulations may limit our campuses’ ability to operate or to award degrees or certificates or offer new programs. Moreover, under the Higher Education Act and federal regulations, approval by such agencies is necessary to maintain eligibility to participate in Title IV Programs. Currently, each of our campuses (ground-based and online) is authorized by the state in which it is located.

Additionally, CTU and AIUS meet state authorization requirements for their online activities via participation in a consortia program called the State Authorization Reciprocity Agreement(“SARA”).

SARA is an agreement among member states, districts and U.S. territories that establishes comparable national standards for interstate offering of postsecondary distance education courses and programs. States, districts and territories apply to become members of SARA (which, in many cases, requires action by the state legislature) and if accepted, institutions approved in their “home” state may apply to become participants in the SARA compact and the “home” state authorization is deemed acceptable to operate an online program in other states that also participate in SARA as long as they do not establish a “physical presence” in those other states (as defined by SARA). Forty-nine states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands are SARA participants (www.nc-sara.org). CTU and AIUS are approved to participate in SARA by their home states (Colorado and Arizona, respectively). California is the only state which is not a part of SARA; CTU and AIUS hold the appropriate approval in that state. AIUS also has licenses for its physical campus locations in Texas and Georgia. USAHS is licensed in its home state of California and the states of Florida and Texas where its physical campuses are located; in addition, USAHS maintains licenses or exemptions in each state which requires such licensure and where students are enrolled since it is not eligible to participate in SARA.

In addition to state education regulations, there are other state agencies that oversee regulations related to student financing, payment servicing and general consumer protection. In some cases, state laws and regulations require us to register the volume of payment plans our students enter into and/or require licenses for our institutions to collect student payments for the educational services they deliver.

Other Compliance Matters

On July 26, 2019, the Company executed a settlement agreement with the U.S. Federal Trade Commission ("FTC") to resolve an inquiry commenced by the FTC in 2015. While not admitting any wrongdoing, the Company chose to settle the FTC inquiry after almost four years of legal expenses and cooperating with the FTC’s investigation. Under the terms of the agreement with the FTC, the Company agreed to continue its compliance with the Federal Trade Commission Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act, including compliance with the national do not call registry. The Company agreed to enhance its current operational and compliance processes with respect to prospective student expressions of interest, or “leads,” purchased from third party lead aggregators and generators and implement other agreed-upon compliance measures. Specifically, the agreement with the FTC requires the operation of a system to monitor third party lead aggregators and generators involving a compliance review by, or on behalf of, the Company of the various sources a prospective student interacts with prior to the Company’s purchase and use of the prospective student lead. In addition, the FTC Agreement contains requirements regarding employee and lead aggregator acknowledgements of the agreement, compliance certifications and record creation and maintenance. The principal provisions of the agreement with the FTC will remain in effect for twenty years.

See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – Our agreement with the FTC may lead to unexpected impacts on our student enrollments or higher than anticipated expenses, a failure to comply may lead to additional enforcement actions and continued scrutiny may result in additional costs or new enforcement actions,”for more information about these agreements.

STUDENT FINANCIAL AID AND RELATED FEDERAL REGULATION

A majority of our students require assistance in financing their education. Our institutions are approved to participate in the Department's Title IV federal aid programs. Our institutions also participate in a number of state financial aid programs, tuition assistance programs of the United States Armed Forces and other employers and education benefits administered by the Department of Veterans Affairs (“VA”). Our institutions that participate in federal and state financial aid programs are subject to extensive and frequently changing regulatory requirements imposed by federal and state government agencies, and other standards imposed by educational accrediting bodies.

Nature of Federal Support for Postsecondary Education in the United States

The U.S. government provides a substantial portion of its support for postsecondary education in the form of Title IV Program grants, loans and work-study programs to students who can use those funds to finance certain education related expenses at any institution that has been approved to participate by the Department. These federal programs are authorized by the Higher Education Act. While most students are eligible for a Title IV loan, typically, financial aid administered under Title IV is awarded on the basis of financial need, which is generally defined under the Higher Education Act as the difference between the costs associated with attending an institution and the amount a student’s family can reasonably be expected to contribute based on a federally determined formula. Among other things, recipients of Title IV Program funds must maintain a satisfactory grade point average and progress in a timely manner toward completion of their program of study.

Students at our institutions may receive grants, loans and work-study opportunities to fund their education under the Title IV Programs described in the sections below. In addition, some students at our institutions receive education related benefits pursuant to certain programs for veterans and military personnel or through participating in employer benefit programs, the most significant of which are described further below.

Federal Student and Parent Loans

The Department’s major form of aid includes loans to students and parents through the William D. Ford Federal Direct Loan(“Direct Loan”) Program. Direct Loans are loans made directly by the U.S. Government to students or their parents. The Direct Loan program offers Federal Direct Stafford, Federal Direct PLUS (which provides loans to parents of dependent students and to graduate or professional students, known as Parent PLUS and Grad PLUS) and Federal Direct Consolidation Loans.

Undergraduate students who have demonstrated financial need may be eligible to receive a Direct Subsidized Loan, with the Department paying the interest on this loan while the student is enrolled at least half-time in school. Graduate and undergraduate students who do not demonstrate financial need may be eligible to receive a Direct Unsubsidized Loan. Graduate/professional students may only receive Direct Unsubsidized Loans. With Direct Unsubsidized Loans the student is responsible for the interest while in school and after leaving school, although actual interest payments generally may be deferred by the student until after he or she has left school. Students who are eligible for a Direct Subsidized Loan may also be eligible to receive a Direct Unsubsidized Loan.

A student is not required to meet any specific credit scoring criteria to receive a Direct Loan, but historically, any student with a default on a prior loan made under any Title IV Program may not be eligible for new loans unless the default has been cured through repayment progress. Through a recent temporary student loan initiative announced on April 6, 2022, students that had previously defaulted on a student loan were temporarily eligible for new loans which increased the number of prospective students who were able to continue their education at one of our academic institutions. This initiative expired in October 2024. The Department has established maximum annual and aggregate borrowing limits for Direct Loans.

The Direct PLUS Loan Program provides loans to either the parents of dependent students or to graduate students. Parents and graduate students who have an acceptable credit history may borrow a Direct PLUS Loan to pay the education related expenses of a child who is a dependent or a graduate student enrolled at least half-time at our eligible institutions. The amount of a Direct PLUS Loan cannot exceed the student’s cost of attendance less all other financial aid received.

Federal Pell Grant and Federal Supplemental Educational Opportunity Grant

Title IV Program grants are generally made to our students under the Federal Pell Grant(“Pell Grant”) program and the Federal Supplemental Educational Opportunity Grant(“FSEOG”)program. The 2024-25 maximum annual Pell Grant is $7,395, excluding any additional amount awarded pursuant to a year-round Pell Grant. Beginning with the 2017-18 award year, eligible students may receive year-round Pell Grant funds. A year-round Pell Grant program allows students to receive up to 150% of the student’s regular award, allowing students to maintain their enrollment status and receive Pell Grant funds for up to two additional academic terms during an award year so that they can continue taking classes and work toward graduating more quickly. To be eligible for the additional Pell Grant funds, the student must be enrolled at least half-time in the payment period(s) for which the student receives the additional Pell Grant funds in excess of 100% of the student’s regular Pell Grant award.

The FSEOG program awards are designed to supplement Pell Grants up to a maximum amount of $4,000 per academic year for the neediest students. Our institutions are required to provide matching funding for FSEOG awards that represent not less than 25% of the total FSEOG award to be received by eligible students. The matching may be accomplished through institutional, private and/or state funds.

Federal Work-Study Program

Generally, under the federal work-study program, federal funds are used to pay 75% of the cost of part-time employment of eligible students to perform work for the institution or certain off-campus organizations. The remaining 25% is paid by the institution or the student’s employer. In select cases, these federal funds under the federal work-study program are used to pay up to 100% of the cost of part-time employment of eligible students.

Veterans Benefits Programs

Some of our students who are veterans use their benefits under the Montgomery GI Bill or the Post-9/11 Veterans Educational Assistance Act of 2008, as amended(“Post-9/11 GI Bill”), to cover their tuition. A certain number of our students are also eligible to receive funds from other education assistance programs administered by the VA.

The Yellow Ribbon program under the Post-9/11 GI Bill expanded education benefits for veterans who have served on active duty on or after September 11, 2001, including reservists and members of the National Guard. As originally passed, the Post-9/11 GI Bill provided that eligible veterans could receive benefits for tuition purposes up to the cost of in-state tuition at the most expensive public institution of higher education in the state where the veteran was enrolled. In addition, veterans who were enrolled in classroom-based programs or “blended programs” (programs that combine classroom learning and distance learning) could receive monthly housing stipends, while veterans enrolled in wholly distance-based programs were not entitled to a monthly housing stipend. The provisions regarding education benefits for post-9/11 veterans took effect August 1, 2009. The Post-9/11 GI Bill also increased the amount of education benefits available to eligible veterans under the pre-existing Montgomery GI Bill. The legislation also authorized expansion of service members’ ability to transfer veterans’ education benefits to family members.

On January 4, 2011, the Post-9/11 Veterans Educational Assistance Improvements Act of 2010(“Improvements Act”) was adopted, which amends the Post-9/11 GI Bill in several respects. The Improvements Act alters the way benefits related to tuition and fees are calculated. For nonpublic U.S. institutions, the Improvements Act bases the benefits related to tuition and fees on the net cost to the student (after accounting for state and federal aid, scholarships, institutional aid, fee waivers, and similar assistance paid directly to the institution for the sole purpose of defraying tuition cost) rather than the charges established by the institution. The Improvements Act also replaced the state-dependent benefit cap with a single national cap which is adjusted annually and as of August 1, 2024, and effective through July 31, 2025, the national cap of academic year tuition and fee charges for private institution of higher learning is $28,937. In addition, veterans pursuing a program of education solely through distance learning on a more than half-time basis are eligible to receive up to 50% of the national average of the basic housing allowance available to service members who are at military pay grade E-5 and have dependents. Most “Improvements Act” changes took effect on August 1 or October 1, 2011, though changes to rules regarding eligibility for benefits were effective immediately or retroactively to the effective date of the Post-9/11 GI Bill. The Improvements Act did not change the Post-9/11 GI Bill’s provision that allows veterans to receive up to $1,000 per academic year for books, supplies, equipment and other education costs.

U.S. Military Tuition Assistance

Service members of the United States Armed Forces are eligible to receive tuition assistance from their branch of service through the Uniform Tuition Assistance Program of the Department of Defense(“DoD”). Service members may use this tuition assistance to pursue postsecondary degrees at postsecondary institutions that are accredited by accrediting agencies that are recognized by the Department. Each branch of the armed forces has established its own rules for the tuition assistance programs of DoD.

In 2010, both the U.S. Congress and DoD increased their focus on DoD tuition assistance that is used for distance education and programs at for-profit institutions. The DoD Voluntary Education Partnership Memorandum of Understanding(“MOU”)was established as part of the revised DoD Instruction 1322.25, Voluntary Education Programs dated March 15, 2011. The DoD updated the MOU in 2014 and 2019, in each case with enhanced requirements for institutions. The MOU requires that participating institutions provide meaningful information to students about the financial cost and attendance at an institution so military students can make informed decisions on where to attend school, not use unfair, deceptive, and abusive recruiting practices, and provide academic and student support services to service members and their families. It contains requirements regarding the disclosures of costs and amounts covered by federal educational benefits, marketing standards, state authorization, accreditation approvals, standard institutional refund policies, educational plans and academic and financial advising. The MOU also incorporates the development and implementation of the “VA Shopping Sheet,” a standardized cost form with federal aid information which has evolved into what is now referred to by the Department as the “College Financing Plan.” The MOU conveys the commitments and agreements between the educational institution and DoD prior to accepting funds under the tuition assistance program. For example, the MOU requires an institution to agree to support DoD regulatory guidance, adhere to a bill of rights that is specified in the regulations, and participate in the proposed Military Voluntary Education Review program. Under the MOU, institutions must also agree to adhere to the principles and criteria established by the Service Members Opportunity Colleges Degree Network System regarding the transferability of credit and the awarding of credit for military training and experience. CTU, AIUS and USAHS have signed each of the DoD’s standard MOUs. CTU and AIUS have signed most recently in July 2024, which is effective through 2029.

Institutional Payment Plans

Some of our students will enter into institutional payment plans with our institutions to pay a portion, or occasionally all, of their institutional charges directly to the school. This may occur for students who have a gap between Title IV financial aid funding and other third-party aid available to them and the institutional charges or for students who are enrolled in programs or courses for which Title IV or other financial aid is not offered. The payment period for these plans varies and includes payment periods during the in-school period as well as those extending up to 12 months beyond graduation. The payment plans do not charge interest.

Eligibility and Certification by the Department

Under the provisions of the Higher Education Act, an institution must apply to the Department for continued certification to participate in Title IV Programs at least every six years or when it undergoes a change of control. In addition, an institution must obtain the Department's approval for certain substantial changes in its operations, including changes in an institution’s accrediting agency or state authorizing agency or changes to an institution’s structure or certain basic educational features.

Institutions approved to participate in Title IV Programs sign a program participation agreement provided by the Department that describes the terms of participation and includes a number of certifications and assurances made by the head of the institutions. As long as an institution has submitted an application for re-certification at least ninety days prior to the expiration of its current program participation agreement, the institution’s eligibility to participate in Title IV Programs continues on a month-to-month basis until the Department completes its review. The Department may issue full certification to an institution, it may deny certification or it may elect to issue provisional certification, in which case the program participation agreement outlines additional requirements that the institution must meet.

The Department may place an institution on provisional certification status if it finds that the institution does not fully satisfy all required eligibility and certification standards. During the period of provisional certification, an institution must obtain prior Department approval to add an educational program, open a new location or make any other significant change. Provisional certification does not generally limit an institution’s access to Title IV Program funds. The Department may withdraw an institution’s provisional certification without advance notice if the Department determines that the institution is not fulfilling all material requirements.

In February 2025, both CTU and AIUS received renewals of their program participation agreements through June 30, 2027. Additionally, AIUS was removed from provisional certification, leaving both AIUS and CTU with full certification. Following the Trident acquisition and AIU’s implementation of a university system model, institutional accreditation and approval by the Department continues at the AIU System level. By March 31, 2027, CTU and AIUS will each be required to submit applications for recertification to continue participation in Title IV Programs.

As part of the standard change of ownership process, USAHS is operating under a temporary provisional program participation agreement as a result of PEC’s recent acquisition while the Department reviews all of the materials submitted as part of the change of ownership application process. Pursuant to applicable regulations, if the change of ownership is approved, USAHS will then participate under provisional certification for up to three years.

In connection with its administration of Title IV Programs, the Department has broad powers to request information and review records of a participating institution. Since December 2021, the Company has responded to extensive requests for information from the Department's Investigation Group relating to CTU and AIUS. On January 17, 2025, the Department informed us that this inquiry that had spanned over three years was being closed. We were never provided with any explanation or basis for the information requests.

See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – “If the Department denies, or significantly conditions, recertification of any of our institutions to participate in Title IV Programs, that institution could not conduct its business as it is currently conducted,” and other risk factors in Item 1A for additional information about the risks surrounding continued participation in Title IV Programs.

Scrutiny of the For-Profit Postsecondary Education Sector

In recent years, Congress, the Department, states, accrediting agencies, the Consumer Financial Protection Bureau (“CFPB”), the FTC, state attorneys general, consumer advocacy groups and the media have all scrutinized the for-profit postsecondary education sector. Congressional hearings and roundtable discussions were held regarding various aspects of the education industry, including issues surrounding student debt as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit colleges and universities. Many of the most highly criticized institutions have been closed now for several years. A group of influential U.S. senators, consumer advocacy groups and some media outlets have strongly and repeatedly encouraged the Department, DoD and the VA and its state approving agencies to take action to limit or terminate the participation of institutions such as ours in existing tuition assistance programs. In several cases, these groups have received significant financial support from third parties critical of our sector and have aligned on messaging that negatively impacts our sector during policy and rulemaking discussions. In addition, the Biden Administration made student loan forgiveness one of its top domestic policy objectives, and it was aggressively pursued by the Department in cooperation with special interest groups, other federal agencies, state attorney generals and others. These groups collectively focused efforts relating to student debt forgiveness on for-profit colleges and universities, encouraging loan discharge applications and complaints by former students. The loan discharge efforts culminated in an expansive loan forgiveness effort that resulted in the discharge of nearly $189 billion for 5.3 million borrowers. In our sector, these efforts specifically targeted any school that was no longer in operation, allowing the administration to make accusations supporting loan forgiveness to go unchallenged. Additionally, the Biden Administration agreed with activist groups to allow the approval of loan forgiveness without any supporting evidence as part of a legal settlement which vastly expanded the number of former students submitting applications without merit.

The November 2024 federal elections resulted in the election of a new President and Congress. We cannot predict the specific actions that the new Administration or Congress may take or their effect on the higher education sector, however the prior Trump administration focused significantly on a de-regulatory agenda and recent 2025 executive orders similarly call on all federal agencies to prioritize rescinding costly and burdensome regulations over the adoption of new regulation. The new Congress or Administration may delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions. In addition, the new Administration may interpret, apply, and enforce Title IV and other regulations in a manner different from current Department guidance and practice. There have also been calls to dismantle or reorganize the Department. While we are not able to predict the likelihood of these changes, we expect that Title IV participation will continue to be heavily regulated. We expect to continue to need to operate nimbly, making necessary changes to the extent possible to comply with new rules or interpretations as well as new interpretations of existing rules.

Legislative Action and Recent Department Regulatory Initiatives

The U.S. Congress must periodically reauthorize the Higher Education Act and other laws governing Title IV Programs and annually determines the funding level for each Title IV Program.

The Higher Education Opportunity Act(“HEOA”)was the most recent reauthorization of the Higher Education Act and was signed into law on August 14, 2008. It revised many of the regulations governing an institution’s eligibility to participate in Title IV Programs.

Congress has subsequently taken several actions that effectively extend the Higher Education Act and various Title IV Programs on a temporary basis. Congress could work to reauthorize the Higher Education Act in its entirety, pass a series of smaller bills that focus on individual parts of the Higher Education Act, primarily Title IV Programs, or continue to extend existing Title IV Programs for more limited terms while continuing debate on broader policy objectives. Ongoing policy differences in Congress, a majority of which concern spending levels, could lead to significant regulatory changes in connection with any reauthorization of the Higher Education Act or the funding of Title IV Programs generally. A recent proposal from Congress included significantly different obligations for institutions, including a sharing of the financial risks for students that do not repay their student loans, the elimination of Parent and Graduate PLUS loans for new borrowers, and replacement of current annual loan limits with a new system based on the median cost of attendance by program of study. Additionally, legislative changes impacting Title IV Programs is included in broader legislation from time to time and a number of proposals are currently part of ongoing discussions between the White House and Congress regarding the federal budget.

See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult."

There continues to be significant uncertainty around the requirements and approach to handling applications for “borrower defense to repayment” due to a series of rulemakings and competing regulations published in 2016, 2019 and again in 2022 along with a number of legal challenges of those rulemakings and the Department's application of these rules to select institutions. See the “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” section below for a description of these regulations. The Department published its latest version of these rules in final regulations on November 1, 2022 in the Federal Register, with the updated regulations effective July 1, 2023; however a pending legal challenge by a group of schools in Texas has resulted in a stay of aspects of the rule’s effectiveness pending judicial review (see “Negotiated Rulemaking 2022: Affordability and Student Loans” below).

Negotiated Rulemaking 2022: Affordability and Student Loans

In December 2021, the Department concluded negotiated rulemaking on a number of topics related to affordability and student loans. The topics discussed during these negotiations generally related to different Title IV regulations that impact the Department’s ability to discharge student loans. During the process, the Department expressed a goal of making it easier for students to have their loans discharged or forgiven and providing more favorable loan repayment terms. The Department also intends to make it easier to seek recovery of discharged loan funds from institutions. After taking public comment on proposed rules, the Department published final regulations on November 1, 2022 in the Federal Register, which means these regulations were generally effective on July 1, 2023, subject to a court imposed stay discussed below.

These new regulations from the November 1, 2022 Final Rule include the following topics:

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discharges for borrowers with a total and permanent disability;

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eliminating certain interest capitalization events not required by statute;

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discharges for when a school falsely certifies a student was eligible for Title IV Program financial aid;

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closed school loan discharges;

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expanding and simplifying public service loan forgiveness;

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modifying the bases for borrower defense to repayment ("BDR") claims as well as the adjudication processes for student claims;

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modifying the procedures for recovering funds from schools for loans discharged pursuant to the borrower defense to repayment process; and

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prohibiting schools from adopting or enforcing pre-dispute arbitration agreements and waivers of class action lawsuits.

As published, these rules remove certain barriers and simplify the process for borrowers with a total and permanent disability and borrowers seeking public service loan forgiveness. The rules also expand closed school loan discharge provisions. The rules reduce the required supporting evidence and related obligations of students applying for BDR loan forgiveness, expand the categories students could raise in a BDR application, and provide the Department wide latitude to selectively adjudicate future BDR applications without affording institutions adequate opportunity to respond and potentially without regard to the individual merits of the BDR applications.

On August 22, 2023, the Department announced a new, more generous income driven repayment ("IDR") plan for student borrowers called the Saving on a Valuable Education (“SAVE”) plan. The SAVE plan was one of the 2022 negotiated rulemaking topics. The modified IDR plan calculates payments based on a borrower’s income and family size and not the loan balance and forgives outstanding balances after a certain number of years. The plan reduces many borrowers’ monthly payments to zero if their income level does not exceed certain levels. While the plan is intended to reduce the impact of prolonged student debt burdens, the plan is also likely to encourage some portion of students to take on more student loan debt than they might otherwise borrow assuming they will be able to have excess loan borrowing forgiven rather than having to repay what they have borrowed. On March 28, 2024, a coalition of eleven states filed a lawsuit, Kansas v. Biden, challenging the SAVE plan in the U.S. District Court for the District of Kansas. On April 8, 2024, a coalition of seven states filed a second lawsuit, Missouri v. Biden, to invalidate the plan. In August 2024, the Eighth Circuit in Missouri v, Biden upheld the district court order and affirmed a preliminary injunction against the Department preventing the Department from providing forgiveness of principal or interest, not charging borrowers accrued interest and implementing the payment-threshold provisions of the SAVE plan.

We continue to closely monitor the Department’s public statements, legal filings, and other communications, but are unable to determine the ultimate impact of any final regulations on our business at this time. See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult,"for information about the potential impact of new regulations on our business.

Negotiated Rulemaking 2022: Institutional and Programmatic Eligibility

On October 4, 2021, the Department announced its intent to establish another negotiated rulemaking committee to develop proposed regulations related to institutional and programmatic eligibility. Negotiating sessions of the institutional and programmatic eligibility negotiated rulemaking committee were held in January, February and March 2022. The Department provided issue papers that revealed its intent to impose a number of additional obligations for schools and programs to remain eligible for Title IV funds.

On July 28, 2022, the Department published in the Federal Register another set of proposed regulations for public comment covering a topic that was part of the 2021 affordability and student loan negotiations along with two topics that were part of the 2022 institutional and programmatic eligibility negotiations. After public comment on proposed rules, the Department published final regulations on October 28, 2022 in the Federal Register, which means these regulations became effective July 1, 2023.

The new regulations from the October 28, 2022 Final Rule include the following topics:

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adopting new regulations to calculate the percentage of a for-profit school’s revenue that is derived from federal education assistance, referred to as the “90-10 Rule”;

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placing additional requirements and limits on changes of ownership or control; and

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Pell Grant eligibility for prison education programs.

The American Rescue Plan Act of 2021 (H.R.1319), passed on March 11, 2021, amended the Higher Education Act requirement of the 90-10 Rule that for-profit schools derive no more than 90% of their tuition and fee revenue from Title IV funds to require that for-profit schools derive no more than 90% of their tuition and fee revenue from generally any identifiable sources of federal funding. The regulation describing the new 90-10 Rule includes an expanded view of what federal aid is considered “federal educational assistance funds” under the rule, and is intended to include any identifiable revenue a school receives from tuition assistance programs offered by federal agencies, such as the Departments of Defense, Veterans Affairs, and Labor. The new rule also includes a number of technical changes, including a departure from the historical focus on cash basis revenue and existing Title IV Program cash management regulations. For example, in certain instances, institutions would be required to accelerate the receipt of, or would be deemed to have received, federal funds not received at the end of the annual measurement period. Although the Department published regulations in its Final Rule that are consistent with the consensus language reached during negotiated rulemaking, the Department included in the preamble to the regulation a number of interpretations that are likely not consistent with the consensus language and may potentially narrow and/or limit non-federal revenue that may be included by institutions in their annual calculations. These interpretations were offered with limited explanation and are expected to make future compliance with these regulations unclear and therefore more difficult for for-profit institutions.

We are continuing to monitorthe Department’s interpretations, public statements, and other communications and have had to make adjustments in our operations in response to these new rules. See Item 1A, "Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult,"and "Our institutions could lose their eligibility to participate in federal student financial aid programs, face limitations on their ability to serve new or former students or have other limitations placed upon them if the percentage of their revenues derived from certain federal programs is too high,"for information about the potential impact of new regulations on our business.

2023 Negotiated Rulemakings:

On May 19, 2023, the Department published a Notice of Proposed Rulemaking for the following rules:

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Gainful Employment ("GE");

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Financial Value Transparency ("FVT");

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Financial Responsibility;

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Administrative Capability;

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Certification Procedures; and

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Ability to Benefit ("ATB").

Additionally, the Department published a Notice of Proposed Rulemaking for regulations related to student loan debt relief on April 17, 2024. The Department published a second Notice of Proposed Rulemaking for regulations related to student loan debt relief (hardship) on October 31, 2024.

GE and FVT Negotiated Rulemaking

The 2021-2022 Negotiated Rulemaking Committee included rulemaking to re-adopt a new version of the gainful employment regulation (see “Negotiated Rulemaking 2022: Institutional and Programmatic Eligibility” above). A prior Department rulemaking effort in 2019 during the first Trump Administration resulted in the rescission of similar “gainful employment” regulations first adopted in 2015. Our institutions, and most other for-profit institutions, qualify for Title IV Program participation on the basis that they offer programs that, in addition to meeting other requirements, “prepare students for gainful employment in a recognized occupation.” On October 30, 2014, the Obama Administration published a new complex final regulation, effective July 1, 2015, to define “gainful employment” as meeting certain standards measuring the general amount students borrow for enrollment in a program against an amount of their reported earnings. In 2019, through new negotiated rulemaking sessions, the first Trump Administration considered different options for adopting a uniform set of requirements that could be applicable to all schools and not specifically targeted at for-profit institutions. After a public comment period on its proposal, the Department published a final regulation on July 1, 2019 to rescind the 2015 gainful employment regulation effective on July 1, 2020. In lieu of the complex gainful employment regulation designed to eliminate program eligibility, the Department continued to update the college scorecards it developed, which apply to all Title IV eligible institutions, with relevant information for prospective students. While the eligibility tests and disclosures associated with the 2015 gainful employment regulation were no longer required, the term “gainful employment” continues to exist in the Higher Education Act and CTU’s, AIUS’ and USAHS' Title IV eligible programs will continue to need to be career focused educational programs.

Following public comment on the 2023 proposed rules, on October 10, 2023, the Biden Administration published final regulations for a new GE rule. The new GE rule includes an eligibility framework that imposes additional requirements on for-profit sector programs, including our schools. The regulation uses two key metrics: Debt-to-Earnings (“D/E”) and Earnings Premium (“EP”) metrics to determine whether a program prepares students for gainful employment. The D/E metrics measure student debt at a program level against a measure of earnings. The EP metric measures student earnings at a program level against working individuals with a high school diploma or equivalent. GE programs that fail either the D/E or the EP metric in two of three consecutive years will lose Title IV eligibility. Programs offered by AIUS, CTU and USAHS are subject to the GE rule and could lose Title IV eligibility if their programs fail to pass the D/E rates and/or the EP measures. The rule also requires our institutions to warn current and prospective students if a program fails any metric in any year. The issuance of required GE warnings could deter prospective students from enrolling at our institutions and current students from continuing in their programs. Significantly, the 2023 GE rule is retroactive in its measurements, looking at data dating back many years to determine a program’s future eligibility and provides no opportunity for institutions to adopt changes that impact these eligibility metrics. It is also unclear whether and to what extent these metrics may be adversely impacted by the state and federally mandated business closures during the COVID pandemic and the general economic downturn and job loss that resulted from it.

The FVT regulation establishes a framework that is designed to increase the quality and availability of information provided directly to students about the costs, sources of financial aid, and outcomes of students enrolled in all Title IV eligible programs. FVT disclosures apply to only certain Title IV eligible programs offered by all institutions and use the same D/E and EP metrics as the GE framework. While the FVT regulations do not contemplate penalties or sanctions as under the GE rule, the regulations require that current and prospective students be provided relevant disclosures and acknowledge when an educational program is associated with a high debt burden.

On December 22, 2023, the American Association of Cosmetology Schools (“AACS”) filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the GE rule. AACS initiated the lawsuit in an effort to set aside the GE rule on the grounds that it violates the U.S. Constitution and the Administrative Procedure Act and exceeds the Department’s authority under the laws passed by Congress. On March 20, 2024, Ogle School Management, LLC and Triocci University of Beauty Culture, LLC filed a second lawsuit U.S. District Court for the Northern District of Texas seeking to invalidate the rule. On February 10, 2025, the Department of Justice filed a Consent Motion to Stay Proceedings for 90 days to allow incoming officials in the new Administration to familiarize themselves with the challenged regulations and potentially reevaluate them in order to ensure that any additional filings in the case are in accord with the Administration’s policy. The Department further indicated that due to “a number of technical and operational complexities,” the Department currently estimates that the first year’s metrics could not be issued before early fall 2025.

The GE and FVT rules became effective on July 1, 2024. A ‘Fact Sheet’ subsequently released by the Department announced that the first official metrics would be released by early 2025. Administrative and legal challenges to the rollout of the GE and FVT rules have led to delays to the required reporting timelines. A reporting deadline of January 15, 2025 was defined by repeated reports of system glitches and error reports from schools across the country, with many institutions unable to submit data at all. As a result, the Department reopened its debt reporting window to February 18, 2025. On February 14, 2025, the Department further extended the reporting deadline for evaluating completers’ lists and reporting data associated with Financial Value Transparency and Gainful Employment (FVT/GE) until September 30, 2025. The Department further noted that it does not plan to produce any FVT/GE metrics prior to the new deadline and will take no enforcement or other punitive actions against institutions who have been unable to complete reporting to date.

If the Department publishes initial rates by late 2025, presumably the second round of rates would be at some time in the second half of 2026. Programs may be deemed ineligible to participate in Title IV programs as of the second round of rates would need to fail in 2 of 3 reporting years. We are unsure if or when the Administration or the pending legal challenges will provide further changes to the rule and or timelines. A loss or material reduction in eligible Title IV programs due to the GE rule would materially impact our student enrollments and profitability. We are continuing to evaluate the regulation, but given the complexity of the rules and the lack of our access to, and the lack of the Department providing transparency regarding, the earnings data used to calculate the metrics, we are unable to determine the ultimate impact of the regulation on our business at this time.

Financial Responsibility Negotiated Rulemaking

On October 31, 2023, the Department published new regulations on financial responsibility that became effective July 1, 2024. The Financial Responsibility regulations, among other things, significantly modify and expand the mandatory and discretionary triggering events that require an institution to post a letter of credit or other form of financial protection with the Department. The rule provides that a separate letter of credit of not less than 10% of the institution’s prior year Title IV receipts is required for each mandatory event or discretionary triggering event as determined by the Department in its discretion, such that multiple triggering events could subject our institutions to substantial cumulative financial protection obligations.

Examples of mandatory triggering events in the rule include: lawsuits by federal or state authorities to impose an injunction, to establish fines or penalties, or to obtain financial relief, or in a qui tam action in which the federal government has intervened, subject to certain timing requirements; an action by the Department to recover from the institution for adjudicated borrower defense to repayment claims where the potential amount of recovery would cause the institution’s recalculated composite score to drop below 1.0; the institution has received at least 50% of its Title IV funds in its most recently completed fiscal year programs that are failing the GE rule; the institution is required to submit a teach-out plan by a state or federal agency, an accrediting agency, or other oversight body for reasons related to financial concerns; for an institution owned at least 50% by a publicly traded entity, the entity is subject to certain actions or events specified in the rule initiated by the Securities and Exchange Commission; the institution fails the 90-10 rule for its most recently completed fiscal year; and, the institution is subject to a default or other adverse condition under a line of credit, loan agreement, security agreement or other financing arrangement due to an action by the Department.

Specified discretionary triggers would provide the Department flexibility on whether to require a letter of credit based on the adverse financial impact the triggering event would have on the institution. Examples of discretionary triggers include: an accrediting agency or a federal, state, or other authority places the institution on probation, show cause, or comparable status; the institution is subject to a default or other specified adverse condition under a credit or financing arrangement (unless due to an action by the Department, which is a mandatory trigger); a “significant fluctuation” in Direct Loan or Pell Grant funds received by the institution over different award years that cannot be accounted for by changes in those programs; the institution has high annual dropout rates as calculated by the Department; the institution is under prior financial reporting obligations to the Department and has any of the following occurrences: negative cash flows, failure of other financial ratios, cash flows that significantly miss projections submitted to the Department, significant increases in withdrawal rates or other indicators of a significant change in the institution’s financial condition; pending group-process BDR claims; a discontinuation of programs that enroll more than 25% of the institution’s students who receive Title IV funds; a closure of locations that enroll more than 25% of its students who receive Title IV funds; a citation by a state licensing agency for failing to meet its requirements; the institution or a program loses eligibility to participate in another federal educational assistance program due to an administrative action; for an institution owned at least 50% by a publicly traded entity, a disclosure by the entity in a public filing that its owner is under investigation for possible violations of state, federal or foreign law; a citation and potential loss of education assistance funds from another federal agency if it does not comply with agency requirements; the institution is required to submit a teach-out plan or agreement, including programmatic teach-outs, by a state, the Department or another federal agency, an accrediting agency, or other oversight body; or any other event or condition that the Department learns about from the institution or other parties where the Department determines that the event or condition is likely to have a significant adverse effect on the financial condition of the institution.

The new rule also adds additional circumstances that would deem an institution to lack financial responsibility, such as: failing to make debt payments for more than 90 days; failing to meet payroll obligations; borrowing from employee retirement plans or restricted funds without authorization; failing to make timely refunds or returns of Title IV funds or pay Title IV credit balances; or failing to make repayments of any Title IV liabilities. Finally, the regulations establish new rules for evaluating financial responsibility during a change in ownership.

Administrative Capability Negotiated Rulemaking

The Department regulations specify extensive criteria that an institution must satisfy to establish that it has the requisite administrative capability to participate in Title IV Programs. These criteria relate to, among other things, institutional staffing, operational standards such as procedures for disbursing and safeguarding Title IV Program funds, timely submission of accurate reports to the Department and various other procedural matters. If an institution fails to satisfy any of the Department’s criteria for administrative capability, the Department may require the repayment of Title IV Program funds disbursed by the institution, place the institution on provisional certification status, require the institution to receive Title IV Program funds under another funding arrangement, impose fines or limit or terminate the participation of the institution in Title IV Programs.

On October 31, 2023, the Department published new regulations on administrative capability (the "Administrative Capability" regulations) that became effective July 1, 2024. The Administrative Capability regulations expand the requirements for institutions to demonstrate that they are administratively capable of providing the education they promise and of properly managing Title IV program funds, adding new standards related to financial counseling and career services, adequate clinical and externship opportunities, timely disbursement of Title IV funds, compliance with high school diploma verification requirements, aggressive and deceptive recruitment tactics or conduct, gainful employment requirements, and significant negative actions by a federal, state or accreditation agencies. The changes also provide the Department with increased and explicit authority to make an administrative capability finding based on a broader set of issues than it has used historically. Such findings could lead to fines, limitations, suspensions, terminations or other actions, including placing the institution on a provisional program participation agreement or heightened cash monitoring.

Certification Procedures Negotiated Rulemaking

On October 31, 2023, the Department published new regulations on certification procedures (the "Certification" rule) that became effective July 1, 2024. The revised Certification rule provides a more rigorous process for certifying institutions to participate in the Title IV programs, both initially and on an ongoing basis. The changes increase the Department’s oversight of institutions at critical points of institutional review including initial certification, during provisional certification, after a change of ownership, at recertification, and when there is a risk of closure.

This rule adds additional events that lead to provisional certification, such as if an institution is required to post a letter of credit because of a mandatory or discretionary triggers in the financial responsibility regulations, the Department determines the institution is at risk of closure, or the institution fails the 90-10 rule. It establishes new supplementary performance measures the Department may consider in determining whether to certify or condition the participation of the institution, such as withdrawal rates, the amount of educational and pre-enrollment expenditures, and licensure pass rates where the institution is required by an accrediting agency or state to report licensure exam passage rates.

The changes add a provision to include all federal agencies and add state attorneys general to the list of entities that have the authority to share with each other and the Department any information pertaining to an institution’s eligibility for or participation in Title IV programs or any information on fraud, abuse, or other violations of law.

The regulations establish a non-exhaustive list of conditions that the Department may apply to provisionally certified institutions, such as the submission of teach-out plans, the release of holds on student transcripts, restrictions or limitations on the addition of new programs or locations, requirements related to enrollment in programs that lead to state licensure, restrictions on growth in enrollments or Title IV volume, restrictions on the ability to provide a teach-out on behalf of another institution, restrictions on the acquisition of other institutions, additional financial reporting requirements, and limitations on entering into written arrangements with other institutions for the provision of educational instruction.

Finally, the new rule requires provisionally certified schools that have major consumer protection issues to recertify after no more than three years. For institutions alleged or found to have engaged in misrepresentation, aggressive recruiting, or incentive compensation violations, the Department may require that the institution engage a monitor and submit marketing materials to the Department for its review and approval.

Student Loan Debt Relief Negotiated Rulemaking

On August 31, 2023, the Department issued a notice of its intent to establish a Student Loan Debt Relief negotiated rulemaking committee to prepare proposed regulations for the federal student aid programs authorized under the Higher Education Act. As part of this rulemaking, the Department considered revisions to its federal student loan compromise regulations, as well as adding regulations on the circumstances under which the Department may waive or release all or part of federal student loan debts. On October 31, 2024, the Department published a Notice of Proposed Rulemaking on student debt relief based on hardship. On December 26, 2024, the Department withdrew its notice of proposed rulemaking for both rules.

2024 Negotiated Rulemaking

The Department convened a negotiating committee to develop proposed regulations pertaining to the following topics:

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The Federal TRIO programs;

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The Secretary's recognition of accrediting agencies;

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State authorization;

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Return to Title IV funds ("R2T4");

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Cash Management; and

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The definition of "distance education" as it pertains to clock hour programs and reporting for students who enroll primarily online.

This committee met in January, February and March 2024. On July 24, 2024, the Department published its Proposed Rule addressing distance education, R2T4 and Federal TRIO programs. The regulations were intended to help the Department improve its oversight of distance education and correspondence programs, and increase the accuracy of its R2T4 calculations. On December 30, 2024, the Department published final rules on distance education and R2T4, which rules would not become effective until July 1, 2026. On December 20, 2024, the Department terminated the negotiated rulemaking process for state authorization, cash management, and accreditation. We continue to closely monitor the Department’s rulemaking agenda, but we are unable to determine the potential impact of any future rule proposals or final regulations on our business at this time.

2024 Final Regulations – Summary

Return to Title IV Funds

In the final rule, the Department abandoned its proposal to require institutions to take attendance for every course offered by distance education. The Department also dropped its proposal to permit students who received a student loan credit balance refund, but who never began attendance, to repay the loan according to the terms of the promissory note.

The new rule retains other proposed provisions, including an optional exemption from performing an R2T4 calculation for institutions with generous tuition refund policies, defined as treating withdrawn students as though they had never begun attendance; returning all Title IV aid and refunding all institution charges for the payment period or period of enrollment; and writing off any balance due for the payment period or period of enrollment (changed from the proposed rule where the Department required writing off balances for the “current year”) in which the withdrawal occurred.

The Department chose to retain its proposal to codify longstanding guidance that, for institutions required to take attendance, the date of determination of withdrawal must be documented within 14 days after the student’s last date of attendance.

The new rule includes a change to how the R2T4 calculation is performed for programs offered in modules, specifically with respect to establishing a “freeze date” to determine the number of days in a payment period for these programs. In place of the freeze date, the rules will now consider a module part of the payment period for R2T4 calculation purposes only if the student began attendance in that module.

Distance Education

The final rules do not include a proposal to report distance education programs as “additional virtual locations” but, retained a new definition for “distance education course,” with slight changes from the proposal.

TRIO Programs

The Department chose not to finalize any of the TRIO rule changes proposed in July, which would have expanded eligibility for the Talent Search, Upward Bound, and Educational Opportunity Center to noncitizen students enrolled or seeking to enroll in a high school in the U.S., its territories, or the Freely Associated States.

See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult," for information about the potential impact of new regulations on our business.

The Department’s proposed and final rules discussed above impose additional burdens on academic institutions, and often apply unevenly. For example, the 90-10 Rule is an additional annual eligibility test requirement that applies exclusively to for-profit sector institutions. The GE rule is designed to primarily impose additional requirements on for-profit sector programs and many of the proposed modifications to other long standing existing rules contain new requirements that apply exclusively to for-profit sector institutions and their ownership structures. The previously adopted and rescinded GE regulation is discussed above in this “Legislative Action and Recent Department Regulatory Initiatives” section, and see the “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” section below for an overview of the current rules relating to the 90-10 Rule, change of ownership or control, financial responsibility and administrative capability.

Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations

To be eligible to participate in Title IV Programs, an institution must comply with the Higher Education Act and regulations thereunder that are administered by the Department. We and our institutions are regularly subject to audits and compliance reviews and periodically subject to inquiries, lawsuits, investigations, and/or claims of non-compliance from federal and state regulatory agencies, accrediting agencies, the Department, based on claims by present and former students and employees, and others that may allege violations of statutes, regulations, accreditation standards or other regulatory requirements applicable to us or our institutions. If the results of any such audits, reviews, investigations, claims or actions are unfavorable to us, we may be required to pay monetary damages or be subject to fines, operational limitations, loss of federal funding, injunctions, additional oversight and reporting, provisional certification or other civil or criminal penalties. In addition, if the Department or another regulatory agency determined that one of our institutions improperly disbursed Title IV Program funds or violated a provision of the Higher Education Act or the Department’s regulations, that institution could be required to repay such funds, and could be assessed an administrative fine.

The Higher Education Act also requires that an institution’s administration of Title IV Program funds be audited annually by an independent accounting firm and that the resulting audit report be submitted to the Department for review. In May 2023, the Department’s Office of Inspector General (“OIG”) released a revised audit guide applicable specifically to proprietary schools and third-party servicers administering Title IV programs. The updated guide is effective for fiscal years beginning after January 1, 2023. The revised audit guide was effective for us for the year ending December 31, 2023 and applies to annual compliance audits due June 30, 2024 and thereafter. The new guide increases the requirements and testing procedures necessary when filing our annual Title IV compliance audits.

“90-10 Rule”

Under a provision of the Higher Education Act commonly referred to as the “90-10 Rule,” any of our institutions that, on modified cash basis accounting, derives more than 90% of its cash receipts from federal sources for a fiscal year will be placed on provisional participation status for its next two fiscal years, is required to provide warning notices to students regarding the potential loss of Title IV and would be required to post a letter of credit with the Department. If an institution does not satisfy the 90-10 Rule for two consecutive fiscal years, it will lose its eligibility to participate in Title IV Programs for at least two fiscal years. We have essentially no control over the amount of federal funding sought by or awarded to our students. If an institution violates the 90-10 Rule and becomes ineligible to participate in Title IV Programs but continues to disburse Title IV Program funds, the Department could require repayment of all Title IV Program funds received by it after the effective date of the loss of eligibility

We have implemented various measures intended to reduce the percentage of our institution’s 90-10 revenue attributable to federal Program funds, including emphasizing employer-paid and other direct-pay education programs such as our corporate engagements, diversifying our educational offerings to increase the portion of our students who do not rely on Title IV Programs, recruitment of international students, the use of externally funded scholarships and grants and counseling students to carefully evaluate the amount of necessary Title IV Program borrowing consistent with Department regulations and guidance.

As discussed above in “Legislative Action and Recent Department Regulatory Initiatives," the calculation beginning with the 2023 fiscal year was calculated using the new calculation. We have preliminarily calculated the 90-10 rates for the year ended December 31, 2024 and AIUS, CTU and USAHS are all in compliance with the 90-10 Rule. The preliminary calculations for AIUS and CTU show improvement from the prior year. The new 90-10 Rule requires a much greater level of granularity and research of different fund sources to determine whether there may be an indirect and otherwise unobvious federal connection. While our preliminary calculations of the 90-10 rates for 2024 show our institutions continue to be in compliance, we are continuing our review of the applicable requirements and audit of our 2024 rates.

On December 21, 2022, the Department published in the Federal Register the list of sources of Federal Education Assistance to be included as “federal educational assistance” under the revised rule. This publication confirmed that government education assistance for military or veteran personnel is considered “federal educational assistance.” Furthermore, the Department indicates that the list is not all encompassing as certain non-federal entities may sub-grant award funds under various names, and that it is up to each institution to determine if there are federal funds included in amounts received from students or other funding sources, and the precise federal and non-federal breakdown in instances where funds may be co-mingled. The result makes compliance with the revised rule more difficult if not impossible in some cases, as well as adding additional layers of complexity for institutions to calculate a rate under the new rules.

The ability of our institutions to maintain 90-10 rates below 90% will depend on the impact of future changes in our student enrollment mix, and Department regulations and guidance and other factors outside of our control. In addition, disagreements with, changes in, or new interpretations of, the technical aspects of the calculation methodology or other industry practices under the 90-10 Rule could further significantly impact our compliance with the 90-10 Rule.

See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – Our institutions could lose their eligibility to participate in federal student financial aid programs, face limitations on their ability to serve new or former students or have other limitations placed upon them if the percentage of their revenues derived from certain federal programs is too high,"for additional information regarding risks relating to the 90-10 Rule.

Student Loan Default Rates

An institution may lose eligibility to participate in some or all Title IV Programs if the rates at which its former students default on the repayment of their federally-guaranteed or federally-funded student loans exceed specified percentages. This is determined by an institution’s cohort default rate which is calculated on an annual basis as a measure of administrative capability. Each cohort is the group of students who first enter into student loan repayment during a federal fiscal year (ending September 30 of each year). An institution’s cohort default rate is calculated as the percentage of borrowers who entered repayment in the relevant federal fiscal year who default before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment. This represents a three-year measurement period.

If an institution’s three-year cohort default rate exceeds 10% for any one of the three preceding years, it must delay for 30 days the release of the first disbursement of U.S. federal student loan proceeds to first time borrowers enrolled in the first year of an undergraduate program. As a matter of regular practice, our institutions have implemented a 30-day delay for such disbursements.

If an institution’s three-year cohort default rate exceeds 30% for any given year, it must establish a default prevention task force and develop a default prevention plan with measurable objectives for improving the cohort default rate.

Excessive three-year cohort default rates will result in the loss of an institution’s Title IV eligibility, as follows:

•Annual test. If the three-year cohort default rate for any given year exceeds 40%, the institution will cease to be eligible to participate in Title IV Programs; and

•Three consecutive years test. If the institution’s three-year cohort default rate exceeds 30% for three consecutive years, the institution will cease to be eligible to participate in Title IV Programs.

We have initiatives aimed at reducing the likelihood of our students’ failure to repay their loans in a timely manner. These initiatives emphasize the importance of students’ compliance with loan repayment requirements and provide for loan counseling and communication with students after they cease enrollment. Our efforts supplement the counseling, processing and other student loan servicing work performed by the Department through contracts it has with select third parties. The quality and nature of the student loan servicing work performed by the Department has a direct impact on our cohort default rates and we have experienced past performance failures by the Department and its student loan servicers in outreach to students.

As part of the CARES Act, which was signed into law on March 27, 2020, federal student loan payments and interest were suspended for a period of time. Ultimately, student loan repayment started up again in October 2023, while interest began accruing on those loans as of September 1, 2023. During the suspended period, student loan borrowers had their loans placed in forbearance, and as such, were no longer required to make payments on their federal student loans. Consequently, no further defaults could occur during this period. Based on this forbearance, and more specifically the timing of it, we have seen a favorable impact on the CDR rates starting with the 2018 rates. We believe this favorability will at least continue through the 2023 cohort default rates, and expect the rates through the 2022 cohort to be at or near zero percent and 2023 to be under 10%.

In September 2024, the Department released the official three-year cohort default rates for the 2021 cohort which was 0% for all our academic institutions. A listing of the official 2021, 2020 and 2019 three-year cohort default rates for our institutions is provided in the table below.

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Trident University students who entered repayment on or after March 2, 2020, will begin to be included in the American InterContinental University cohort default rates starting with the 2020 cohort.

With the forbearance period having ended in October 2023, and interest once again accruing on these loans, all students were encouraged to resume their next normally scheduled payment in October 2023. To assist with the resumption of loan repayment after a long hiatus, the Department issued an “on-ramp” program, which would not penalize students even if they failed to make the required payments for one year. As students become delinquent, they will automatically be redesignated by the Department’s loan servicers as in good standing up through September 2024. Separately, with the resumption of repayment in October 2023, borrowers have experienced numerous issues, such as having a new servicer to make payments to, not receiving or receiving incorrect information on their payment, and significantly long wait times to get through to the servicers.

Furthermore, with the resumption of repayment, the Department also implemented a new repayment option called the “SAVE” plan. This plan was designed to generally be more favorable than all the other existing repayment plans, eliminating several options and therefore simplifying the repayment choices for borrowers. On July 28, 2024, this new income-based repayment plan had been paused by a federal appeals court. There are two legal challenges currently on-going against the “SAVE” plan. It is unclear what the outcome of the legal challenges will be, and what repayment options will be available to students should the legal challenge be successful. Under this new plan, starting with the October repayment resumption, among other benefits, many more borrowers would have been eligible for a zero-dollar repayment amount. Starting in July 2024, many borrowers with a repayment amount greater than zero would have been eligible for a new, significantly reduced payment amount. Most borrowers, not already in an income-based repayment plan, would need to actively sign up for this new repayment plan with their federal loan servicer. Currently, students who have signed up for this new repayment plan have been place in an interest free forbearance, where they are not required to make any payments. It is unclear how the repayment plan “on-ramp” process, coupled with the various servicer issues will ultimately impact cohort default rates in the future. Many of these servicers have been advertising long wait times for supporting student borrowers for an extended period of time which is likely to adversely impact the cohort default rates at our institutions. Furthermore, servicers have indicated they are performing limited to no outreach to delinquent borrowers, as they concentrate their resources on attempting to answer the inbound call volume. The Department has warned that defaults across all institutions may rise considerably when the blanket forbearance expires. Additionally, a number of recently adopted policies by the Biden Administration have created disincentives for students to repay their loans, including forgoing a number of common consequences of nonpayment during this “on-ramp” period and frequently promoting a desire to provide broad based loan forgiveness. These policies are expected to negatively impact future default rates and recent reports show repayment trends on student loans that have re-entered repayment in October 2023, are significantly behind historical levels. As a result of all these changes, as well as the servicer issues, we anticipate seeing higher cohort default rates as compared to historical rates starting with the 2024 cohort, until the loan repayment landscape improves.

Borrower Defense to Repayment

On November 1, 2016, the Department adopted new regulations that cover multiple issues including the processes and standards for the discharge of federal student loans, which are commonly referred to as “borrower defense to repayment” ("BDR") regulations. On September 23, 2019, the Department published new final BDR regulations that became effective on July 1, 2020. The new 2019 final BDR regulations are summarized below and created a distinct loan discharge process and standards applicable to federal student loans first disbursed after July 1, 2020. On November 1, 2022, the Department published further revised and final BDR regulations that were to become effective on July 1, 2023. See “Legislative Action and Recent Department Regulatory Initiatives - Negotiated Rulemaking 2022: Affordability and Student Loans,” for more information. These regulations have been negotiated and revised multiple times by the Department, who has created competing standards and outcomes for institutions and student borrowers. Since their initial adoption in 2016 and with their subsequent modifications in 2019 and 2022, the Department’s BDR regulations have also been the subject of numerous legal challenges in different jurisdictions around the country. The Department subsequently used the settlement of a lawsuit (discussed below) that was primarily seeking improvements in the Department's processing of claims as a means of providing loan forgiveness, including previously denied and/or meritless claims and further adopting yet a new BDR process and set of standards applicable to claims pending as of that date. Numerous legal challenges remain pending regarding these regulations, making it difficult to predict what standards and processes will ultimately apply to historical or future student loans incurred by our current or former students.

2019 Final Regulations – Summary

Loan Discharge. The 2019 BDR regulations significantly altered how loan discharge applications are to be treated by the Department. In addition to adopting the more balanced burden of proof standard of “preponderance of the evidence,” the 2019 regulations provided for a single new federal standard for a misrepresentation claim a student may assert against its school. Under the new standard, an individual borrower may assert a defense to repayment based on the institution’s statement, act, or omission that is false, misleading, or deceptive. To be eligible for relief, the borrower would be required to demonstrate that the misrepresentation (1) was made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth, (2) was relied upon by the borrower in making an enrollment decision, and (3) caused the student financial harm.

In addition, the 2019 final regulations eliminated the concept of automatic group loan discharges contained in the 2016 and subsequent 2022 regulations and require individual claims to be made by students and include a process for the institution to provide a defense to any claims asserted. Although these 2019 regulations were finalized and adopted, it does not appear that the Department implemented or applied them to any pending BDR applications and instead agreed to a settlement of existing claims (discussed below) that called for relying on a modified set of standards while they developed new standards and processes adopted in November 2022.

Department Settlement of Pending BDR Applications, Inducement of New Claims

On November 16, 2022, a California federal court in Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.) approved a settlement agreement entered into by the Department in a class action lawsuit that challenges the way the Department has been dealing with BDR applications over the past few years (“Sweet Settlement”). The Sweet Settlement provides a streamlined path to debt forgiveness for former students of over 150 schools, including AIUS, CTU, and institutions of ours that have previously closed. Neither the Company nor our current or former institutions are a party to this lawsuit. BDR applications for over 150 schools pending at the time of the settlement agreement were approximately 286,000, but expanded by an addition 180,000 applications prior to the court’s final approval following publicity about the opportunity afforded by the settlement. The Department has neither identified the number of claims nor the specific claims covered by the Sweet Settlement that are related to our institutions. Because the process agreed to by the Department in the Sweet Settlement does not follow the claim adjudication procedures set out in applicable regulations, while uncertain, we believe the claims covered by the Sweet Settlement cannot form the basis of a claim for recoupment against the Company or our institutions.

Pending Borrower Defense to Repayment Applications

In May 2021, the Department notified the Company that the Department has several thousand borrower defense applications that make claims regarding the Company’s institutions, including institutions that have ceased operations. As part of the initial fact-finding process, the Department sent individual student claims to the Company and allowed the institutions the opportunity to submit responses to the borrower defense applications. A majority of the claims received involve institutions or campuses that have ceased operations and, in some cases, involve students who attended over 25 years ago. We have submitted responses to the claims received which indicate that we believe the applications fail to establish a valid borrower defense and the Department should therefore deny them. We have responded to substantial requests for information going back as far as 25 years with respect to these claims. The initial volume of several thousand expanded significantly as the Department and outside interest groups have continued to promote different pathways for students to receive loan forgiveness or loan discharge. Despite our belief expressed in responses submitted to the Department that the applications fail to establish a valid borrower defense and the Department should therefore deny them, the Department has already agreed in the Sweet Settlement to discharge most of the applications we are aware of. Our belief is that those applications discharged pursuant to the Sweet Settlement would not be eligible for recoupment against the Company. Almost all of the applications we have been provided to date would be covered by procedures set forth in the Sweet Settlement. It remains unclear what loan discharge applications the Department may grant in the future and whether they will assert repayment claims against us regardless of the date the student loan was disbursed and the corresponding discharge standards and processes.

2022 Final Regulations – Summary

As part of the Institutional and Programmatic Eligibility rulemaking, on November 1, 2022, the Department of Education released final rules on borrower defense to repayment (“BDR”). The borrower defense to repayment rules have an effective date of July 1, 2023. The rules establish a single federal standard for BDR, include a new definition of aggressive and deceptive recruitment - one of five grounds under which a claim could be filed under the new rules - and reinstate a ban on pre-dispute arbitration and class action waivers. The grounds on which a student may make a claim for BDR under these new rules include:

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substantial misrepresentation,

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substantial omission of fact,

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breach of contract,

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aggressive and deceptive recruitment, or

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a federal, state judgment, departmental adverse action against an institution that could give rise to a borrower defense claim.

As published, the new rules remove certain barriers and simplify the process for borrowers with a total and permanent disability and borrowers seeking public service loan forgiveness. The rules also expand closed school loan discharge provisions. The rules reduce the required supporting evidence and related obligations of students applying for BDR loan forgiveness, expand the categories students could raise in a BDR application, and provide the Department wide latitude to selectively adjudicate future BDR applications without affording institutions adequate opportunity to respond and potentially without regard to the individual merits of the BDR applications. The new BDR rules remove any statute of limitations on student claims and create a rebuttable presumption in favor of full loan forgiveness as opposed to partial relief for most approved applications, eliminating the Department’s approach under the previous rules of assessing whether and to what extent a student had been financially harmed. The rules also increase the burden on institutions to maintain and provide documentation to refute student claims. As a result, an institution’s failure to maintain and provide timely and responsive information that goes beyond the contents of a typical student’s academic file in response to future BDR applications could form the basis for loan forgiveness. The combination of the reduced requirements, increased categories, and presumptions will increase the likelihood of loan forgiveness and potentially create a significant financial incentive for existing and former students to apply for loan forgiveness regardless of a claim’s merit. In fact, the Department’s current efforts to settle litigation in the Sweet Matter (see "Borrower Defense to Repayment: Department Settlement of Pending BDR Applications, Inducement of New Claims" for more information regarding the Sweet Matter) reflects an attempt to discharge the loans for hundreds of thousands of students without regards to the merits of their claims and induced the filing of tens of thousands of new BDR applications in a matter of only a few months from students hoping to benefit from the opportunity afforded by the settlement.

On February 28, 2023, the Career Colleges & Schools of Texas (“CCST”) filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the Department’s recently promulgated borrower defense to repayment and closed school loan discharge regulations. CCST initiated the lawsuit in an effort to set aside the BDR rule on the grounds that it violates the U.S. Constitution and the Administrative Procedure Act. On August 7, 2023, a three-judge Fifth Circuit Court of Appeals panel granted a motion for an injunction pending appeal in the lawsuit. The motion stayed the effective date of the borrower defense to repayment and closed school loan discharge provisions that went into effect on July 1, 2023. On November 6, 2023, oral argument was heard by a three judge panel of the Fifth Circuit. On April 4, 2024, the Fifth Circuit Court of Appeals reversed the order of the U.S. District Court for the Western District of Texas, and granted a preliminary injunction against the 2022 BDR Rule. On October 11, 2024, the Department of Education petitioned the Supreme Court to review the U.S. Court of Appeals for the Fifth Circuit’s grant of the preliminary injunction. On January 10, 2025, the Supreme Court granted the petition for certiorari review. According to the Supreme Court’s docket, it is only taking up one of the two questions in the petition: “Whether the court of appeals erred in holding that the Education Act does not permit the assessment of borrower defenses to repayment before default, in administrative proceedings, or on a group basis.” On February 6, 2025, the Supreme Court paused at the Department’s request its review of the lawsuit, as the Acting Secretary of Education announced that the Department would reevaluate the Department’s BDR regulations.

Financial Responsibility Standards

To participate in Title IV Programs, our institutions must either satisfy standards of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and possibly accept other conditions on their participation in Title IV Programs. Pursuant to the Title IV Program regulations, each eligible higher education institution must, among other things, satisfy on an annual basis a quantitative standard of financial responsibility that is based on a weighted average of three tests that assess the financial condition of the institution, known as a “composite score.” The three tests measure primary reserve, equity and net income ratios. The Primary Reserve Ratio is a measure of an institution’s financial viability and liquidity. The Equity Ratio is a measure of an institution’s capital resources and its ability to borrow. The Net Income Ratio is a measure of an institution’s profitability. These tests provide three individual scores that are converted into a single composite score. The maximum composite score is 3.0. If the institution achieves a composite score of at least 1.5, it is considered financially responsible without conditions or additional oversight. A composite score from 1.0 to 1.4 is considered to be in “the zone” of financial responsibility, and a composite score of less than 1.0 is not considered to be financially responsible. If an institution is in “the zone” of financial responsibility, the institution may establish eligibility to continue to participate in Title IV Programs under the Zone Alternative.

Zone Alternative. Under what is referred to as the “zone alternative,” an institution may continue to participate in Title IV Programs for up to three years under additional monitoring and reporting procedures but without having to post a letter of credit in favor of the Department. These additional monitoring and reporting procedures include being transferred from the “advance” method of payment of Title IV Program funds to cash monitoring status (referred to as Heightened Cash Monitoring 1, or“HCM1,” status) or to the “reimbursement” or Heightened Cash Monitoring 2(“HCM2”)methods of payment. If an institution does not achieve a composite score of at least 1.0 in one of the three subsequent years or does not improve its financial condition to attain a composite score of at least 1.5 by the end of the three-year period, the institution must satisfy another alternative standard to continue participating in Title IV Programs.

If an institution has a composite score of less than 1.0 it may continue to participate in Title IV programs under either of the following alternative bases:

• Letter of Credit Alternative. An institution that fails to meet one of the standards of financial responsibility, including by having a composite score less than 1.5, may demonstrate financial responsibility by submitting an irrevocable letter of credit to the Department in an amount equal to at least 50% of the Title IV Program funds that the institution received during its most recently completed fiscal year. By choosing this option, the institution qualifies as a financially responsible institution.

• Provisional Certification. If an institution fails to meet one of the standards of financial responsibility, including by having a composite score less than 1.5, the Department may permit the institution to participate under provisional certification for up to three years. If the Department permits an institution to participate under provisional certification, an institution must comply with the requirements of the Zone Alternative, including being transferred to the HCM1, HCM2 or “reimbursement” method of payment of Title IV Program funds, and must submit a letter of credit to the Department in an amount determined by the Department which can range from 10%-100% of the Title IV Program funds that the institution received during its most recently completed fiscal year. If an institution is still not financially responsible at the end of the period of provisional certification, including because it has a composite score of less than 1.0, the Department may again permit provisional certification subject to the terms the Department determines appropriate.

The Department applies its quantitative financial responsibility tests annually based on an institution’s audited financial statements and may apply the tests if an institution undergoes a change in control or under other circumstances. The Department also may apply the tests to the parent company of our institutions, and to other related entities. The Department currently applies the composite score to the parent company on a consolidated basis. Our composite score for the consolidated entity for the year ended December 31, 2023 was 3.0, and our preliminary calculation for the year ended December 31, 2024 is also 3.0, which is the highest possible score and considered financially responsible without conditions or additional oversight. If in the future we are required to satisfy the Department’s standards of financial responsibility on an alternative basis, including potentially by posting irrevocable letters of credit, we may not have the capacity to post these letters of credit.

Currently, USAHS is on HCM1 and has posted an LOC in favor of the Department in the amount of $21.5 million as of December 31, 2024, due to its FRR score attributable to its prior ownership which for 2023 was 0.5. We will engage with the Department to seek removal of these limitations in connection with their review the change of ownership application materials we have submitted and the resulting passing financial responsibility metrics and subsequent FRR score for USAHS.

Accreditor and state regulatory requirements also address financial responsibility, and these requirements vary among agencies and also are different from the Department requirements. Any developments relating to our satisfaction of the Department’s financial responsibility requirements may lead to additional focus or review by our accreditors or applicable state agencies regarding their respective financial responsibility requirements.

In addition to the annual tests referenced above, both the 2016 and 2019 borrower defense to repayment regulations include discussion of financial triggering events that may provide the Department discretion regarding periodic determinations of our financial responsibility and associated enhanced financial protection in the form of a letter of credit or other security it determines it needs. Recently promulgated changes to the financial responsibility regulations that became effective July 1, 2024 included updates to the list of triggering events that, if they occur, may require the posting of one or more letters of credit with the Department.

See “Negotiated Rulemaking 2023: Financial Responsibility” above for more information about changes to the previous rule. See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – A failure to demonstrate ‘financial responsibility’ or ‘administrative capability’ or meet new 'certification' requirements would have negative impacts on our operations,” for additional information regarding risks relating to the financial responsibility standards.

Return and Refunds of Title IV Program Funds

An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that were disbursed to students who withdraw from their educational programs, and must return those funds to the government in a timely manner.

The portion of tuition and fee payments billed to students but not yet earned is recorded as deferred tuition revenue and reflected as a current liability on our consolidated balance sheets, as such amounts represent revenue that we expect to earn within the next year. If a student withdraws from one of our institutions prior to the completion of the academic term, we refund the portion of tuition and fees already paid that we are not entitled to retain, pursuant to applicable federal and state law and accrediting agency standards and our refund policy. The amount of funds to be refunded on behalf of a student is calculated based upon the period of time in which the student has attended classes and the amount of tuition and fees paid by the student as of the student’s withdrawal date.

Institutions are required to return any unearned Title IV funds within 45 days of the date the institution determines that the student has withdrawn. An institution that is found to be in non-compliance with the Department refund requirements for either of the last two completed fiscal years must post a letter of credit in favor of the Department in an amount equal to 25% of the total Title IV Program returns that were paid or should have been paid by the institution during its most recently completed fiscal year. As of December 31, 2024, CTU and AIUS have posted no letters of credit in favor of the Department due to non-compliance with the Department refund requirements. USAHS has issued a letter of credit for $0.1 million due to non-compliance with the Department's refund requirements that took place before our acquisition.

Change of Ownership or Control

When an institution undergoes a change of ownership or a change of ownership resulting in a change of control, as those terms are defined and applied by the applicable state approving agency, its accrediting agency and the Department, it must secure the approval of those agencies to continue to operate and to continue to participate in Title IV Programs. If the institution is unable to re-establish state authorization and accreditation requirements and satisfy other requirements for certification by the Department, the institution may lose its authority to operate and its ability to participate in Title IV Programs. An institution whose change of ownership or control is approved by the appropriate authorities is nonetheless provisionally re-certified by the Department for a period of up to three years. Transactions or events that constitute a change of ownership or a change of control by one or more of the applicable regulatory agencies, including the Department, applicable state agencies, and accrediting bodies, include the acquisition of an institution from another entity or significant acquisition or disposition of an institution’s equity or assets. It is possible that some of these events may occur without our control. Our failure to obtain, or a delay in obtaining, a required approval of any change in control from the Department, applicable state agencies, or accrediting agencies could impair our ability or the ability of the affected institutions to participate in Title IV Programs. If we were to undergo a change of control and our institutions failed to obtain the required approvals from applicable regulatory agencies in a timely manner, our student population, financial condition, results of operations and cash flows could be materially adversely affected.

When we acquire an institution that is eligible to participate in Title IV Programs, that institution typically undergoes a change of ownership resulting in a change of control as defined by the Department. Our acquired institutions in the past have undergone a certification review under our ownership and have been certified to participate in Title IV Programs on a provisional basis, per Department requirements, until such time that the Department signs a new program participation agreement with the institution.

Currently, only USAHS is subject to provisional certification status due to the Department’s change of ownership criteria. The potential adverse effects of a change of control under Department regulations may influence future decisions by us and our stockholders regarding the sale, purchase, transfer, issuance or redemption of our common stock.

On October 28, 2022, the Department, as part of 2021-2022 negotiated rulemaking agenda, published Final Regulations on Change of Ownership. The Department added a definition of main campus as “the primary physical location where the institution offers programs, within the same ownership structure of the institution, and certified as the main campus by the Department and the institution’s accrediting agency.” Also included is a required notification to the Department and students of planned change in ownership at least 90 days in advance. The new regulations also lower reporting of ownership interest changes to 5%, instead of the current 25% threshold and raised the threshold of full review of change in control from 25% ownership interest changes to 50%.

Opening New Institutions, Start-up Campuses and Adding Educational Programs

The Higher Education Act generally requires that for-profit institutions be fully operational for two years before applying to participate in Title IV Programs. However, an institution that is certified to participate in Title IV Programs may establish a start-up branch campus or location and participate in Title IV Programs at the start-up campus without satisfying the two-year requirement if the start-up campus has received all of the necessary state and accrediting agency approvals, has been reported to the Department, and meets certain other criteria as defined by the Department. Nevertheless, under certain circumstances, a start-up branch campus may also be required to obtain approval from the Department to be able to participate in Title IV Programs.

In addition to the Department regulations, certain of the state and accrediting agencies with jurisdiction over our institutions have requirements that may affect our ability to open a new institution, open a start-up branch campus or location of one of our existing institutions, or begin offering a new educational program at one of our institutions. If we establish a new institution, add a new branch start-up campus, or expand program offerings at any of our institutions without obtaining the required approvals, we would likely be liable for repayment of Title IV Program funds provided to students at that institution or branch campus or enrolled in that educational program, and we could also be subject to sanctions. Also, if we are unable to obtain the approvals from the Department, applicable state regulatory agencies, and accrediting agencies for any new institutions, branch campuses, or program offerings where such approvals are required, or to obtain such approvals in a timely manner, our ability to grow our business would be impaired and our financial condition, results of operations and cash flows could be materially adversely affected.

Administrative Capability

See “Negotiated Rulemaking 2023: Administrative Capability” above.

Restrictions on Payment of Commissions, Bonuses and Other Incentive Payments

An institution participating in Title IV Programs cannot provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or awarding Title IV financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance. Regulations issued in October 2010 which became effective July 1, 2011 rescinded previously issued Department guidance and “safe harbors” relied upon by higher education institutions in making decisions about how they managed, compensated and promoted individuals and their supervisors engaged in student recruiting and awarding of financial aid. The elimination of these “safe harbor” protections and guidance required us to terminate certain compensation payments to our affected employees and to implement changes in contractual and other arrangements with third parties to change structures formerly allowed under Department rules, and has had an impact on our ability to compensate, recruit, retain and motivate affected admissions and other affected employees as well as on our business arrangements with third-party lead generators and other marketing vendors. In September 2016, the Department’s Office of Inspector General released a revised audit guide, subsequently amended, applicable specifically to for-profit schools that requires an annual audit to review compliance with the incentive compensation restrictions.

Further, the Department provides very limited published guidance regarding this rule and does not establish clear criteria for compliance for many circumstances. If the Department determined that an institution’s compensation practices violated these standards, the Department could subject the institution to substantial monetary fines, penalties or other sanctions, and exposure to increased risk of action under the False Claims Act.

Substantial Misrepresentation

The Higher Education Act prohibits an institution participating in Title IV Programs from engaging in substantial misrepresentation of the nature of its educational programs, financial charges, graduate employability or its relationship with the Department. Under the Department’s rules, a "misrepresentation" is any statement (made in writing, visually, orally or otherwise) made by the institution, any of its representatives or a third party that provides educational programs, marketing, advertising, recruiting, or admissions services to the institution, that is false, erroneous or has the likelihood or tendency to deceive, and a "substantial misrepresentation" is any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment. Considering the broad definition of “substantial misrepresentation,” it is possible that, despite our training efforts and compliance programs, our institutions' employees or service providers may make statements that could be construed as substantial misrepresentations. If the Department determines that one of our institutions has engaged in substantial misrepresentation, the Department may revoke the institution’s program participation agreement, deny applications from the institution for approval of new programs or locations or other matters, initiate proceedings under its borrower defense to repayment regulations, or fine, limit, suspend, or terminate its eligibility to participate in Title IV Programs; the institution could also be exposed to increased risk of action under the Federal False Claims Act.

OTHER INFORMATION

Our website address iswww.perdoceoed.com. We make available within the “Investor Relations” portion of our website under the caption “Annual Reports & SEC Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, including any amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the U.S. Securities and Exchange Commission(“SEC”). Also, the SEC maintains an Internet site atwww.sec.govthat contains reports, proxy and information statements, and other information that we file electronically with the SEC. Information contained on our website is expressly not incorporated by reference into this Form 10-K.