PERDOCEO EDUCATION Corp

Previous wording

As a provider of postsecondary education and a participant in federal and state programs providing financial assistance to students, we are subject to extensive laws and regulation at both the federal and state levels as well as by accrediting agencies. These requirements cover virtually all aspects of our business.

Current wording

As a provider of postsecondary education and a participant in federal and state programs providing financial assistance to students, we are subject to extensive laws and regulations at both the federal and state levels, as well as by accrediting agencies. These requirements cover virtually all aspects of our business.

Previous wording

In particular, the Higher Education Act authorizes Title IV Programs and subjects participants to extensive regulations by the Department, state education authorizing agencies, and accrediting agencies. Our institutions’ participation in education assistance programs administered by the Departments of Defense and Veterans Affairs also subjects us to oversight by those agencies. In addition, other federal agencies such as the Consumer Financial Protection Bureau (“CFPB”) and the Federal Trade Commission (“FTC”) and various state agencies and state attorneys general enforce a broad range of consumer protection and other laws applicable to activities of postsecondary educational institutions, such as recruiting, marketing, the protection of personal information, student financing and payment servicing.

Current wording

In particular, the Higher Education Act of 1965, as amended (“HEA”), authorizes participation in Title IV Programs and subjects participants to extensive regulations by the Department, state education authorizing agencies, and accrediting agencies. Our institutions’ participation in education assistance programs administered by the Departments of Defense and Veterans Affairs also subjects us to oversight by those agencies. In addition, other federal agencies such as the Consumer Financial Protection Bureau (“CFPB”) and the Federal Trade Commission (“FTC”) and various state agencies and state attorneys general enforce a broad range of consumer protection and other laws applicable to activities of postsecondary educational institutions, such as recruiting, marketing, the protection of personal information, student financing and payment servicing.

Previous wording

Because of these regulatory requirements, we are subject to compliance reviews and audits, as well as claims of noncompliance and lawsuits by government agencies based on claims by students, current and former employees and other third parties. These matters often require the expenditure of substantial time and resources to address and, additionally, they may damage our reputation, even if such actions are eventually determined to be without merit. For example, the Department has broad powers to request information and review records of an institution participating in Title IV Programs. These requests can be open-ended and do not necessarily relate to any specific allegations of wrongdoing or assert any compliance failures of any kind. We received such a request from the Department in December 2021. The inquiry was subsequently closed in January 2025 without any findings. Due process safeguards and protections for institutions subjected to this type of information request are limited to the Department’s interpretation of the boundaries of its authority over institutions participating in Title IV programs.

Current wording

Because of these regulatory requirements, we are subject to compliance reviews and audits, as well as claims of noncompliance and lawsuits by government agencies based on claims by current and former students or employees and other third parties. These matters often require the expenditure of substantial time and resources to address and, additionally, they may damage our reputation, even if such actions are eventually determined to be without merit. For example, the Department has broad powers to request information and review records of an institution participating in Title IV Programs. These requests can be open-ended and do not necessarily relate to any specific allegations of wrongdoing or assert any compliance failures of any kind. We received such a request from the Department in December 2021. The inquiry was subsequently closed in January 2025 without any findings. Due process safeguards and protections for institutions subjected to this type of information request are limited to the Department’s interpretation of the boundaries of its authority over institutions participating in Title IV Programs.

Previous wording

The Department, under the Biden Administration, took an ever-expanding view on its authority over the administration of Title IV programs, institutions and loans, including overruling or ignoring a number of historical precedents and due process safeguards. The Department partnered with advocacy groups critical of the for-profit education sector in numerous aspects of its agenda, which have lobbied for targeting the sector and our schools. The postsecondary education regulatory environment may change in the future as a result of the U.S. federal election in November 2024. The new Presidential Administration and new Congress may act to change or eliminate currently effective ED regulations and final ED regulations that have been promulgated but are not yet effective.

Current wording

The Department, under the Biden Administration, took an ever-expanding view on its authority over the administration of Title IV Programs, institutions, and loans, including overruling or ignoring a number of historical precedents and due process safeguards. The Department partnered with advocacy groups critical of the for-profit education sector in numerous aspects of its agenda, which have lobbied for targeting the sector and our schools. The postsecondary education regulatory environment has changed as a result of the U.S. federal election in November 2024.

Previous wording

In addition to responding to compliance reviews and audits and other informational requests, we have had significant matters pending against us in the past which have resulted in the payment of significant amounts to settle the matters and our agreement to ongoing compliance and operational oversight. In this regard, see Item I,“Business – Accreditation, State Regulation and Other Compliance Matters – Other Compliance Matters,” for discussion of agreements undertaken in connection with several matters resolved in recent years.

Current wording

In addition to responding to compliance reviews, audits and other informational requests, we have settled significant matters pending against us in the past which have resulted in the payment of significant amounts and our agreement to ongoing compliance and operational oversight. See Item 1,“Business – Accreditation, State Regulation and Other Compliance Matters – Other Compliance Matters,” for discussion of agreements undertaken in connection with several matters resolved in recent years.

Previous wording

Compliance with reviews and audits and applicable laws, regulations, standards or policies may impose significant burdens and a failure to comply could result in substantial financial penalties, severe restrictions on or closure of our operations, loss of federal and state financial aid funding for our students, or loss of authorization to operate our institutions.

Current wording

Compliance with reviews, audits and applicable laws, regulations, standards or policies may impose significant burdens and a failure to comply could result in substantial financial penalties, severe restrictions on or closure of our operations, loss of federal and state financial aid funding for our students, or loss of authorization to operate our institutions, which could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

“Gainful Employment” regulations may subject us to significant disclosures and limitations, including program closures, which could materially reduce the enrollments and revenue at our institutions and negatively impact our future growth.

Current wording

Accountability regulations may subject us to significant disclosures and limitations, including program closures, which could materially reduce the enrollments and revenue at our institutions and negatively impact our future growth.

Previous wording

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.

Current wording

Our institutions could lose their eligibility to participate in federal student financial aid programs, face significant 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.

Previous wording

Under revised regulations effective for calendar year 2023, any of our institutions may lose eligibility to participate in Title IV Programs if, on modified cash basis accounting, the percentage of the cash receipts derived from federal funding programs for two consecutive fiscal years is greater than 90%. The Department specified the sources of federal funding to be included in the 90-10 Rule in mid-December 2022, well after a substantial majority of students for the upcoming 2023 calendar year, a majority of those students which were in the process of continuing through their program, had already enrolled and elected financing for upcoming classes. Federal funding now includes tuition assistance under the Title IV program as well as tuition assistance benefits provided to members of the military and veterans as well as a significant number of other federal programs supporting higher education and training. Under this modified 90-10 Rule, an institution that derives more than 90% of its cash receipts from federal funding sources for any fiscal year will be placed on provisional participation status for its next two fiscal years and is required to issue notices to existing students about the potential loss of Title IV funding. The issuance of any required notice could deter prospective students from enrolling at our institutions and current students from continuing in their programs. We have substantially no control over the amount of Title IV student loans and grants, military or veteran education benefits, or other federal education assistance funds sought by or awarded to our students and given the significant existing student populations at our institutions when these rules were adopted, the 90-10 Rule operates retroactively to capture the significant federal funding those students were already utilizing and entitled to.

Current wording

An institution that derives more than 90% of its cash receipts from qualifying federal funding sources for any fiscal year will be placed on provisional participation status for its next two fiscal years and must provide notices to existing students about the potential loss of Title IV funding. If the institution violates the 90-10 Rule for two consecutive fiscal years and becomes ineligible to participate in Title IV Programs, but continues to disburse Title IV Program funds, the Department would require the repayment of all Title IV Program funds received by it after the effective date of the loss of eligibility. The issuance of any required notice could deter prospective students from enrolling at our institutions and current students from continuing in their programs.

Previous wording

Several factors have adversely impacted our 90-10 percentages in recent years, including increases in Title IV Program aid availability including year-round Pell Grant funds and budget reductions for state grant programs, workforce training programs, and other funding programs. We expect this negative trend to continue. Additionally, the lack of visibility into federal fund sources that students utilize, the timing of the identification of the federal fund sources applicable to the 90-10 Rule, the lack of clarity regarding the definition of federal funds which funds count in the “10”, as well as other technical aspects of the calculation methodology, and interest levels and variability in the timing of receipts of future cash payments made for allowable non-Title IV programs offered by our institutions, all make it difficult to predict future compliance with the 90-10 Rule. We have implemented various measures intended to reduce the percentage of our institutions’ cash basis revenue attributable to designated federal funding sources, including efforts to diversify the sources of our revenue. However, these measures may not be adequate to prevent our compliance with the 90-10 Rule and may not be sufficient to allow our institutions to serve degree-seeking prospective students at the same rates as we have historically, or may require limiting the type or volume of new students we enroll or programs we offer. We may be required to modify our business operations, including reducing our investments in prospective student outreach and recruitment, in order to preserve our existing students’ ability to continue benefitting from financial assistance for their education pursuant to Title IV Programs. For example, in 2023, we materially reduced prospective student enrollment, marketing and outreach processes at AIUS during the year to limit the volume of new federal funding that the institution would receive to preserve available funding for existing students. Any necessary business changes could materially impact our revenue, operating costs and opportunities for growth. Furthermore, these business changes could make more difficult our ability to comply with other important regulatory requirements.

Current wording

We have limited ability to control the amount of Title IV Program funds, military or veteran education benefits, or other federal funds sought by or awarded to our students. Additionally, the lack of visibility into federal fund sources that students utilize, the timing of the identification of the federal fund sources applicable to the 90-10 Rule, and the lack of clarity regarding the definition of federal funds make it difficult to predict future compliance with the 90-10 Rule. Although we have implemented various measures intended to reduce the percentage of our institutions’ cash basis revenue attributable to federal funding sources, including efforts to diversify the sources of our revenue, these measures may not be sufficient to ensure our compliance with the 90-10 Rule in the future. We may be required to modify our business operations, including reducing investments in prospective student outreach, recruitment, and enrollment growth in order to preserve Title IV eligibility for our existing students.

Previous wording

While the Department may attempt to impose additional sanctions on institutions that fail the 90-10 Rule, but there is only limited precedent available to determine their legality or predict what those additional sanctions might be. For example, the new financial responsibility rule, discussed further below, imposes a mandatory trigger for failure to comply with one year of the 90-10 Rule. It would require a minimum financial protection of 10 percent of the previous year’s Title IV funds. This protection would remain in place until the institution passes the 90-10 Rule for two consecutive years. The Department has discretion to impose a wide range of additional conditions as part of its provisional certification and the institutions' continued participation in Title IV Programs. These conditions may include, but are not limited to: restrictions on the total amount of Title IV Program funds that may be distributed to students attending the institutions; restrictions on programmatic, enrollment, and geographic expansion; requirements to obtain and post letters of credit; and additional reporting requirements to include additional interim financial or enrollment reporting.

Current wording

In addition to the consequences described above, the financial responsibility rule, discussed further below, imposes mandatory consequences for failure to comply for one year of the 90-10 Rule. A one-year violation triggers a requirement to provide financial protection equal to at least 10 percent of the institution’s prior-year Title IV funding, which must remain in place until the institution passes the 90-10 Rule for two consecutive fiscal years. The Department has discretion to impose a wide range of additional conditions as part of its provisional certification. These conditions may include but are not limited to restrictions on the total amount of Title IV Program funds that may be distributed to students attending the institutions; restrictions on programmatic, enrollment, and geographic expansion; requirements to obtain and post letters of credit; and additional reporting requirements to include additional interim financial or enrollment reporting.

Previous wording

If any of our institutions lose eligibility to participate in Title IV Programs due to violation of the prior or modified 90-10 Rule, the institution would experience a dramatic decline in revenue and would be unable to continue its business as it currently is conducted. Efforts to reduce the 90-10 Rule percentage for our institutions have and may in the future involve taking measures that reduce our revenue, increase our operating expenses or involve interpretations of the 90-10 Rule or other Title IV regulations that are without clear precedent (or all of the foregoing, in each case perhaps significantly).

Current wording

If any of our institutions were to lose eligibility to participate in Title IV Programs due to violation of the 90-10 Rule, the institution would experience a dramatic decline in revenue and would be unable to continue its business as it currently is conducted. Past and future efforts to manage compliance with the 90-10 Rule for institutions may require actions that reduce our revenue, increase our operating expenses, or rely on interpretations of the 90-10 Rule or other Title IV regulations that are without clear precedent, any of which could materially and adversely affect our business, financial condition, and results of operations.

Previous wording

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.

Current wording

The extensive and evolving 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.

Previous wording

The Higher Education Act guides the federal government’s support of postsecondary education. The U.S. Congress is required to periodically reauthorize the Higher Education Act and other laws governing Title IV Programs and annually determines the funding level for each Title IV Program. Congress last reauthorized the Higher Education Act in 2008. The reauthorization of the Higher Education Act results in a change in the requirements for existing programs and its participation in Title IV programs. Additionally, funding for student financial assistance programs may be impacted during appropriations and budget actions. See Item 1,“Business—Student Financial Aid and Related Federal Regulation—Legislative Action and Recent Department Regulatory Initiatives,” for more information about the reauthorization of the Higher Education Act. In recent years, Congress, the Department, states, accrediting agencies, the CFPB, the FTC, state attorneys general, consumer advocacy groups, and the media have scrutinized the for-profit postsecondary education sector. See Item 1,“Business - Student Financial Aid and Related Federal Regulation - Scrutiny of the For-Profit Postsecondary Education Sector,”for more information about the focus on our industry. This scrutiny and efforts of the Biden Administration led to significant regulatory changes designed to target and limit for-profit postsecondary education. See Item 1,“Business - Student Financial Aid and Related Federal Regulation - Legislative Action and Recent Department Regulatory Initiatives,” for an overview of regulatory initiatives by the Department. Ongoing efforts by activists to change state authorization regulations, State Authorization Reciprocity Agreement ("SARA") reciprocity rules, and state-by-state standards could increase regulatory burdens on our business. See Item 1,“Business - Accreditation, State Regulation and Other Compliance Matters - State Regulation,” for more information about state regulation and SARA.

Current wording

In recent years, Congress, the Department, states, accrediting agencies, the CFPB, the FTC, state attorneys general, consumer advocacy groups, and the media have scrutinized the for-profit postsecondary education sector. See Item 1,“Business - Student Financial Aid and Related Federal Regulation - Scrutiny of the For-Profit Postsecondary Education Sector,”for more information about the focus on our industry. This scrutiny has resulted in significant regulatory changes and increased enforcement efforts designed to target and limit for-profit postsecondary education. See Item 1,“Business - Student Financial Aid and Related Federal Regulation - Legislative Action and Recent Department Regulatory Initiatives,” for an overview of regulatory initiatives by the Department. In addition, ongoing efforts by states and activist groups to change state authorization regulations, State Authorization Reciprocity Agreement ("SARA") reciprocity rules, and other state-by-state standards could further increase regulatory compliance burdens and operational complexity related to our business. See Item 1,“Business - Accreditation, State Regulation and Other Compliance Matters - State Regulation,” for more information about state regulation and SARA.

Previous wording

As in the past, recent and future regulatory changes may have significant impacts on our business, potentially requiring a large number of operational changes, changes to and elimination of certain educational programs, or other fundamental changes to our business. These actions may reduce our student enrollments and profitability or limit our ability to maintain or grow our business. These recent and future regulatory changes may also make compliance with regulatory requirements even more complex and difficult.

Current wording

As in the past, recent and future regulatory changes—whether arising from legislation, rulemaking, enforcement actions, or shifts in regulatory interpretation—may have significant impacts on our business, potentially requiring a large number of operational changes, changes to and elimination of certain educational programs, or other fundamental changes to our business. These actions could reduce our student enrollments and profitability or limit our ability to maintain or grow our business. These recent and future regulatory changes may also make compliance with regulatory requirements even more complex and difficult.

Previous wording

A failure to demonstrate "financial responsibility" or "administrative capability" or meet new "certification" requirements would have negative impacts on our operations.

Current wording

A failure to demonstrate "financial responsibility," "administrative capability" or meet new "certification" requirements would have negative impacts on our operations.

Previous wording

See“Negotiated Rulemaking: Financial Responsibility,” “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations,”“Negotiated Rulemaking: Administrative Capability” and“Negotiated Rulemaking: Certification Procedures” above for an overview of the current rules relating to the financial responsibility, administrative capability and certification procedures.

Current wording

See Item 1,“Business – Student Financial Aid and Related Federal Regulation -- Negotiated Rulemaking: Financial Responsibility,” “Business – Student Financial Aid and Related Federal Regulation -- Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations,”“Business – Student Financial Aid and Related Federal Regulation -- Negotiated Rulemaking: Administrative Capability”and“Business – Student Financial Aid and Related Federal Regulation -- Negotiated Rulemaking: Certification Procedures”above for an overview of the current rules relating to the financial responsibility, administrative capability and certification procedures.

Previous wording

See the “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” above for an overview of the current rules relating to Borrower Defense to Repayment.

Current wording

See Item 1, “Business – Student Financial Aid and Related Federal Regulation -- Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” above for an overview of the current rules relating to Borrower Defense to Repayment.

Previous wording

We cannot predict the impact various defense to repayment regulations will have on student enrollments, the volume of claims for loan discharge (including closed school discharge), the amount of claims for loan discharge the Department approves, the amount of discharged loans the Department asserts we have repayment liability for, our future financial responsibility as determined by the Department, or any sanctions or other actions the Department might take against our institutions based on loans discharged, all of which could be materially adverse to our business.

Current wording

We cannot predict the effect that current or future borrower defense and loan discharge regulations will have on student enrollments, the volume of claims submitted by borrowers for loan discharge (including closed school discharge claims), the number or amount of claims for loan discharge the Department approves, the extent to which the Department may seek to recover discharged loan amounts from us, our future financial responsibility as determined by the Department, or any sanctions, conditions, or enforcement actions that may be taken or imposed by the Department against our institutions based on loans discharged, including any requirement to post a letter of credit. Any such developments could require significant cash outlays, increase compliance costs, constrain capital resources, and materially and adversely affect our business, financial condition, results of operations, and future growth.

Previous wording

An institution must be accredited by an accrediting agency recognized by the Department in order to participate in Title IV Programs. See Item 1,“Business – Accreditation, Jurisdictional Authorizations and Other Compliance Matters – Institutional Accreditation.” The failure to comply with accreditation standards subjects an institution to additional oversight and reporting requirements, accreditation proceedings such as a show-cause directive, an action to defer or deny action related to an institution's application for a new grant of accreditation, an action to suspend an institution's accreditation or a program's approval, or other negative actions. Future inquiries or actions by state or federal agencies could negatively impact our accreditation status. If our institutions or programs are subject to accreditation actions or are placed on probationary or other negative accreditation status, we may experience adverse publicity, impaired ability to attract and retain students and substantial expense to obtain unqualified accreditation status. The inability to obtain reaccreditation following periodic reviews or any final loss of institutional accreditation after exhaustion of the administrative agency processes would result in a loss of Title IV Program funds for the affected institution and its students. In addition, if an accrediting body of our institutions loses recognition by the Department, that institution could lose its ability to participate in Title IV Programs. See Item 1, "Business - Student Financial Aid and Related Federal Regulation - Eligibility and Certification by the Department," for more information.

Current wording

If any of our institutions or programs were to be subject to negative accreditation actions or placed on probationary or other negative accreditation status, we could experience adverse publicity, impaired ability to attract and retain students, increased compliance costs, and substantial expense to restore good standing. The inability to obtain reaccreditation following periodic reviews or any final loss of institutional accreditation after exhaustion of the administrative agency processes would result in a loss of Title IV Program funds for the affected institution and its students. In addition, if an accrediting agency that accredits one of our institutions were to lose recognition by the Department, that institution could lose its ability to participate in Title IV Programs. See Item 1,

Previous wording

Many states and professional associations require professional programs to be accredited. While programmatic accreditation is not a sufficient basis to qualify for institutional Title IV Program certification, programmatic accreditation may be a prerequisite for or improve employment opportunities of program graduates in their chosen field. Those of our programs that do not have such programmatic accreditation, where available, or fail to maintain such accreditation, particularly in programs in the health sciences field, may experience adverse publicity, declining enrollments, litigation or other claims from students or suffer other adverse impacts, which could result in it being impractical for us to continue offering such programs.

Current wording

In addition to institutional accreditation, many states, licensing bodies, and professional associations require certain educational programs to be accredited by specialized accrediting agencies. While programmatic accreditation alone is not a sufficient basis to qualify for institutional Title IV Program certification, it may be required for graduates to obtain professional licensure or employment in their chosen field. Those of our programs that do not have such programmatic accreditation, where available, or fail to maintain such accreditation, particularly in programs in the health sciences field, may experience adverse publicity, declining enrollments, litigation or other claims from students or suffer other adverse impacts, which could result in it being impractical for us to continue offering such programs.

Previous wording

Our institutions must maintain systems and processes to identify and prevent fraudulent applications for enrollment and financial aid. We cannot be certain that our institutions’ systems and processes will continue to be adequate in the face of increasingly sophisticated fraud schemes, or that we will be able to expand such systems and processes at a pace consistent with the changing nature of these fraud schemes. We believe the risk of outside parties attempting to perpetrate fraud in connection with the award and disbursement of Title IV program funds, including as a result of identity theft, is heightened due to being an exclusively online education provider.

Current wording

Our institutions must maintain systems and processes to identify and prevent fraudulent applications for enrollment and financial aid. We cannot be certain that our institutions’ systems and processes will continue to be adequate in the face of increasingly sophisticated fraud schemes, or that we will be able to expand such systems and processes at a pace consistent with the changing nature of these fraud schemes. We believe the risk of outside parties attempting to perpetrate fraud in connection with the award and disbursement of Title IV Program funds, including as a result of identity theft, is heightened at our institutions that are exclusively online education providers.

Previous wording

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.

Current wording

Our agreement with the FTC may lead to unexpected impacts on our student enrollments or higher than anticipated expenses. A failure to comply with the agreement may lead to additional enforcement actions and continued scrutiny, which may result in additional costs or new enforcement actions.

Previous wording

As discussed above, states and other regulatory bodies have increased their focus on the for-profit postsecondary education sector. In 2019, we entered into an agreement with the FTC to bring closure to inquiries by them. See Item 1,“Business – Accreditation, State Regulation and Other Compliance Matters – Other Compliance Matters” for information about this agreement. This agreement may ultimately result in negative impacts on our business, any one of which may be material.

Current wording

As discussed above, states and other regulatory bodies have increased their focus on the for-profit postsecondary education sector. In 2019, we entered into an agreement with the FTC to bring closure to inquiries made by them. See Item 1,“Business – Accreditation, State Regulation and Other Compliance Matters – Other Compliance Matters” for information about this agreement. This agreement may ultimately result in negative impacts on our business, any one of which may be material.

Previous wording

Pursuant to the agreement with the FTC, we agreed to various operating provisions including the operation of a system to monitor 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. The compliance costs related to these agreements may be greater than anticipated and may have a negative impact on our ability to compete effectively and maintain and grow student enrollments at our institutions, and a failure to comply may lead to additional enforcement action by the FTC. In addition, we may receive requests from states and other regulatory bodies to provide ongoing proof that we are complying with applicable laws and regulations and meeting our obligations pursuant to this agreement. Compliance with these requests results in significant additional costs and a failure to respond, whether required or not, could result in additional enforcement actions.

Current wording

Pursuant to the agreement with the FTC, we agreed to various operating provisions including the operation of a system to monitor 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. The compliance costs related to these agreements may be greater than anticipated and may have a negative impact on our ability to compete effectively and maintain and grow student enrollments at our institutions, and a failure to comply may lead to additional enforcement action by the FTC. In addition, we may receive requests from states and other regulatory bodies to provide ongoing proof that we are complying with applicable laws and regulations and meeting our obligations pursuant to this agreement. Compliance with these potential requests results in significant additional costs and a failure to respond, whether required or not, could result in additional enforcement actions.

Previous wording

If we are unable to successfully resolve pending or future litigation and regulatory and governmental inquiries involving us, or face increased regulatory actions or litigation, our financial condition and results of operations could be adversely affected.

Current wording

If we are unable to successfully resolve pending or future litigation and regulatory and governmental inquiries, or face increased regulatory actions or litigation, our financial condition and results of operations could be adversely affected.

Previous wording

We have been named as defendants currently and/or in the past in various lawsuits, investigations and claims covering a range of matters, including, but not limited to, violations of federal securities laws, breaches of fiduciary duty and claims made by current and former students and employees of our institutions. Current claims include a qui tam action filed in federal court by an individual plaintiff on behalf of themselves and the federal government alleging that we submitted false claims or statements to the Department in violation of the False Claims Act. See Note 12 "Contingencies" to our consolidated financial statements for discussion of these and certain other current matters. Additional actions may arise in the future.

Current wording

We have been named as defendants currently and/or in the past in various lawsuits, investigations and claims covering a range of matters, including, but not limited to, violations of federal securities laws, breaches of fiduciary duty and claims made by current and former students and employees of our institutions. Current claims include aqui tam action filed in federal court by an individual plaintiff on behalf of themselves and the federal government alleging that we submitted false claims or statements to the Department in violation of the False Claims Act. See Note 11 "Contingencies" to our audited consolidated financial statements for a discussion of these and certain other current matters. Additional actions may arise in the future.

Previous wording

Given the highly regulated nature of our industry, we and our institutions are subject to and have regular audits, compliance reviews, inquiries, investigations, and claims of non-compliance by the Department, federal and state regulatory agencies, accrediting agencies, state attorney general offices, present and former students and employees, and others that may allege violations of statutes, regulations, accreditation standards, consumer protection and other legal and regulatory requirements applicable to us or our institutions. See Note 12 "Contingencies" to our consolidated financial statements and Item 1,"Business - Student Financial Aid and Related Federal Regulation - Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations" for additional discussion of these and certain other current matters. If the results of any such audits, reviews, inquiries, 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, undertakings, additional oversight and reporting, or other civil or criminal penalties.

Current wording

Given the highly regulated nature of our industry, we and our institutions are subject to and have regular audits, compliance reviews, inquiries, investigations, and claims of non-compliance by the Department, federal and state regulatory agencies, accrediting agencies, state attorney general offices, present and former students and employees, and others that may allege violations of statutes, regulations, accreditation standards, consumer protection and other legal and regulatory requirements applicable to us or our academic institutions. See Note 11 "Contingencies" to our consolidated financial statements and Item 1,"Business - Student Financial Aid and Related Federal Regulation - Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations" for additional discussion of these and certain other current matters. If the results of any such audits, reviews, inquiries, 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, undertakings, additional oversight, and reporting, or other civil or criminal penalties.

Previous wording

We are subject to a variety of other claims and litigation that arise from time to time alleging non-compliance with or violations of state or federal regulatory matters including, but not limited to, claims involving students, graduates and employees. In the event that extensive changes in the overall federal and state regulatory construct results in additional statutory or regulatory bases for these types of matters, or other events result in more of such claims or unfavorable outcomes to such claims, there exists the possibility of a material adverse impact on our business, reputation, financial position, cash flows and results of operations for the periods in which the effects of any such matter or matters becomes probable and reasonably estimable.

Current wording

We are subject to a variety of other claims and litigation that arise from time-to-time alleging non-compliance with or violations of state or federal regulatory requirements including, but not limited to, claims involving students, graduates, and employees. In the event that extensive changes in the overall federal and state regulatory construct results in additional statutory or regulatory bases for these types of claims, or other events result in an increase of such claims or unfavorable outcomes to such claims, there exists the possibility of a material adverse impact on our business, reputation, financial position, cash flows and results of operations for the periods in which the effects of any such matter or matters becomes probable and reasonably estimable.

Previous wording

We cannot predict the ultimate outcome of these and future matters and expect to continue to incur significant defense costs and other expenses in connection with them. We may be required to pay substantial damages or settlement costs in excess of our insurance coverage related to these matters. Government investigations and any related legal and administrative proceedings may result in the institution of administrative, civil injunctive or criminal proceedings against us and/or our current or former directors, officers or employees, or the imposition of significant fines, penalties or suspensions, or other remedies and sanctions. Any such costs and expenses could have a material adverse effect on our financial condition and results of operations and the market price of our common stock.

Current wording

We cannot predict the ultimate outcome of these and future matters and expect to continue to incur significant defense costs and other expenses in connection with such matters. We may be required to pay substantial damages or settlement costs in excess of our insurance coverage related to these matters. Government investigations and any related legal and administrative proceedings may result in the institution of administrative, civil injunctive or criminal proceedings against us and/or our current or former directors, officers or employees, or the imposition of significant fines, penalties or suspensions, or other remedies and sanctions. Any such costs and expenses could have a material adverse effect on our financial condition and results of operations and the market price of our common stock.

Previous wording

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.

Current wording

If the Department denies, or significantly conditions, recertification of any of our institutions to participate in Title IV Programs, that institution could not operate its business as it is currently conducted.

Previous wording

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 whenever it undergoes a change of control. Generally, the recertification process includes a review by the Department of an institution’s educational programs and locations, administrative capability, financial responsibility, and other regulatory oversight categories. USAHS is operating under a temporary provisional program participation agreement as a result of its recent change of ownership. Pursuant to applicable regulations, if the change of ownership is approved, USAHS will then participate under provisional certification for up to three years. During the period of provisional certification, an institution must obtain prior Department approval to add an educational program, open a new location, increase the credential level of its offerings, or shorten or lengthen its programs, which could negatively impact USAHS ability to take these actions. Institutions may be given provisional program participation agreements for nominal or arbitrary reasons and we have seen in some instances without justification, including the existence of an open and pending audit or review within the Department’s discretion or unspecified issues arising out of past administrative capability issues. Recently, the Department has imposed a number of additional reporting, limiting and monitoring conditions on continued participation against institutions it has recertified.

Current wording

Under the HEA, an institution must apply to the Department for continued certification to participate in Title IV Programs at least every six years or whenever it undergoes a change of control. Generally, the recertification process includes a review by the Department of an institution’s educational programs and locations, administrative capability, financial responsibility, and other regulatory oversight categories. USAHS is operating under a temporary provisional program participation agreement as a result of its change of ownership at the end of 2024. Pursuant to applicable regulations, if the change of ownership is approved, USAHS will then participate under provisional certification for up to three years. During the period of provisional certification, an institution must obtain prior Department approval to add an educational program, open a new location, increase the credential level of its offerings, or shorten or lengthen its programs, which could negatively impact USAHS’s ability to undertake any of these actions. Institutions may be given provisional program participation agreements for any number of reasons, and we have seen in some instances without justification, including the existence of an open and pending audit or review within the Department’s discretion or unspecified issues arising out of past administrative capability issues. Recently, the Department has imposed additional reporting, limiting, and monitoring conditions on continued participation against institutions it has previously recertified.

Previous wording

Additionally, as stated above, 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. By March 31, 2027, CTU and AIUS will each be required to submit applications for recertification to continue participation in Title IV Programs.

Current wording

As indicated above, in February 2025, both CTU and AIUS received renewals of their program participation agreements through June 30, 2027. AIUS was removed from provisional certification, leaving both AIUS and CTU with full certification. By March 31, 2027, CTU and AIUS will each be required to submit applications for recertification to continue participation in Title IV Programs.

Previous wording

If the Department finds that any of our institutions do not fully satisfy all required eligibility and certification standards, the Department could deny recertification or limit, suspend, or terminate the institution’s participation in Title IV Programs. Continued Title IV Program eligibility is critical to the operation of our business. If any of our institutions becomes ineligible to participate in Title IV Programs, or have that participation significantly conditioned, it could not conduct its business as currently conducted and we would experience a dramatic decline in revenue.

Current wording

If the Department finds that any of our institutions do not fully satisfy all required eligibility and certification standards, the Department could deny recertification or limit, suspend, or terminate the institution’s participation in Title IV Programs. Continued Title IV Program eligibility is critical to the operation of our business. If any of our institutions becomes ineligible to participate in Title IV Programs or have its participation significantly conditioned, it could not operate its business as currently conducted, and we would experience a dramatic decline in revenue.

Previous wording

A substantial majority of our students rely upon Title IV Programs to assist in financing their education, and we derive a substantial majority of our revenue and cash flows from Title IV Programs. For example, for the year ended December 31, 2024, a majority of our students who were in a program of study at any date during that year participated in Title IV Programs, which resulted in Title IV Program cash receipts of approximately $484 million. As a result, any legislative or regulatory action that significantly reduces Title IV Program funding or the ability of our students to participate, or that places significant additional burdens on or eliminates our ability to participate, would materially reduce the number of students who enroll at our institutions, our revenue and our profitability, and we would be unable to continue our business as it currently is conducted.

Current wording

A substantial majority of our students rely upon Title IV Programs to assist in financing their education, and we derive a substantial majority of our revenue and cash flows from Title IV Programs. For example, for the year ended December 31, 2025, a majority of our students who were in a program of study at any time during that year participated in Title IV Programs, which resulted in Title IV Program cash receipts of approximately $615 million. As a result, any legislative or regulatory action that significantly reduces Title IV Program funding or the ability of our institutions to participate, or that places significant additional burdens on or eliminates our ability to participate, would materially reduce the number of students who enroll at our institutions, and we would be unable to continue our business as it currently is conducted, which would have a material adverse effect on our revenues, cash flows and results of operations.

Previous wording

Our institutions frequently need to obtain approvals from regulatory agencies in the conduct of their business. For example, to establish a new educational program or substantive changes to existing programs, we are required to obtain the appropriate approvals from the Department and applicable state and accrediting regulatory agencies. Staffing levels at the Department and other regulatory agencies and the volume of applications and other requests may delay our receipt of necessary approvals. Further, approvals may be conditioned or denied in a manner that could significantly affect our strategic plans and future growth. Approval by these regulatory agencies may also be negatively impacted due to regulatory inquiries or reviews and any adverse publicity relating to such matters or the industry generally.

Current wording

Our institutions frequently need to obtain approvals from regulatory agencies in the regular conduct of their business. For example, to establish a new educational program or make substantive changes to existing programs, we are required to obtain the appropriate approvals from the Department and applicable state and accrediting regulatory agencies. Staffing levels at the Department and other regulatory agencies and the volume of applications and other requests may delay our receipt of necessary approvals. Further, approvals may be conditioned or denied in a manner that could significantly affect our strategic plans and future growth. Approval by these regulatory agencies may also be negatively impacted due to regulatory inquiries or reviews and any adverse publicity relating to such matters or the industry generally.

Previous wording

Enrollment of students at our institutions is impacted by many of the regulatory risks discussed above and business risks discussed below, many of which are beyond our control. We also believe that the level of our student enrollments is affected by changes in economic conditions, although both the nature and magnitude of this effect are uncertain and may change over time. For example, during periods when the unemployment rate declines or remains stable, prospective students may have more employment options, leading them to choose to work rather than to pursue postsecondary education. On the other hand, high unemployment rates may affect the willingness of students to incur loans to pay for postsecondary education or to pursue postsecondary education in general.

Current wording

The number of students enrolled at our academic institutions is impacted by many of the regulatory risks discussed above and business risks discussed below, many of which are beyond our control. We also believe that the level of our student enrollments is affected by changes in economic conditions, although both the nature and magnitude of this effect are uncertain and may change over time. For example, during periods when the unemployment rate declines or remains stable, prospective students may have more employment options, leading them to choose to work rather than to pursue postsecondary education. On the other hand, high unemployment rates may affect the willingness of students to incur loans to pay for postsecondary education or to pursue postsecondary education in general.

Previous wording

Affordability concerns and negative perception of the value of a college degree increase reluctance to take on debt and make it more challenging for us to attract and retain students. We may experience decreasing enrollments in our institutions due to changing demographic trends in family size, overall declines in enrollment in postsecondary institutions, job growth in fields unrelated to our core disciplines or other societal factors. Further, we continue to make investments in and changes to our business which are designed to improve student experiences, retention and academic outcomes and support the long-term sustainable and responsible growth of our institutions. These initiatives may not be successful or the success of these initiatives may reduce over time.

Current wording

Affordability concerns and negative perception of the value of a college degree increase reluctance to take on debt and make it more challenging for us to attract and retain students. We may experience decreasing enrollments in our institutions due to changing demographic trends in family size, overall declines in enrollment in postsecondary institutions, job growth in fields unrelated to our core disciplines or other societal factors. Further, we continue to make investments in our academic institutions which are designed to improve student experiences, retention and academic outcomes and support the long-term sustainable and responsible growth of our institutions. These initiatives may not be successful or the impact of these initiatives may decrease over time.

Previous wording

Our student enrollments could suffer from any of these circumstances. We believe it is likely that legislative, regulatory and economic uncertainties will continue, and thus it is currently difficult to assess our long-term growth prospects. Reduced enrollments at our institutions, for any of the reasons mentioned herein or otherwise, generally reduce our profitability, which, depending on the level of the decline, could be material.

Current wording

Our student enrollments could suffer under any of these circumstances. We believe it is likely that legislative, regulatory, and economic uncertainties will continue, and thus it is currently difficult to assess our long-term growth prospects. Reduced enrollments at our institutions, for any of the reasons mentioned herein or otherwise, generally reduce our revenues and profitability, which, depending on the level of the decline, could be material.

Previous wording

The postsecondary education industry is highly fragmented and increasingly competitive. Our institutions compete with traditional public and private two-year and four-year colleges and universities, other for-profit institutions, other online education providers and alternatives to higher education, such as immediate employment and military service. Some public and private institutions charge lower tuition for courses of study similar to those offered by our institutions due, in part, to government subsidies, government and foundation grants, tax-deductible contributions and other financial resources not available to for-profit institutions, and this competition may increase if additional subsidies or resources become available to those institutions. For example, a typical community college is subsidized by local or state government and, as a result, tuition rates for associate’s degree programs may be much lower at community colleges than at our institutions. Many states have adopted or proposed programs to enable residents to attend community colleges for free.

Current wording

The postsecondary education industry is highly fragmented and increasingly competitive. Our institutions compete with traditional public and private two-year and four-year colleges and universities, other for-profit institutions, other online education providers and alternatives to higher education, such as employment and military service. Some public and private institutions charge lower tuition for courses of study similar to those offered by our institutions due, in part, to government subsidies, government and foundation grants, tax-deductible contributions and other financial resources not available to for-profit institutions, and this competition may increase if additional subsidies or resources become available to those institutions. For example, a typical community college is subsidized by local or state government and, as a result, tuition rates for associate’s degree programs may be much lower at community colleges than at our institutions. Many states have adopted or proposed programs to enable residents to attend local community colleges for free.