Phoenix Education Partners, Inc.

Our Mission

To provide access to higher education opportunities that enable students to develop the knowledge and skills necessary to achieve their professional goals, improve the performance of their organizations and provide leadership and service to their communities.

Our Business

We are a mission-driven organization operating at the forefront of the rapidly evolving post-secondary education market. The demands of the modern workforce are continually shifting, and we are focused on transforming the way individuals achieve their educational and career aspirations while balancing the unique demands of being an adult learner by delivering a personalized, career-relevant, and affordable education to our students through our flexible learning model, skills-aligned curriculum and accessible tuition costs. We have created purpose-built platforms that leverage an artificial intelligence (“AI”) ready data infrastructure and technology stack to enhance student experience, increase student success, and improve the connectivity between students, educators and employers.

The University of Phoenix was founded in 1976 and has been continuously accredited since 1978 by The Higher Learning Commission (“HLC”), an institutional accrediting agency recognized by the U.S. Department of Education (the “Department of Education” or the “Department”). In our five decades of operation, as of August 31, 2026, we have served nearly 1.2 million alumni (including those who have completed non-degree certificates) and conferred more than 1.3 million degrees.

Our student body, which consists primarily of working adult learners seeking to advance their careers, represents an attractive and growing sub-segment of the higher education market. However, these learners face unique challenges that are not addressed by traditional programs designed for 18- to 22-year-olds, including the time constraints and responsibilities of work, community, and caring for dependents. As a result, these students can significantly benefit from an education solution tailored to their needs. We are dedicated to these adult learners, and we are constantly evolving the flexible, asynchronous learning models and the robust technology solutions designed to meet their unique needs. We believe we provide a differentiated value proposition to both students and employers. Both inside and outside of the classroom, our purpose is to help our students achieve their educational and career goals and to assist employers in upskilling their employees.

For the fiscal year ended August 31, 2026, the University’s Average Total Degreed Enrollment was 83,700, including 67,400 undergraduate and 16,300 graduate students. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the definition of Average Total Degreed Enrollment. Students either enroll at the University independently or through our employer relationships. Many of our students receive discounted tuition benefits under programs offered through our employer relationships, which are classified as B2B enrollment. These include students who enroll in the University through employer-provided programs, as well as students who enroll independently but are employees of employers with whom we have an employer relationship. Enrollment through our employer relationships represented 35.2% of our Average Total Degreed Enrollment in fiscal year 2026.

The University currently offers a number of degree-granting and non-degree certificate programs across a wide range of disciplines, including business and information technology (“IT”), health professions, social and behavioral sciences, education, nursing, doctoral studies, and general studies. Our degree-granting programs represented approximately 98% of our net revenue for fiscal year 2026 and serve a diverse set of students who are seeking to improve their career opportunities:

Average Total Degreed Enrollment by degree type for fiscal year 2026:

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Bachelor’s: 70%

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Master’s: 17%

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Associate’s: 10%

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Doctoral: 3%

Of the University’s enrollment during fiscal year 2026, subject to data availability for each metric:

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73% are currently employed;

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94% of new students are over the age of 22, with an average age of 37;

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53% are first-generation college students;

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62% of students who completed an optional survey identify as members of a minority group; and

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72% are female.

Our non-degree offerings for students and employers represent the remaining portion of net revenue and are a growing priority for the University. These non-degree offerings include shorter credit-bearing certificates and non-credit professional development courses designed to provide flexible options for working adults to develop critical skills for career advancement. We are expanding offerings to include additional targeted, continuous learning pathways to address evolving workforce needs, including areas that may require immediate or focused development. These offerings complement our degree programs providing opportunities for upskilling and benefit employers working to develop their workforce and strengthen their talent pipelines.

We are also developing new talent and workforce solutions that expand how we serve students, alumni, and employers. These initiatives include a talent-sourcing platform that connects employers with students and alumni whose skills profiles align with employment opportunities, as well as skills intelligence and validation capabilities designed to identify skills gaps, make workforce-relevant skills more visible and measurable, and create development pathways tied to career opportunities and internal mobility.

These initiatives build on the University’s skills-aligned approach to education, including career-relevant curriculum and digital badges that enable students to demonstrate verified capabilities, and the continued growth of our employer-supported enrollment. Our strategy is to create stronger connections among learning, demonstrated capabilities, and career opportunities.

The University’s non-term academic model encompasses a series of courses taken consecutively over the length of the program, which generally limits seasonal enrollment fluctuations. However, we have historically experienced, and expect to continue to experience, lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to the University’s holiday breaks when no related net revenue is recognized. While our operating costs generally do not fluctuate significantly on a quarterly basis, we have historically experienced increased marketing expense in our second and fourth fiscal quarters due to course starts that occur during traditional back-to-school seasons. The timing and magnitude of such fluctuations may vary from period to period and may not follow historical trends.

Initial Public Offering and Corporate Conversion

In October 2025, we completed an initial public offering (the “IPO”) in which certain funds affiliated with or managed by Apollo Global Management, Inc. and its subsidiaries (“Apollo” or the “Apollo Stockholder”) and certain funds affiliated or managed by the Vistria Group LP and its subsidiaries (“Vistria” or the “Vistria Stockholder”) sold an aggregate of 4,887,500 shares of our common stock (including 637,500 shares sold to the underwriters pursuant to their option to purchase additional shares) at a public offering price of $32.00 per share, for an aggregate offering price of $156.4 million. The Apollo Stockholder and the Vistria Stockholder received all the proceeds from the sale of shares of common stock in the IPO. As such, we did not receive any proceeds from the sale of shares of common stock in the IPO.

Prior to the IPO, we operated as a Delaware limited partnership under the name AP VIII Queso Holdings, L.P. On October 7, 2025, AP VIII Queso Holdings, L.P. converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Phoenix Education Partners, Inc. (the “Corporate Conversion”). In connection with our conversion into a corporation, all of the outstanding limited partnership units of AP VIII Queso Holdings, L.P. were converted into shares of our common stock. See Note 1. Nature of Operations and Significant Accounting Policies to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information regarding the Corporate Conversion.

Competition

There are thousands of colleges and universities serving traditional and adult students in the United States. Competition among these institutions is highly fragmented and varies by geography, program offerings, ownership, quality level, and selectivity of admissions. While we are one of the largest universities in the U.S. that predominantly focuses on the distance education market (defined as universities with 90% or more of students enrolled in distance education) according to the Department of Education’s National Center for Education Statistics, no single institution has a significant share of the total post-secondary market. We compete with online programs offered by local, traditional colleges and universities, with other proprietary institutions that offer online programs, and with institutions that offer non-traditional, credit-bearing and noncredit-bearing education programs. As the proportion of traditional colleges and universities providing alternative learning modalities increases, a trend that accelerated during the COVID-19 pandemic, we expect that competition will increase. See Item 1A, “Risk Factors—Risks Related to Our Business—We face intense and increasing competition in the post-secondary education market, which could decrease our market share and create pricing pressure.”

Some of our competitors have greater financial and non-financial resources than we have and are able to offer programs similar to ours at lower tuition levels. In addition, the ability to bring online programs to market with the aid of sophisticated online program management companies has allowed some traditional institutions that historically did not offer online education programs to access the online market quickly. While traditional colleges’ and universities’ use of online program managers, who assist those universities in bringing program offerings online, has lessened in recent years, these programs tend to target working adults, which is the University’s main student base. Accordingly, one of our primary competitive advantages has been diminished as a significant and increasing number of traditional institutions offer an increasing array of distance learning and other online education programs, including programs that are offered wholly online and geared towards the needs of working adults. As the proportion of traditional colleges and universities providing alternative learning platforms increases, we will face increased competition from these institutions, including those with highly regarded reputations, the degrees from which may be perceived as more valuable in the workplace.

In addition, in response to student preferences, education providers have introduced new education and operating models focused on reducing costs and time to completion, including competency-based formats, intensive and immersive skills focused bootcamps, other non-degree programs, and career-focused educational pathways, tools and services. While the bootcamp market has tapered due to the emergence of AI and future growth is uncertain, price sensitive consumers and businesses may still be attracted to these alternative approaches.

The higher education industry is continually evolving due to regulatory and political considerations, technology and AI, student and employer preferences, economic constraints, competition, the need for quality secondary education in the United States, and other factors. Despite the continued evolution, we believe that we are well-positioned within our market to successfully compete for working adult students based on the following primary components:

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affordable and accessible education pathways, including the University’s Tuition Price Guarantee, which generally fixes an eligible student’s tuition price per course at the rate in effect on the student’s enrollment date and, beginning November 2, 2026, the University’s Locked-In Pricing Guarantee, which gives new students one combined price per course, covering both tuition and the resource fee, locked from enrollment through graduation in their enrolled program, providing greater predictability regarding tuition costs throughout the duration of the student’s program;

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student-centric policies that recognize the need of adult learners to juggle family and work priorities along with school;

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scale and experience with online learning;

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focus on AI to match the evolving needs of students and employers;

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brand recognition;

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high quality, outcome-oriented, and career-relevant degree portfolio and learning pedagogy;

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qualified and experienced faculty that bridge the gap between education and career;

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select, active employer relationships that demonstrate the validity of our curriculum for preparing students for the modern workforce;

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speed of implementation in service and learning innovations and the ability to employ sophisticated practices for assessing levels of student learning, allowing us to issue verifiable badges for skills attainment;

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data-driven, multi-dimensional approach to personalized student support;

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digital skills tagging that recommends job pathways to students based on skills attained and gathered from students via robust data repositories and digital tools; and

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long-standing record of regulatory compliance with robust accreditation portfolio.

Human Capital Resources

As of August 31, 2026, we employed approximately 3,300 staff employees, in addition to approximately 2,200 active adjunct faculty members. Average tenure is 12 years for staff and 17 years for faculty, reflecting strong retention and institutional knowledge.

Our human capital strategy is grounded in our core values of Brave, Honest, and Focused – encouraging innovation and open communication, maintaining integrity and accountability, and centering our work on student success. We are committed to attracting, developing, and retaining high-performing employees who embody these values and advance our mission of improving the lives of adult learners through education.

Student-facing employees complete a comprehensive, role-specific training program that builds the knowledge, skills, and confidence needed to support students effectively. New hires participate in a four-week onboarding program combining foundational learning with hands-on, scenario-based practice, followed by mentorship and ongoing professional development to reinforce quality in every student interaction.

Our faculty bring real-world experience to the classroom and complete a structured onboarding program that translates professional expertise into effective teaching. Credentials are verified for course alignment, and new faculty receive targeted training on our academic culture and expectations. Each new faculty member is paired with a mentor during their first course and supported through quality assurance reviews that promote ongoing development and teaching excellence.

We foster a culture of transparency, engagement, and continuous learning. Quarterly leadership broadcasts keep employees informed and provide opportunities for dialogue with executive leadership. Employees are encouraged to pursue career growth through internal training and leadership programs that build skills and prepare them for future roles.

We provide a competitive benefits package for all eligible staff employees and faculty members designed to support our team members’ health, financial security, and well-being. Our programs are designed to attract, engage, and retain talent while reinforcing a results-driven culture focused on academic excellence. Eligible staff employees receive a comprehensive benefits package that includes health and wellness offerings, many that we fully subsidize, as well as a 401(k) savings plan with an employer match to help our employees save for their retirement. Additional benefits that support work-life balance include paid time off, flexible and remote work options, paid parental leave, tuition assistance for eligible staff employees and faculty members (and their families), and opportunities for community involvement and volunteer service.

We are committed to conducting business with honesty, integrity, and high ethical standards. Employees complete regular training on ethics, compliance, and data privacy, reinforcing a shared responsibility to act lawfully and ethically. We also maintain robust compliance monitoring programs, regularly assess effectiveness of these programs, and provide multiple reporting channels that allow employees to raise concerns in good faith without fear of retaliation.

These efforts support a skilled, ethical, and high-performing workforce aligned with our mission and strategic priorities.

Accreditation and Jurisdictional Authorizations

The University is institutionally accredited by the HLC, which provides, at least in part, the following:

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validation of the quality of the institution as a whole;

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additional assurance to current and potential students that they are receiving a quality educational experience from an institution that meets accreditation criteria and is engaged in continuous improvement;

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qualification to participate in the federal student financial aid programs under Title IV of the Higher Education Act (“Title IV”), in combination with state higher education operating and degree granting authority and multiple other federal requirements; and

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qualification for authority to operate in certain states.

Institutional accreditation is widely accepted nationally as the basis for the recognition of earned credit and degrees for academic, employment, and professional licensure purposes, and, in some states, as a component of authorization to operate as a degree-granting institution. The University’s most recent reaffirmation of its institutional accreditation with the HLC took place in 2022-2023, and the next reaffirmation will take place in 2032-2033, with a mid-cycle visit in 2027.

Accreditation information for the University and applicable programs is described below:

(1)

The referenced years are on a calendar year basis.

In addition to accreditation by independent accrediting bodies, institutions that participate in Title IV programs must be authorized to operate by the appropriate post-secondary regulatory authority in each state where the institution has a physical presence as well as each of the other domestic jurisdictions in which it operates. The University operates its only physical campus in Phoenix, Arizona and is authorized by the Arizona State Board for Private Postsecondary Education (the “Arizona State Board”) to operate both its Phoenix campus and offer distance education under the national State Authorization Reciprocity Agreement (“SARA”). See “—Regulatory Environment—State Regulation” and Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—If we fail to maintain our state authorization, we would lose our ability to participate in Title IV programs.” The University is also registered as an out-of-state institution with the California Bureau for Private Postsecondary Education (the “California BPPE”) to offer its distance education programs to California students.

(1)

The referenced years are on a calendar year basis.

Financial Aid Programs

The principal source of federal student financial aid in the United States is established and governed by Title IV of the Higher Education Act and regulations promulgated thereunder. We refer to the federal student financial aid programs under the Higher Education Act as “Title IV” programs. The U.S. Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program. The most recent reauthorization of the Higher Education Act occurred in 2008 after multiple extensions of the statutory deadline. This reauthorization expired September 30, 2013. Since this expiration, the Higher Education Act has been extended through a series of temporary extensions by Congress so that Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in discussion and activity regarding Higher Education Act reauthorization, but the timing and the terms of any eventual reauthorization cannot be predicted.

Independent of broader Higher Education Act reauthorization efforts, the U.S. Congress enacted amendments to the Higher Education Act through the One Big Beautiful Bill Act (“OBBB”). The OBBB’s amendments implemented through final regulations published in 2026 make significant changes to the Direct Loan program, including new annual and lifetime borrowing limits, the elimination of Grad PLUS loans for graduate and professional students subject to transition provisions for certain existing borrowers, and new annual limits for parent borrowers of Direct PLUS Loans. The amendments also establish a new earnings accountability framework under which programs may lose Direct Loan eligibility if their graduates’ median earnings do not exceed the applicable earnings threshold in two out of three consecutive award years for which the measure is calculated. See “Regulatory Environment—Regulation of Student Financial Aid Programs—Recent Department of Education Rulemaking Initiatives.”

The recent amendments and implementing federal regulations also reduce the number of federal student loan repayment programs available to borrowers for loans issued on or after July 2026, revise the repayment terms that will be available to such borrowers, will require certain borrowers on income-contingent plans to transition to a different plan by July 2028, and will impose new restrictions on the availability of loan deferment and forbearance in July 2027. In March 2026, the Department of Education announced, in accordance with the terms of a court-approved settlement agreement, that federal loan servicers would begin issuing notices to borrowers enrolled in the Saving on a Valuable Education (“SAVE”) loan repayment plan in July 2026 instructing them to exit SAVE and enroll in a different repayment plan within 90 days.

The OBBB’s amendments to the Higher Education Act also include provisions that delay the implementation of certain of the Department of Education’s most recently promulgated loan discharge regulations by revoking the applicability of such regulations to any loans first originated before July 1, 2035. See “Regulatory Environment—Regulation of Student Financial Aid Programs—Borrower Defense to Repayment” and “—Closed School Loan Discharge.”

Some Title IV programs award financial aid on the basis of financial need, generally defined as the difference between the cost of attending an educational institution and the amount the student and/or the student’s family, as the case may be, can reasonably be expected to contribute to that cost. The amount of financial aid awarded to a student each academic year is based on many factors, including, but not limited to, the student’s program of study, grade level, Title IV annual loan limits, prior aid received, and financial need. All recipients of Title IV program funds must maintain satisfactory academic progress within the guidelines published by the Department of Education to remain eligible. See Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—Further action by Congress to revise the laws governing federal student financial aid programs, including changes applicable only to proprietary educational institutions, could materially impact our enrollments, revenue, and costs of operation.”

In addition to Title IV programs, qualifying U.S. active military, veterans, and their family members are eligible for federal student aid from various U.S. Department of Defense (the “Department of Defense”) and U.S. Department of Veterans Affairs (the “Department of Veterans Affairs”) programs. We refer to the financial aid programs administered by these Departments as “military benefit” programs.

During fiscal year 2026, 88.6% of the University’s cash basis revenue for eligible tuition and fees was derived from the receipt of federal program funds, as calculated under the 90/10 Rule described in“—Regulatory Environment—Regulation of Student Financial

Aid Programs—90/10 Rule.” The majority of these federal program funds consist of Title IV funds, specifically, federal student loans and federal grants:

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Student loans currently are the most significant component of Title IV program funds and are administered through the Federal Direct Loan Program, which includes the Direct Subsidized Loan Program, the Direct Unsubsidized Loan Program, and the Direct PLUS Loan Program. During fiscal year 2026, student loans (including Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans) represented approximately 67% of the gross Title IV program funds received by the University.

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Federal grants are awarded based on financial need and only to eligible undergraduate students who have not earned a bachelor’s or professional degree. Unlike loans, federal grants do not have to be repaid. During fiscal year 2026, federal grants represented approximately 33% of the gross Title IV program funds received by the University.

The remaining funding for tuition and other fees paid by our students primarily consists of military benefit programs, tuition assistance from employers, and personal funds.

Regulatory Environment

We are subject to extensive regulatory requirements imposed by a wide range of federal and state agencies, as well as by institutional and programmatic accreditors. These regulatory requirements cover the vast majority of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, financial operations and financial condition. These regulatory requirements also affect our ability to acquire, expand or open additional institutions or campuses, to revise or expand our educational programs, and to change our corporate structure and ownership. The approvals granted by agencies and accreditors permit us to operate and to participate in a variety of government-sponsored financial aid programs that assist students in paying for their education. The most significant of these are the Title IV federal student aid programs administered by the Department of Education pursuant to the Higher Education Act. Generally, to participate in Title IV programs, an institution must be licensed or otherwise legally authorized to operate in the state where it is physically located, be accredited by an accreditor recognized by the Department of Education, be certified as an eligible institution by the Department of Education, offer at least one eligible program of education, and comply with other statutory and regulatory requirements. Executive actions, orders, and related regulatory changes implemented by the administration and its appointees could impact our industry.

In October 2025, the U.S. federal government experienced a shutdown due to a failure by Congress to timely enact funding bills needed for the new fiscal year. The shutdown modestly impacted military tuition assistance funding for some of our students. The federal government experienced additional partial shutdowns in fiscal year 2026, and additional shutdowns may occur in the future. Future shutdowns may have a pronounced and substantial effect on access to federal student aid for our students and for the University, including, but not limited to, military tuition assistance and other military benefits programs. Any future government shutdowns, and other suspensions, interruptions, delays, or cessations of governmental funding or changes to the U.S. federal government’s budget and budgetary priorities, especially if related to the Department of Education or appropriations for Title IV programs, could adversely affect the funding of federal programs providing financial assistance to our students, which could in turn adversely affect our business, financial condition and operating results.

In addition to governance by the Department of Education, the HLC, state agencies, and programmatic accreditors, there has been substantial focus during the past decade by members of the U.S. Congress and other federal agencies, including the Department of Education and its Office of Inspector General (“OIG”), the Consumer Financial Protection Bureau, and the Federal Trade Commission (“FTC”), as well as state attorneys general, on the role that proprietary educational institutions play in higher education. Congressional hearings, rulemaking initiatives, and other regulatory oversight activities have focused upon various aspects of the education industry, and reports have been issued that are highly critical of proprietary institutions and include a number of recommendations to be considered by Congress in connection with the reauthorization of the Higher Education Act. A group of influential U.S. senators has strongly and repeatedly encouraged the Departments of Education, Defense, and Veterans Affairs to further regulate, limit or terminate the participation of proprietary educational institutions, including the University, in existing federal student aid and tuition assistance programs.

For more information about the risks associated with the regulatory environment in which we operate, see Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate.”

State Regulation

To operate and offer post-secondary programs, and to be certified to participate in Title IV programs, we must be authorized to operate by the appropriate post-secondary regulatory authority in each state where we have a physical presence. To offer distance education programs in any given jurisdiction, we also must have state authorization, whether individually or through a reciprocity agreement. Since 2014, the University has been an approved, participating institution in SARA, which enables it to enroll students in distance education programs in each SARA member state and jurisdiction. SARA is a voluntary agreement among 49 member states (all but California), the District of Columbia, Puerto Rico, and the U.S. Virgin Islands that establishes standards for interstate offering of post-secondary distance education. When states, districts, and U.S. territories join SARA, their participating degree-granting and accredited institutions are authorized to provide their approved distance education programs through reciprocity to students in other SARA member states. SARA only provides approval to offer exclusively distance education programs in other SARA member states, so institutions that have a “physical presence” in any particular jurisdiction are required to obtain individual authorization in that jurisdiction. The University operates its only physical campus in Phoenix, Arizona and is authorized by Arizona for both its Phoenix campus and as the home state for online authorization under SARA. The University is also registered as an out-of-state institution with the California BPPE to offer its distance education programs to California students.

Substantially all of the University’s enrolled students attend online through authorization under SARA and its policies, and pursuant to the rules, regulations, and complaint procedures of Arizona, or through direct authorization by California. Thus, whether through direct authorization from states, or through participation in the SARA compact, the University is authorized to offer its educational programs at its physical location and online and must maintain such authorization to continue to operate its business.

Under the Department of Education’s current state authorization rules, adopted in 2020, institutions offering post-secondary distance education to students located in states other than where the institution is located must meet the state requirements to offer distance education to residents of that state for Title IV eligibility. The rules also provide that a state reciprocity agreement, like SARA, is an acceptable means by which those states may grant that authority. The 2020 rules also expanded the required disclosures to current and prospective students regarding whether programs leading to professional licensure or certification meet their state’s licensing requirements. Further revisions to these rules require that institutions enrolling students in a distance education program to prepare for professional licensure must determine that the program satisfies the applicable educational requirements for professional licensure or certification in the state the student is located at the time of enrollment so that the student qualifies to take the state’s licensure or certification exam that is needed to practice or find employment in the occupation the program prepares the student to enter. Moreover, the 2024 revisions require institutions to provide a list of all states where the institution has determined that its program does and does not meet state requirements for a specific professional license or certification required for employment and to notify a student when they move to a new state while enrolled in a professional licensing program and provide an updated state disclosure about whether the University’s program is approved in that state and whether the student may continue in the program. In recent years, Department of Education regulations on state authorization of distance education and the use and structure of a state reciprocity agreement to meet such requirements remains an area of interest and potential regulatory change in the future.

In addition to being subject to ongoing changes to state authorization requirements in Title IV federal regulations, SARA has conducted an annual policy modification process that allows interested parties to submit proposals to modify, add, or remove policies within the SARA policy manual. Since its inception, several hundred proposals have been submitted that have resulted in changes, additions, or deletions of SARA policies that have been unanimously agreed to by the four Regional Education Compacts and passed by the NC-SARA Board. The approved policies have included changes to such things as notification requirements for adverse actions, the resolution of student complaints, the loss of state or institutional eligibility, and the provisional status process, among others. The University participated in recent annual SARA policy proposal processes and plans to continue doing so in the future. Policies that ultimately receive unanimous approval by the four Regional Education Compacts and are approved by the NC-SARA Board will apply to the University as a participating institution. Additionally, as SARA participation is voluntary, states may decide at any time to withdraw from the compact. No states have withdrawn from SARA since originally joining, but recently some states have expressed dissatisfaction with their inability to apply their own education specific laws to out-of-state institutions providing distance education. If any state were to leave SARA, the University would be required to obtain direct state authorization to continue serving and enrolling students from that jurisdiction, which is an uncertain process and could result in more onerous requirements.

California is not a member of the SARA compact, and the University is registered as an out-of-state institution with the California BPPE to offer its distance education programs to California students. Unless California decides to join SARA as a member state, the University must continue to maintain its individual state authorization through registration as an out-of-state institution. If California’s regulations or statutes were to change, the University would need to comply with those changes to continue its separate authorization to offer distance education to California students. In the 2026 legislative session, the California BPPE went through a statutory sunset reauthorization process. The sunset bill introduced and passed during the 2026 session made various procedural and substantive changes to the Bureau’s regulations including procedures involving the student tuition recovery fund that will apply to out-of-state registered schools.

The University will continue to be subject to changes in state authorization. See Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—If we fail to maintain our state authorization, we would lose our ability to participate in Title IV programs.”

State Professional Licensure

Many states have specific requirements that an individual must satisfy in order to be licensed as a professional in specified fields, including fields such as nursing, education, counseling, and social work. These requirements vary by state and by field. A student’s success in obtaining licensure following graduation typically depends on several factors, including the background and qualifications of the individual graduate, whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association; whether the program from which the student graduated meets all requirements for professional licensure in that state; whether the institution and the program are accredited and, if so, by what accrediting commissions; and whether the institution’s degrees are recognized by other states in which a student may seek to work. Many states also require that graduates pass state and/or national examinations as a prerequisite to becoming certified in certain fields, such as nursing and teaching. Many states will certify individuals if they have already been certified in another state. The University’s professional licensing programs must meet all specific state requirements for licensure in any state where the program is offered so that graduates of these programs may pursue licensure in their state.

Accreditation

Accreditation is a private, non-governmental process for evaluating the quality of an educational institution and its programs in areas including student performance, governance, integrity, educational quality, faculty, physical resources, administrative capability and resources, and financial stability. To be recognized by the Department of Education, an accrediting commission must adopt specific standards for its review of educational institutions, conduct peer-review evaluations of institutions, and publicly designate those institutions that meet its criteria. An accredited school is subject to periodic review by its accrediting commission to determine whether it continues to meet the performance, integrity, and quality required for accreditation.

We have been institutionally accredited by the HLC since 1978, most recently obtaining reaccreditation for the ten-year period through 2032-33. The HLC is an accrediting agency recognized by the Secretary of Education and accredits entire institutions of higher education. Institutional accreditation by a recognized accreditation agency is one of the prerequisites for an institution of higher education to be eligible to disburse Title IV aid to students. Institutional accreditation is widely accepted nationally as the basis for the recognition of earned credit and degrees for academic purposes, employment, professional licensure, and, in some states, as a component of authorization to operate as a degree-granting institution.

In addition to institutional accreditation, programmatic accreditation may be required for particular educational programs. Programmatic accreditors review specialized and professional programs in a range of fields and disciplines within an institution to assure the public that an academic program has undergone a rigorous review process and been found to meet high standards for educational quality. Such programs are required to meet the standards of their programmatic accreditor. We hold several programmatic accreditations, including for nursing, education, counseling, and social work, and we must periodically renew these accreditations by completing a comprehensive programmatic accreditation renewal process. Those programmatic and specialized accreditors could determine that future offerings or transactions constitute a substantive change requiring their further review and approval, and such processes would trigger additional accreditor and specialized state board or agency evaluation of our educational programs and of our compliance with the applicable standards and requirements of those agencies. See “—Accreditation and Jurisdictional Authorizations” for a listing of the institutional, programmatic, and specialized accreditations we hold. See also Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—If an education regulatory agency that regulates us delays or denies approval of a transaction involving us that constitutes a “change in control,” our ability to operate or participate in Title IV programs may be materially impaired.”

Regulation of Student Financial Aid Programs

To be eligible to participate in Title IV programs, an institution must comply with specific requirements contained in the Higher Education Act and the regulations issued thereunder by the Department of Education. The substantial amount of federal funds disbursed to schools through Title IV programs, the large number of students and institutions participating in these programs, and allegations of fraud and abuse by certain for-profit educational institutions have caused Congress to require the Department of Education to exercise considerable regulatory oversight over for-profit educational institutions. As a result, for-profit educational institutions, including ours, are subject to extensive oversight and review. Because the Department of Education periodically revises its regulations and changes its interpretations of existing laws and regulations, we cannot predict with certainty how the Title IV program requirements will be applied in all circumstances.

If we fail to comply with the regulatory standards governing Title IV programs, the Department of Education could impose one or more sanctions, including requiring us to repay Title IV program funds, requiring us to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against us, initiating proceedings to impose a fine or to limit, suspend, or terminate our participation in Title IV programs, delaying or denying a future application for Title IV recertification, imposing restrictions on our participation in Title IV programs, or referring the matter for civil or criminal prosecution.

See Item 1A, “Risk Factors—If the University fails to obtain recertification by the Department of Education when required, our participation in Title IV programs could be restricted or terminated, our students could lose their access to Title IV program funds, or we could be required to accept significant limitations as a condition of our continued participation in Title IV programs.” In addition to the actions that may be brought against us as a result of our participation in Title IV programs, we are also subject to complaints and lawsuits relating to regulatory compliance brought not only by regulatory agencies, but also by other government agencies and third parties, such as current or former students or employees and other members of the public. Further, operational or systems errors, potentially impacting student academic records, grades, academic standing, or related Title IV determinations, may be identified in the course of normal operations that could require corrective action, repayments, student remediation, and regulatory reporting and could result in program reviews, audits, or other inquiries or enforcement proceedings by our accreditors, state oversight agencies, the Department of Education, or other regulatory agencies, which could result in complaints, claims from students or other third parties, and result in reputational harm. See Item 1A, “Risk Factors—Government agencies, regulatory agencies, and third parties may conduct compliance reviews, bring claims, or initiate litigation against us based on alleged violations of the extensive regulatory requirements applicable to us.”

Significant aspects of the regulation of Title IV programs include the following:

Eligibility and Certification Procedures. The Higher Education Act specifies the manner in which the Department of Education reviews institutions for eligibility and certification to participate in Title IV programs. Every educational institution involved in Title IV programs must be certified to participate and is required to periodically renew this certification, which is granted in a Program Participation Agreement (“PPA”) between the Department of Education and the institution. Such recertification generally is required at least every six years, but may be required earlier, including when an institution undergoes a change in control. In August 2025, the Department of Education renewed the University’s PPA and approved the recertification of the University’s continued participation in the Title IV programs through June 2031. Department of Education review may be triggered when an institution expands its activities in certain ways, such as opening an additional location, adding a new educational program or modifying the academic credentials it offers. Certification can be granted on a full or provisional basis, and, in instances where the Department of Education does not complete the review of an application for renewal by the stated date of expiration, certification may be continued on a month-to-month basis until the review is complete.

The Department of Education may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control. During the period of provisional certification, the institution must comply with any additional conditions included in the institution’s PPA and typically is required to obtain prior Department of Education approval to add an educational program or make any other significant change. In addition, the Department of Education may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another institution, or make any other significant change. If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its PPA, it may seek to revoke the institution’s certification to participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. In the case of month-to-month certification, the Department of Education may allow the institution’s certification to expire at the end of any month by denying recertification without advance notice, and without any formal procedure for review of such action. Students attending institutions that are provisionally certified or certified on a month-to-month basis remain eligible to receive Title IV program funds, so long as certification remains in place.

Federal regulations relating to certification and imposing additional requirements in PPAs may pose challenges to the University and increase the risk of regulatory noncompliance and a finding by the Department of Education that the University has not or cannot fully satisfy all required eligibility and certification standards. The most recent changes to these regulations, which became effective July 1, 2024, expand the grounds for placing an institution on provisional certification and identify new potential conditions on provisionally certified institutions. The regulations further added new requirements to an institution’s PPA including, among other things, restrictions on student transcript withholding and a prohibition on institutional policies and procedures that induce students to limit their amount of federal student aid. Regarding that prohibition, the OBBB’s amendments to the Higher Education Act granted institutions authority to set loan limits for programs of study below the statutory loan limits, so long as any such limit is applied consistently to all students enrolled in such program of study. See “—Recent Department of Education Rulemaking Initiatives.”The certification and PPA regulations also require that the PPA be signed by entities with direct or indirect ownership of the institution and the power to exercise control over the institution, and require such co-signatories to assume liability for financial losses to the federal government related to the institution’s administration of the Title IV programs. Under this rule, the entities required to become co-signatories include, but are not limited to, (i) entities with at least 50% control over an institution through direct or indirect ownership, by voting rights or by its right to appoint board members to an institution or any other entity, whether by itself or in combination with other entities or natural persons with which it is affiliated or related, or pursuant to a proxy or voting or similar agreement; (ii) entities with the power to block significant actions of an institution; (iii) entities that are the 100% direct or indirect interest holder of an institution; and (iv) certain entities that are required to submit financial statements to the Department of Education in connection with an institution. In January 2026, however, the Department of Education announced that in response to a lawsuit challenging the legality of the PPA signature requirement, it has agreed, going forward, not to enforce this owner-entity signature rule. While the rules may be revised and the scope and manner of their implementation or enforcement may vary or change, in the event that the University were unable to comply with the Department of Education’s regulations governing PPAs, this could have a material adverse effect on our business and the Department of Education could impose letter of credit requirements or take other adverse actions against the University up to and including termination of the University’s Title IV program participation.

Recent Department of Education Rulemaking Initiatives. In recent years, the Department of Education has engaged in negotiated rulemaking to develop regulations focused on various topics. After the Department of Education convenes a negotiated rulemaking committee, the negotiated rulemaking process typically culminates in the Department of Education publishing a Notice of Proposed Rulemaking (“NPRM”) followed by a public comment period, after which the Department of Education responds and publishes final regulations. During fiscal year 2026, the Department of Education issued final regulations relating to public service loan forgiveness, which were struck down in U.S. district courts in June 2026 in litigation that remains pending on appeal, and the Department of Education held OBBB-related negotiated rulemaking sessions. The first session, Reimagining and Improving Student Education (“RISE”), reached consensus in early November 2025 and final regulations were published in May 2026 on a package of federal student loan-related changes, including, among other things, amending annual and aggregate loan limits for graduate, professional, and parent loan borrowers, implementing two new student loan repayment plans for new borrowers, and codifying the authority granted in OBBB to institutions to set loan limits for programs of study below the statutory loan limits. The second committee, Accountability in Higher Education and Access through Demand-driven Workforce Pell (“AHEAD”), reached consensus at negotiated rulemaking sessions in December 2025 and January 2026 and final regulations arising from the AHEAD committee were published in May and July 2026 implementing changes pertaining to earnings-based outcome measures, institutional and programmatic accountability, the Pell Grant Program, and other changes to the Title IV programs. The July 2026 final regulations arising from the AHEAD negotiated rulemaking sessions implement the above-described earnings-based accountability framework and also include transparency measures referred to by the Department of Education as Student Tuition and Transparency Systems (“STATS”). Under STATS, the institutional reporting requirements in the prior financial value transparency framework were renamed, with modifications to certain reporting obligations in future years. The Department of Education also convened a negotiated rulemaking committee, Accreditation, Innovation, and Modernization (“AIM”) for sessions held in April and May 2026. The goals of the AIM committee included simplifying the accreditation recognition process, examining how accreditation contributes to higher education costs and credential inflation, safeguarding against undue influence from related private trade associations, eliminating standards or policies of discrimination, and refocusing quality assurance and improvement on data-driven student outcomes. The AIM committee reached consensus in May 2026, and the Department of Education published the NPRM with proposed regulations in August 2026. The Department of Education may initiate additional negotiated rulemaking proceedings. See Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—Recent action by Congress that resulted in revisions to the laws governing federal student financial aid programs, including the level of federal student aid funding available and the earnings-based accountability requirements that programs must meet to qualify for such funding, could materially impact our enrollment, revenue, and costs of operation.”See“—Borrower Defense to Repayment,” “—State Regulation” and “—New Earnings Accountability Framework and STATS Regulations”for additional information regarding recent rulemaking.

Borrower Defense to Repayment. Under the Higher Education Act, certain Department of Education regulations specify acts or omissions of a school that a student loan borrower may assert as a defense to repayment of a federal student loan (referred to as a BDR claim) and thereby seek to obtain a discharge and refund of such loan (the “BDR Rules”). The Department of Education has indicated that in certain circumstances it may assert such a claim on behalf of a student borrower. Additionally, the Department of Education may initiate a recoupment proceeding against a school to collect loan amounts that are discharged or refunded as the result of certain BDR claims. The BDR Rules have been significantly revised three times in recent years, and the iterations have faced various challenges and litigation. Currently, a complex framework of rules applies different loan relief and recoupment standards and procedures based upon the date that the loan in question was first disbursed. Further, the OBBB delayed the applicability of the most recent iteration of the BDR Rules, promulgated in 2022, and that iteration of the BDR Rules applies only to loans originated on or after July 1, 2035. In addition to this legislative delay of the BDR Rules promulgated in 2022, litigation challenging the legality of several aspects of the 2022 iteration and the Department’s borrower-defense-to-repayment authority remains pending. Following remand from the U.S. Court of Appeals for the Fifth Circuit, the plaintiffs filed an amended complaint in March 2026 that also challenges certain provisions of the BDR Rules promulgated in 2019, which were restored by the OBBB. The Department filed a motion to dismiss the amended complaint in May 2026, which remains pending. The ultimate outcome of the litigation and its effect on the Department of Education’s administration of borrower-defense claims remain uncertain.

In a different lawsuit, a California federal court approved a settlement between the Department of Education and a class of student loan borrowers, on November 16, 2022. Sweet v. Cardona, No. 4:19-cv-03674 (N.D. Cal.) (“Sweet”). Under the Sweet settlement, the Department of Education agreed to grant automatic loan discharge and refund relief on borrower defense applications pending as of June 22, 2022, that were filed with respect to about 150 institutions that were identified in a list attached to the settlement agreement (“Exhibit C”), which includes the University. The Department of Education also agreed to an expedited resolution process for borrower defense applications filed between June 22, and November 15, 2022, regardless of the date of disbursement of the underlying loans. In the course of the Sweet litigation, various court rulings have referenced the Department of Education’s assurances that it will not rely on the automatic discharges under the Sweet settlement as the basis upon which to recoup such discharged loans from institutions. The U.S. Supreme Court denied a request by one of the parties for an appeal and litigation related to the enforcement of the Sweet settlement remains pending.

Beginning in June 2020 and continuing until April 2024, the University received approximately 48,000 borrower defense applications from the Department of Education as part of the fact-finding process by which the Department of Education notifies institutions regarding BDR claims received from student borrowers and provides the institution an opportunity to respond. The University provided substantive, timely responses related to each such application and other requested evidence to the Department of Education. While the University believes it has both factual and procedural defenses to the claims made in the applications regardless of applicable BDR Rules, we cannot predict how the Department of Education will evaluate the evidence and adjudicate each claim. Additionally, approximately one-third of the applications received by the University through April 2024 were dated on or before June 22, 2022, which would subject the underlying loans associated with those BDR claims to automatic discharge under the terms of the Sweet settlement and potentially prevent such claims from serving as the basis of a recoupment action by the Department of Education against us. Nearly all of the remaining applications received by the University through April 2024 were dated between June 23, 2022 and November 15, 2022. The Sweet settlement provided that BDR claims filed between June 22, 2022 and November 15, 2022 would be adjudicated no later than January 28, 2026, subject to the “streamlined review” adjudication process formalized as part of the Sweet settlement, or would be automatically discharged. The Department of Education sought an extension of the January 28, 2026 deadline to adjudicate these “post-class” BDR claims that were filed between June 22 and November 15, 2022. The Department of Education obtained a limited further extension with respect to “post-class” BDR claims filed against non-Exhibit C schools, but on March 25, 2026, the U.S. Court of Appeals for the Ninth Circuit denied the Department of Education’s emergency motion for a stay of the January 28, 2026 deadline with respect to the post-class BDR claims filed against Exhibit C Schools. On July 17, 2026, the Ninth Circuit denied a second motion from the Department of Education for a stay of decision deadlines for post-class BDR claims. During litigation, the federal courts overseeing the Sweet settlement have referenced the Department of Education’s assurances that it will not rely on automatic discharges under the Sweet settlement as the basis upon which to recoup such discharged loans from institutions. Accordingly, the Department of Education may be unable to rely on any such automatic discharges as the basis of a recoupment action against us.

In September 2023, the Department of Education announced that it had approved more than 1,200 BDR claims and discharged nearly $37 million in federal student loans from borrowers who made claims relating to a 2012-2014 University ad campaign. The Department of Education further indicated its intent to commence a recoupment effort against the University for approximately $37 million in discharged loans, but the Department of Education has not yet commenced any such action. While these BDR claims that were discharged appear to also have been subject to automatic discharge under the terms of the Sweet settlement, and the settlement itself could not serve as the basis of a recoupment action by the Department of Education under its stated position, the Department of Education may still attempt to seek recoupment of such discharged payments in the future.

In December 2025, the University began receiving additional borrower defense applications from the Department of Education. The University has submitted, or intends to submit, substantive responses to these applications. These applications are dated after November 15, 2022 and are not subject to the terms of the Sweet settlement. The University believes that it has both factual and procedural defenses to the claims made in these applications regardless of which iteration of the BDR Rules applies.

We believe there are a substantial number of additional pending BDR claims with respect to the University that have not yet been provided to the University by the Department of Education and of which the University has not been formally notified. We dedicate significant resources to navigating BDR claims under the multiple iterations of the BDR Rules and maintain reporting procedures to comply with the financial responsibility provisions related to BDR. See “—Standards of Financial Responsibility.”

Individual BDR applications are submitted by student loan borrowers to the Department of Education, rather than to institutions directly, and the Department of Education has asserted that the BDR Rules provide for group claims without an underlying individual BDR application from a borrower in certain circumstances. It is unclear how many individual or group BDR claims have been approved or denied by the Department of Education, or how many individual or group BDR claims will be asserted, approved or denied in the future.

The University maintains certain BDR-related insurance coverages, which could serve to mitigate a portion of the risk associated with potential BDR recoupment actions that may be asserted against the University by the Department of Education. The most relevant insurance policy covers recoupment actions that correspond to a population of BDR claims that the Department of Education has sent to the University for response thus far. Coverage by this policy is also contingent upon the University’s obligation to first exhaust all non-frivolous appeals and challenges to a recoupment action, and as such, there could be a significant delay between the initiation of a recoupment action and a determination as to the applicability of the insurance coverage. Other potentially applicable insurance coverages cover recoupment actions that correspond to a separate and smaller portion of the claims that the Department of Education has sent to the University for response thus far. The availability and amount of these coverages could be affected by the existence of other non-BDR related claims, which could erode the available coverage. These coverages are contingent upon the University’s obligation to exhaust federal court appeals.

Closed School Loan Discharge (“CSLD”). Under the Higher Education Act, the Department of Education discharges a borrower’s federal student loan liability and shall subsequently pursue any claim available to such borrower against the institution if a student is unable to complete the program in which such student is enrolled due to the closure of the institution. The regulations currently provide that a school’s closure is the date that the school ceases to provide educational instruction, and that a school includes the main campus or any location or branch of the main campus. For loans first disbursed before July 1, 2020 to qualify for a discharge, borrowers must submit an application for a CSLD stating, among other things, that the student did not complete his or her program of study because the school closed while the student was enrolled, or the student withdrew from the school not more than 120 days before the school closed, and that the student did not complete his or her program of study through a teach-out at another school. For loans first disbursed on or after July 1, 2020, the 120-day withdrawal “look-back” period is instead 180 days and the Department of Education may extend those look-back periods for “exceptional circumstances.” The current regulations also permit the Secretary of Education to provide a CSLD without an application from the borrower based on information in the Secretary’s possession, and with respect to schools that closed between November 1, 2013 and July 1, 2020, only if the borrower did not subsequently re-enroll in any Title IV-eligible institution within three years from the date of the school closure. The Department of Education may seek recoupment of the discharged amount from the responsible institution if a loan is discharged on these grounds.

As discussed above in “—Borrower Defense to Repayment,” the OBBB Act delayed the applicability of the most recent iteration of the BDR Rules and that iteration is also enjoined by court order. Those BDR Rules promulgated in 2022 included new CSLD regulations that are also enjoined by the court order (the “2023 CSLD Rules”). Accordingly, the Department is currently applying the CSLD regulations that were in effect on July 1, 2020, rather than the 2023 CSLD Rules, with respect to loans first originated before July 1, 2035. We are unable to predict how this pending litigation will be resolved, and whether or to what extent the Department may ultimately apply and enforce the 2023 CSLD Rules. Among other changes, the 2023 CSLD Rules expand upon the Department of Education’s authority to grant a loan discharge without a borrower application, extend the withdrawal “look-back” period to 180 days to loans first disbursed before July 1, 2020, provide for extension of that period based upon “exceptional circumstances,” and limit the applicability of the teach-out exception for CSLD eligibility.

Commencing in June 2021, the Department of Education conducted an off-site program review focused on possible liabilities for CSLDs related to the University’s closing of various locations. Following the Department of Education’s issuance of a final program review determination in September 2022 and a subsequent administrative appeal, an Administrative Law Judge ruled in December 2024 that the University owes liabilities for CSLDs for three student borrowers in the amount of approximately $44,000. The University has appealed this decision to the Secretary of Education, and the ultimate outcome of the proceedings is uncertain. Although this liability is de minimis, the outcome of the proceedings, together with the evolving regulations governing CSLDs, could have implications for student borrowers who attended the substantial number of our physical campuses and learning centers that have closed in recent years. In connection with those closures, we worked closely with regulatory oversight bodies and students to help ensure that each affected student had the opportunity to choose whether to complete their educational program at their location or to transition to online study. The University has not received data on the number of CSLDs that have been, or may be, approved by the Department of Education in regard to the University’s closed locations.

Standards of Financial Responsibility. To participate in Title IV programs, the Department of Education regulations specify that an eligible institution of higher education must satisfy specific measures of financial responsibility prescribed by the Department of Education or post a letter of credit in favor of the Department of Education and accept other conditions on its participation in Title IV programs. These financial responsibility tests are applied on an annual basis based on each institution’s audited financial statements, and may be applied at other times, such as if the institution undergoes a change in control. These tests may also be applied to an institution’s parent company or other related entity. The most significant financial responsibility standard is the institution’s composite score, which is derived from a formula established by the Department of Education based on a weighted average of the following three annual ratios which assess the financial condition of the institution: (i) primary reserve ratio, which measures an institution’s financial viability and liquidity; (ii) equity ratio, which measures an institution’s capital resources and its ability to borrow; and (iii) net income ratio, which measures an institution’s profitability.

The Department of Education assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength. It then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to produce a composite score for the institution. An institution’s composite score must be at least 1.5 for it to be considered financially responsible and without need for further Department of Education oversight. If an institution’s composite score is less than 1.5 but is 1.0 or higher, it is still considered financially responsible, and the institution may continue to participate as a financially responsible institution for up to three years under the Department of Education’s “zone” alternative. Under the zone alternative, the Department of Education may subject the institution to various operating or other requirements, which may include (i) being transferred from the “advance” method of payment of Title IV program funds to the heightened cash monitoring payment method under which the institution is required to make Title IV disbursements to eligible students and parents before it requests or receives funds from the Department of Education for the amount of those disbursements, or (ii) being transferred to the more onerous reimbursement payment method under which an institution must submit to the Department of Education documentation demonstrating the eligibility for each Title IV disbursement and wait for the Department of Education’s approval before drawing down Title IV funds. Institutions placed on either the heightened cash monitoring payment method or the reimbursement payment method must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department of Education and may not hold Title IV credit balances on behalf of students or parents, even if authorized by the student or parent to hold and apply these credit balances to future tuition payments. If an institution does not achieve a composite score of at least 1.0, it is subject to additional requirements in order to continue its participation in Title IV programs, which can include (i) submitting to the Department of Education a letter of credit in an amount equal to at least 10% or, at the Department of Education’s discretion, up to 50% of the Title IV funds received by the institution during its most recently completed fiscal year; (ii) being placed on provisional certification status, under which the institution must receive Department of Education approval before implementing new locations or educational programs; and (iii) complying with other restrictions, including reduced due process rights in subsequent proceedings before the Department of Education.

The Department of Education measures our financial responsibility on the basis of the Company’s consolidated audited financial statements. Our composite scores, which are calculated as of the end of our fiscal year, were 3.0 and 2.6 for fiscal years 2026 and 2025, respectively.

In addition, Department of Education financial responsibility regulations identify events that constitute a failure of an institution to demonstrate its ability to meet its financial obligations, including certain mandatory triggering events upon which an institution is deemed automatically to lack financial responsibility. An institution that suffers a triggering event and is thus determined by the Department of Education or otherwise deemed automatically to lack financial responsibility must (i) provide a letter of credit or other form of acceptable financial protection to the Department of Education, and (ii) accept other conditions on its Title IV eligibility. Under these regulations, the Department of Education requires an institution to provide financial protection, including a letter of credit, if applicable, in an amount of not less than 10% of the institution’s total Title IV funding in the prior year for each individual triggering event, such that multiple triggering events could subject an institution to substantial cumulative financial protection obligations. We did not have any triggering events during our fiscal year ended August 31, 2026.

Administrative Capability. The Higher Education Act directs the Department of Education to assess the administrative capability of each institution to participate in Title IV programs. The failure of an institution to satisfy any of the criteria used to assess administrative capability may cause the Department of Education to determine that the institution lacks administrative capability and, therefore, subject the institution to fines, sanctions, and additional scrutiny, including the limitation or denial of eligibility for Title IV programs. These criteria impose requirements that, among other things, an institution administer the Title IV programs in accordance with all applicable federal student financial aid requirements, with adequate checks and balances in its system of internal controls over financial reporting, and with capable and sufficient personnel. The criteria further include, among other requirements, that the institution maintain certain records and reporting, reasonable standards for measuring satisfactory academic progress, systems for resolving certain financial aid discrepancies, and maintain adequate internal controls to prevent errors, fraud, or mismanagement of federal student aid funds, and that the institution refer credible information to the OIG indicating that a Title IV applicant may have engaged in fraud or other criminal misconduct in connection with his or her application. In recent guidance, the Department of Education has shared best practices for institutions to consider in establishing and maintaining systems and processes to identify and prevent fraudulent applications for enrollment and financial aid. Other recent Department of Education guidance provides for the return of Title IV funds disbursed to students who are determined to be ineligible in certain circumstances, including in cases involving fraudulent activity, even if the institution had no actual knowledge of the student’s ineligibility at the time of disbursement. See Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—If our institution fails to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institution may lose the ability to participate in Title IV programs, Department of Defense military tuition assistance programs, or Department of Veterans Affairs veterans’ education benefits programs, or have participation in these programs conditioned or limited, may face claims from third parties, may be required to repay Title IV and other federal program funds, or may face fines or other penalties.” Moreover, future legislation may increase regulatory oversight and consequences for institutions, like the University, that are the target of fraudulent activity, including identity theft cases and attempts to obtain federal student aid by means of fraudulent enrollments. Over the past year, multiple bills have been introduced aiming to prevent federal student aid fraud, including the No Aid for Ghost Students Act of 2026 passed by the U.S. House of Representatives in June 2026. This bill, if enacted into law, would, among other things, require the Department of Education to prioritize program reviews of certain institutions identified as having demonstrated a pattern of disbursing Title IV aid to students whose applications presented a reasonable suspicion of identity fraud.

In addition, other amendments by the Department of Education to the administrative capability regulations that became effective July 1, 2024 impose additional requirements, including revised and new criteria regarding an institution’s validation of high school diplomas, financial aid counseling, career services, provision of clinical or externship opportunities, disbursement of Title IV funds, offering of gainful employment programs, substantial misrepresentations, and aggressive and deceptive recruitment tactics or conduct. The recent amendments also provide the Department of Education with increased and explicit authority to make an adverse administrative capability finding based on a broader set of issues than it has used historically. The Department of Education’s final regulations implementing the accountability framework under the OBBB also introduced a related administrative capability rule requiring institutions to demonstrate that at least half of the institution’s recipients of Title IV funds and at least half of the institution’s total Title IV funds are not from what the new accountability framework regulations define as “low-earning outcome programs.” Those regulations require that if an institution fails this administrative capability requirement in two out of any three consecutive award years, the institution will be placed on provisional status and the institution’s low-earning outcome programs shall not qualify for any Title IV funds, and would therefore lose eligibility for Pell Grants and the other Title IV programs in addition to Direct Loans. See “—New Earnings Accountability Framework and STATS Regulations.”

90/10 Rule. The University, and all other proprietary institutions of higher education, are subject to the so-called “90/10 Rule” under the Higher Education Act. Under this rule, a proprietary institution will be ineligible to participate in Title IV programs for at least two fiscal years if, for any two consecutive fiscal years, it derives more than 90% of its cash basis revenue, as defined in the rule, from Title IV programs or other qualifying federal funding sources, including tuition assistance programs offered by the Department of Defense (military tuition assistance) and Department of Veterans Affairs (veterans education benefits). If an institution is determined to be ineligible, any disbursements of Title IV program funds made after the end of the second fiscal year in the measuring period must be repaid to the Department of Education. An institution that derives more than 90% of its cash basis revenue from Title IV programs or other qualifying federal funding sources for any single fiscal year will be automatically placed on provisional certification for two fiscal years and will be subject to possible additional sanctions or requirements determined to be appropriate under the circumstances by the Department of Education. The institution would also be required to provide notices to existing students about the potential loss of Title IV funding. While the Department of Education has broad discretion to impose additional sanctions or requirements on such an institution, there is only limited precedent available to predict what those sanctions might be. For example, the Department of Education could impose conditions in the provisional certification, such as restrictions on the total amount of Title IV program funds that may be disbursed to students; restrictions on programmatic and geographic expansion; requirements to obtain and post letters of credit; additional reporting requirements such as interim financial reporting; or any other conditions deemed appropriate by the Department of Education. The University’s 90/10 Rule percentage was 88.6% for both fiscal years 2026 and 2025.

New Earnings Accountability Framework and STATS Regulations. Under the Higher Education Act, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” The Department of Education has issued multiple, complex versions of gainful employment regulations, which have been subject to litigation, delays, and varied regulatory interpretations regarding scope and application. Following the AHEAD negotiated rulemaking process, the Department of Education published final rules in July 2026 overhauling the prior gainful employment and financial value transparency regulations and implementing the OBBB’s new accountability and transparency framework applicable to all Title IV participating institutions.

The regulations rename the former gainful employment and financial value transparency regulations as Earnings Accountability and STATS, respectively. The new Earnings Accountability framework extends to all Title IV eligible undergraduate and graduate programs at public, nonprofit, and proprietary institutions, including undergraduate certificate programs, and eliminates the debt-to-earnings metric that was in place under the former gainful employment regulations. Instead, the Earnings Accountability regulations use a single earnings premium measure to determine whether a program is a “low-earning outcome program.” A program passes the earnings premium measure if the median annual earnings of the students in the fourth tax year following completion of the program equals or exceeds the applicable earnings premium threshold. If a program fails the earnings premium measure in two of three consecutive years, that program is designated as a low-earning outcome program and loses eligibility to participate in the Direct Loan program for no less than two years. The regulations also introduced a related administrative capability requirement that no more than half of an institution’s total Title IV funds come from low-earning outcome programs, and no more than half of an institution’s Title IV recipients are from low-earning outcome programs. The regulations further require that if an institution fails this administrative capability requirement in two out of any three consecutive award years, the institution will be placed on provisional status and the institution’s low-earning outcome programs shall not qualify for any Title IV funds, and would therefore lose eligibility for Pell Grants and the other Title IV programs in addition to Direct Loans.

The Department of Education has stated that it will first calculate the earnings premium measure in 2027 using earnings data measured during the 2025 tax year, applying the result of the first earnings premium test to the 2027-28 award year. Accordingly, a program may be designated as a low-earning outcome program beginning in the 2028-29 award year if it fails the earnings premium test in the first two years of its application.

As with the prior gainful employment regulations, our ability to satisfy the OBBB accountability metrics for certain programs may depend in part on factors outside of our control, including general economic conditions affecting our graduates and changes in labor markets. Programs that prepare students for service-oriented or public-interest professions may face heightened risk because those fields can produce lower earnings outcomes even when graduates are employed in the occupations for which they were educated. As a result, some programs may fail or be at risk of failing the applicable metrics despite strong educational quality, student demand, or alignment with workforce needs. Additionally, future enrollments could also be impacted by the Department of Education’s transparency rules to disclose low-earning outcome programs. See Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—Recent action by Congress that resulted in revisions to the laws governing federal student financial aid programs, including the level of federal student aid funding available and the earnings-based accountability requirements that programs must meet to qualify for such funding, could materially impact our enrollment, revenue, and costs of operation” and“Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—Failure to comply with the new earnings-based accountability measures or any related reporting of low-earning programs could limit the programs we can offer students and the Title IV eligibility of the impacted programs, which could materially impact our enrollment, revenue, or costs of operation.”

Student Loan Cohort Default Rates. To remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain specified levels. Each cohort is the group of students who first enter into student loan repayment during a federal fiscal year (ending September 30), and the default rate is the percentage of that cohort who default on their payment by the end of the second full year after such repayment start date. The cohort default rates are published by the Department of Education approximately 12 months after the end of the applicable measuring period. Thus, in September 2026, the Department of Education published the cohort default rates for the 2023 cohort. An educational institution loses eligibility to participate in Title IV programs if its cohort default rate equals or exceeds 40% for any given year or 30% for three consecutive years. If an institution’s cohort default rate equals or 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. We believe that our current repayment management efforts would meet these requirements.

Based on information published by the Department of Education, the University’s cohort default rate for fiscal year 2023 was 0.7% following a rate of zero for the prior two fiscal years, principally due to the Department of Education’s federal loan payment pause initiated following the COVID-19 pandemic. As part of the federal relief enacted regarding the COVID-19 pandemic, federal student loan payments were paused until September 1, 2023, causing our three-year cohort default rates and those of other proprietary post-secondary institutions to decline significantly beginning in 2020. The restarting of payment obligations following the multi-year COVID-19 interruption is expected to over time result in an increase in reported rates. Although our cohort default rates, even prior to the COVID-19 pause, have historically been significantly below the mandated levels, any increase in interest rates or declines in income or job losses for our students could contribute to higher default rates on student loans. While we anticipate that there will be substantial increases in cohort default rates among institutions generally and that our rates will also increase, we cannot predict the extent of any such increases in our cohort default rates or how our future rates will compare to our historical pre-pandemic levels and to the Department of Education’s student loan default rate thresholds. In addition, recent changes implemented by the OBBB to the loan repayment plans available to student borrowers could affect the ability of borrowers to repay their loans and potentially result in an increased number of borrower defaults, including among our graduates. See “—Financial Aid Programs.”

Restrictions on Incentive Compensation. As part of an institution’s PPA with the Department of Education and under the Higher Education Act and Title IV regulations, 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 the award of 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. The Department of Education issued rules on incentive compensation that took effect in 2011 and eliminated various safe harbors that had previously defined categories of compensation deemed permissible and thereby increased the uncertainty as to the scope of the incentive compensation restrictions and how the restrictions are and will be interpreted and applied. In February 2023, the Department of Education announced that it would begin gathering information and feedback with the intent to revise the incentive compensation rule. In July 2024, the Department of Education indicated that revised guidance, which could materially change the contours of the established incentive compensation rule and could therefore negatively impact our ability to comply with it, would be promulgated no sooner than the end of the 2024 calendar year. Such guidance has not been issued to date.

The incentive compensation ban also applies to certain vendors of the University who have been deemed a “third-party servicer” because the vendor’s activities and functions are intrinsically intertwined with the institution’s administration of Title IV programs. In February 2023, the Department of Education issued new revised guidance regarding the parameters of third-party servicers, which created significant confusion and appeared to increase the number of vendors who would subsequently be considered a third-party servicer. The Department of Education received more than 1,000 comments from institutions, and announced that the implementation of the February 2023 revised guidance would be delayed. In July 2024, the Department of Education announced its intent to conduct negotiated rulemaking regarding third-party servicers, which could result in significant changes to the established third-party servicer rules and could negatively impact the University’s ability to comply with them. The rulemaking plans remain uncertain.

The restrictions of the incentive compensation rule prohibit us from offering any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students or the award of Title IV financial aid to any of our employees involved with or responsible for such activities. The lack of interpretive guidance regarding the rule, however, has caused uncertainty about what constitutes incentive compensation and which employees are covered by the regulation and has made the development of effective and compliant performance metrics for certain categories of employees or service providers more difficult to establish. Additionally, the incentive compensation rule may impact the University’s contracts with certain third parties, pending clarification from the Department of Education on the scope of the incentive compensation rule and the parameters around “third-party servicers.” The Department of Education has provided very limited published guidance regarding the incentive compensation rule and does not establish clear criteria for compliance for many circumstances.

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, or graduate employability. The Department of Education defines “misrepresentation” to include any false, erroneous or misleading statement made by an institution or its representative. A statement is deemed “misleading” if it has the likelihood or tendency to mislead under the circumstances. Misrepresentations include statements that omit information in such a way as to make the statement false, erroneous, or misleading. A misrepresentation rises to the level of a “substantial misrepresentation” if, under the totality of circumstances, the misrepresentation could reasonably be relied upon to that person’s detriment. Following a December 2022 U.S. Government Accountability Office report recommending increased oversight of substantial misrepresentations by institutions, the Department of Education enhanced its enforcement efforts, including through secret shopping, solicitation of public complaints, and other oversight activities. In September 2024, the Department of Education issued an Enforcement Bulletin identifying conduct that could constitute substantial misrepresentation and reaffirming its intent to continue monitoring complaints and tips and holding institutions accountable. The Department of Education also issued guidance in January 2025 reminding institutions that they may be responsible for the consequences of any misrepresentation committed by external service providers.

Aggressive and Deceptive Recruitment Tactics. Institutions participating in Title IV programs are prohibited by regulation from engaging in activities that constitute aggressive and deceptive recruitment tactics or conduct. An eligible institution is deemed to have engaged in aggressive and deceptive recruitment tactics or conduct when the institution itself, one of its representatives, or any ineligible institution, organization, or person with whom the eligible institution has an agreement to provide educational programs, marketing, advertising, lead generation, recruiting, or admissions services engages in one or more of the prohibited practices. In the event an institution has engaged in aggressive and deceptive recruitment strategies, the Department of Education may revoke or terminate an institution’s PPA, limit the institution’s participation in Title IV programs, deny applications from the institution, such as to add new programs or locations, initiate proceedings to fine the institution, or limit, suspend, or terminate its eligibility to participate in Title IV programs.

Return of Title IV Funds. When a student who has received Title IV funds withdraws from school, the University must determine the amount of Title IV program funds the student has “earned.” If the student withdraws during the first 60% of any period of enrollment or payment period, the amount of Title IV program funds that the student has earned is equal to a pro rata portion of the funds the student received or for which the student would otherwise be eligible. If the student withdraws after the 60% threshold, then the student is deemed to have earned 100% of the Title IV program funds he or she received. The University must return any unearned Title IV program funds to the Department of Education in a timely manner, which is no later than 45 days after the date the University determined that the student withdrew. If such payments are not timely made, the University will be required to submit a letter of credit to the Department of Education equal to 25% of the Title IV funds that the University should have returned for withdrawn students in its most recently completed fiscal year. Under Department of Education regulations, late returns of Title IV program funds for 5% or more of the withdrawn students in the audit sample in the University’s annual Title IV compliance audit for either of the University’s two most recent fiscal years or in a Department of Education program review triggers this letter of credit requirement. We did not exceed this 5% threshold in our annual Title IV compliance audit for either of our two most recent fiscal years.

Branching and Classroom Locations. The Title IV regulations contain specific requirements governing the establishment of new locations at which an eligible institution offers, or could offer, 50% or more of an educational program. The Department of Education requires that the institution notify the Department of Education of each location offering 50% or more of an educational program prior to disbursing Title IV program funds to students at that location. The University has procedures in place to ensure timely notification and acquisition of all necessary location approvals prior to disbursing Title IV program funds to students attending any new location. In addition, the HLC and state regulators have requirements for the establishment of new locations.

Change in Ownership or Control

If the University engages in a transaction that involves a change in control of the Company or the University, under the standards of the Department of Education, the HLC, or any other applicable state education agency or accrediting commission, it must notify or seek the approval of each such agency. These agencies do not have uniform criteria for what constitutes a change in control. Transactions or events that typically constitute a change in control include significant acquisitions or dispositions of the voting stock and/or assets of an institution or its parent company, and significant changes in the corporate form, governance structure, or composition of the board of directors of an institution or its parent company. Some of these transactions or events may be beyond our control.

Under the Department of Education’s regulations, an institution that undergoes a change in control loses its eligibility to participate in Title IV programs and must apply to the Department of Education to reestablish such eligibility. If an institution files the required application and follows other procedures, the Department of Education may temporarily certify the institution on a provisional basis following the change in control, so that the institution’s students retain continued access to Title IV program funds. In addition, the Department of Education may extend such temporary provisional certification if the institution timely files certain required materials, including the approval of the change in control by its state authorizing agency and accrediting agency and certain financial information pertaining to the financial condition of the institution or its parent corporation. We confirmed with the Department of Education in advance that the IPO would not constitute a change in ownership resulting in a change in control. Now that the University is owned by a publicly-traded corporation, the Department of Education identifies a change in ownership and control as occurring when (i) the corporation is required to file a Current Report on Form 8-K with the SEC disclosing a change in control, or (ii) a controlling shareholder of the corporation ceases to be a controlling shareholder. A controlling shareholder is defined in regulation as a shareholder who holds or controls through agreement both 25% or more of the total outstanding voting stock of the corporation and more shares of voting stock than any other shareholder.

The Department of Education also requires that institutions periodically report changes in ownership, even when a change does not result in a change in control that would require approval by the Department of Education. Regulations require that changes of ownership representing at least 5% but under 25% ownership be reported on a quarterly basis, and within 10 days in the event the institution plans to undergo a change in ownership. The University’s failure to timely report required ownership information to the Department of Education could result in adverse action by the Department of Education or imposition of conditions or restrictions on the University’s participation in the Title IV programs.

The University is also required to report any material change in stock ownership to the HLC and must obtain approval prior to undergoing any transaction that affects, or may affect, within definitions adopted by the HLC, its corporate control or governance. The HLC informed the University that the IPO did not require prior review and approval by the HLC under the HLC’s policies governing changes of control, structure, or organization. However, future offerings or transactions may constitute a change in ownership or control of the University under the HLC standards and may therefore require approval of the HLC Board of Trustees, in which case the HLC may undertake an evaluation of the effect of the change on the continuing operations of the University for purposes of determining if continued accreditation is appropriate, which evaluation may include a comprehensive review. That approval may be granted without conditions, granted with conditions that could limit the University’s operations, or could be denied, which would effectively block those future offerings or transactions.

In addition, Arizona rules state that the Arizona State Board must approve certain changes of ownership or control, including, but not limited to, a publicly traded corporation whose control is vested in the voting members of the board of directors when at least 50% of the voting members of the board of directors change within a 12-month period, or when at least 50% of the assets of the publicly traded corporation are sold regardless of whether the sale is called an asset or securities purchase, a stock or share exchange, or something else. Additionally, a licensed institution must notify the Arizona State Board in writing within seven days of a change of interest or of the voting members of the board of more than 20% but less than 50%. An institution that undergoes a change of ownership or control must submit written notification within seven days of the effective date of the change and must submit a new license application including all required documentation that demonstrates the University meets the applicable statutory and licensure requirements of the Arizona State Board no later than 60 days after the date of the written notice. The application process requires the submission of substantial information and documentation, including with respect to our accreditation, corporate ownership, educational programs, financial responsibility, and other matters as may be deemed relevant to determining the University’s compliance with all licensing requirements, including, potentially, an inspection of the University’s place of business. The Arizona State Board’s approval requirements may be triggered by future offerings or transactions that constitute a change in ownership or control under their standards. If such a required Arizona State Board approval were delayed or the University’s application for reauthorization were denied approval, such consequences could have a material adverse effect on our business, financial condition and results of operations. Moreover, pursuant to SARA policy, a change in ownership or control for a SARA participating institution is determined by the institution’s home state. Accordingly, if the Arizona State Board were to determine that a subsequent offering or transaction constitutes a change of ownership or control requiring its approval, the University would be placed on provisional status under such additional oversight measures as its home state considers necessary for purposes of ensuring SARA requirements are met regarding program quality, financial stability, and consumer protection during the pendency of the change of control.

Compliance Reviews and Other Regulatory Investigations

We are subject to ongoing and continuous oversight actions by the Department of Education and other regulatory agencies, including, but not limited to, those conducted by our institutional accreditor, the HLC, other agencies that accredit programs that we offer, our state authorizing agencies, the FTC, and state attorneys general.

Department of Education Program Reviews. In conducting oversight of the administration of the federal student aid program by Title IV-participating institutions, the Department of Education relies on compliance reviews, including program reviews conducted by Department of Education staff, mandatory annual compliance audits by independent audit firms, and audits and investigations conducted by the OIG. The Department of Education conducted an off-site program review in 2021 focused on possible liabilities for closed school loan discharges related to the University’s closing of various locations and an Administrative Law Judge found that the University owes liabilities for CSLDs for three student borrowers totaling approximately $44,000. The liability determination from that review remains subject to an ongoing appeal proceeding before the Secretary of Education.

United States Department of Veterans Affairs Risk-Based Surveys. As part of its oversight of veteran education benefit programs, the Department of Veterans Affairs conducts risk-based surveys of eligible institutions through the various state approving agencies. During fiscal year 2025, the Arizona Department of Veterans’ Services (“AZDVS”) conducted a review of student files as well as financial information, graduation rates for veteran and non-veteran students, licensure pass rates and job placement rates (if applicable), marketing and advertising documents, and student complaints, including a site visit. The auditors expressed no concerns with the University’s marketing, financials, files, or complaints and the report noted “no findings.” Additionally, the University received notices on October 20 and October 21, 2026 that the AZDVS will conduct risk-based surveys of the University’s online and Arizona campuses (collectively, the “Survey”) based on complaints, increased tuition and fees, and cautionary flags pertaining to financial stability and 90/10 that will include the submission and review of requested documentation and a site visit reviewing student files, financial information, enrollment, recruiting, student outcomes, and other success measures. At this time, the University cannot predict the outcome of the Survey. The University is cooperating with AZDVS. If the Survey were to find that the University failed to comply with the requirements relating to veteran education benefit programs, the University’s ability to continue to provide veteran education benefits could be impacted.

Federal Trade Commission Investigation. In July 2015, the University received a Civil Investigative Demand (the “Demand”) from the FTC relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or were engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or post-secondary educational products or services or educational accreditation products or services. The Demand required the production of documents and information regarding a broad spectrum of the business and practices of the University for the time period from January 1, 2011.

The FTC ultimately narrowed its investigation to one advertising campaign that aired between approximately late 2012 and early 2014. In December 2019, we agreed to resolve this matter with the FTC. Under the terms of the resolution, we paid $50 million to the FTC and agreed to forgiveness of certain student debts owed to the University, which totaled approximately $150 million. Substantially all of these student debts had already been deemed uncollectible and had been written-off in prior fiscal years. As a result, the forgiveness of these student debts had no impact on our consolidated financial statements. We do not believe we have any future exposure to the FTC associated with this matter. However, as part of the settlement with the FTC, we agreed to ongoing obligations such as specific prohibitions against misrepresentations about subject matters that were a focus of the FTC’s investigation, as well as notification, recordkeeping and reporting requirements. Actual or perceived non-compliance with these ongoing obligations could prompt the FTC to seek fines and penalties via an enforcement action against the University.

Attorney General Investigations. In August 2015 and February 2016, the University received investigative subpoenas from the Office of the Attorney General of the State of California. The subpoenas required the production of documents and information regarding a broad spectrum of our business and practices as well as additional information relating to marketing and services to members and former members of the U.S. military and California National Guard, for the time period from July 1, 2010. We cooperated with the California Attorney General in these investigative proceedings. During fiscal year 2024, the University reached a mutually agreeable resolution with the Office of the Attorney General of the State of California to resolve this matter for $4.5 million, $1.0 million of which was donated to military relief organizations. This agreement also contains various injunctive provisions related to the University’s recruiting activities on military installations, the vast majority of which were already part of the University’s policies and practices. The agreement also contains recordkeeping and reporting obligations that last approximately three years after the settlement date.

The State of Massachusetts Office of the Attorney General issued a Civil Investigative Demand (the “CID”) on July 6, 2020 related to the University’s students in Massachusetts, including communications, disclosures, catalogs and advertising that these students may have seen during three “snapshot” time periods: October 1, 2016 to March 31, 2017, March 1, 2018 to August 31, 2018, and September 1, 2019 to February 29, 2020. This CID also requested copies of any complaints about the University from Massachusetts-based students during the time period from July 1, 2016. The University cooperated with the Massachusetts Attorney General’s office, and completed its production of responsive documents and information in December 2020. The University has not received any findings, decisions or additional inquiries from the Attorney General’s office since that time. As such, though the University has not received a formal notice of closure, this matter is presumed closed for all practical purposes.

Additionally, with respect to the borrower defense to repayment regulations, under the 2023 Rule (which the OBBB Act delayed applicability of and is also currently enjoined by court order), actions by a state attorney general could become the basis for a group discharge of student loans and subsequent recoupment of funds from the institution.

Potential Effect of Regulatory Violations. If we fail to comply with the regulatory standards governing Title IV programs, the Department of Education could impose one or more sanctions, including requiring us to repay Title IV program funds, requiring us to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against us, initiating proceedings to impose a fine or to limit, suspend or terminate our participation in Title IV programs, delaying or denying a future application for Title IV recertification, imposing restrictions on our participation in Title IV programs, or referring the matter for civil or criminal prosecution.

Intellectual Property

We have developed and own, or are licensed to use in connection with our business, intellectual property that is or will be the subject of copyright, trademark, service mark, patent, trade secret, or other protections. This intellectual property includes, but is not limited to, rights in our curricula and other course materials, technology, proprietary information, processes and other assets. We rely on a combination of intellectual property rights, such as copyrights, trademarks, service marks, trade secrets (including know-how), patents and domain names, in addition to employee and third-party confidentiality agreements, intellectual property licenses and other contractual rights, to establish, maintain, protect and enforce our rights in our curricula and other course materials, technology, proprietary information, processes and other assets. We also rely on agreements under which we contract to own, or license rights to use, intellectual property developed by faculty members, content experts and other third parties.

Other Information

Our website is located at www.phoenixeducationpartners.com. The University’s website is located at www.phoenix.edu. Information on our website is not incorporated by reference into this report. We make available free of charge on our investor relations website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other SEC filings, and any amendments to those reports that are filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings at http://www.sec.gov.