What changed in this filing

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Item 1. Business

2024-03-05 compared with 2023-03-14 · 535 added, 374 removed, 887 unchanged (51% of the section changed)

COMPANY OVERVIEW

American Public Education, or APEI , provides online and campus-based postsecondary education and career learning to approximately 107,100 students through four subsidiary institutions.

American Public Education, or APEI , provides online and campus-based postsecondary education to approximately 107,000 students, and career learning to approximately 27,000 individuals, through our subsidiary institutions.

Our institutions offer purpose-built education programs and career learning designed to prepare individuals for productive contributions to their professions and society and to offer opportunities to advance students in their current professions or to help them prepare for their next career.

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Our vision is for education that transforms lives, advances careers, and improves communities.

Our mission is to provide inclusive, high-quality and relevant education that empowers learners to achieve their ambitions and be of service to their communities while realizing return on their education investment.

Our mission is to Power Potential and Prosperity for Those Who Serve.

Our institutions of advanced learning are purpose-built to prepare service-minded students for employment, careers, and leadership in a diverse and changing world.

We are the number one educator of active-duty military and of veterans, operate the nation’s largest pre-licensure nursing platform focused on a Diploma in Practical Nursing, or PN degree, and an Associate Degree in Nursing, or ADN degree, and operate one of the largest providers of training to the federal government and public workforce.

We are the number one educator of active-duty military and of veterans through American Public University System, a national leader in pre-licensure nursing education, focused on a Diploma in Practical Nursing, or PN degree, and an Associate Degree in Nursing, or ADN degree, through Rasmussen University and Hondros College of Nursing, and operate one of the largest providers of training to the federal government and public workforce through Graduate School USA.

Our Institutions

We have four subsidiary institutions:

American Public University System, or APUS, Rasmussen University, or RU, Hondros College of Nursing, or HCN, and Graduate School USA, or GSUSA.

American Public University System, Rasmussen University, Hondros College of Nursing, and Graduate School USA.

American Public University System

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APUS traces its roots to American Military University, or AMU, which was founded in 1991, as a distance-learning, graduate-level institution for military officers seeking an advanced degree in military studies.

APUS has broadened its focus to include other military communities, veterans, and public service and public service-minded communities, with a focus on educating those who serve, and has two components:

Since then, APUS has broadened its focus to include other military communities, veterans, and public service and public service-minded communities, with a focus on educating those who serve, and has two components:

AMU, which is focused on educating students from the military, national security, military-affiliated and service communities, like police, firefighters, emergency personnel, and government employees, and American Public University, or APU, which is focused on educating career-focused working adults with an emphasis on educating professionals working in service-related communities, including nursing, public health, public administration, and business administration.

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APUS is institutionally accredited by The Higher Learning Commission, or HLC, a regional accrediting agency recognized by the U.S.

Department of Education, or ED, with an Open Pathway designation, which affords institutions greater opportunity to pursue institutional improvement projects than the alternative Standard Pathway designation.

Department of Education, or ED.

Most other higher education institutions accept APUS’s courses for transfer credit as a result of this accreditation.

HLC will conduct a focused visit at APUS in March 2024 after raising concerns regarding compliance with standards related to program development oversight and program assessment processes as a result of course availability in one program.

APUS has a Standard Pathway designation, having transitioned from the Open Pathway in 2023 because of HLC’s decision to conduct a focused visit.

All institutions on the Standard Pathway, including APUS, must undergo a mid-cycle comprehensive evaluation.

A reaffirmation of accreditation site visit date will take place 2030-2031.

Rasmussen University

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At the beginning of its 123-year history, RU focused on educating business students to prepare them for practical careers in bookkeeping, secretarial services, and accounting.

RU’s foundation of education that transforms lives created an inclusive institution built to serve those not typically served by traditional higher education.

While RU continues to

offer programs across a broad range of study including business, technology, and education, it launched its focus on healthcare education in 2006, and today offers a comprehensive “ladder” of nursing degrees, including pre-licensure PN and ADN degrees, post-licensure Bachelor of Science in Nursing, or BSN and RN to BSN degrees, Master of Science degrees in Nursing, Specialties and Nurse Practitioner, and a Doctorate of Nurse Practice.

RU’s foundation of education that transforms lives created an institution built to serve those not typically served by traditional higher education.

While RU continues to offer programs across a broad range of study including business, technology, and education, it expanded its breadth and embarked on providing healthcare education in 2006.

Today, RU offers a comprehensive “ladder” of nursing degrees, including pre-licensure PN and ADN degrees, post-licensure Bachelor of Science in Nursing, or BSN, and RN to BSN degrees, Master of Science degrees in Nursing, Specialties and Nurse Practitioner, and a Doctorate of Nurse Practice.

RU is committed to innovation in program delivery.

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Hondros College of Nursing

HCN provides nursing education to approximately 2,600 students across eight campuses in three contiguous Midwestern states with six campuses in Ohio, one campus in Indianapolis, Indiana, and one campus in suburban Detroit, Michigan, that opened in October 2022.

HCN provides nursing education to approximately 3,100 students across eight campuses in three states.

HCN offers pre-licensure nursing programs that are designed to prepare individuals for productive careers through both a PN degree and an ADN degree, and two Direct Entry ADN degree options that offer an accelerated graduation pathway for students who meet certain transfer, academic, and entrance exam requirements.

HCN’s students principally receive on-campus instruction at one of HCN’s campuses and offer certain courses in a virtual setting for those that prefer remote course learning.

For the fiscal year ended December 31, 2022, approximately 60% of HCN students were enrolled in the PN program, while 40% were enrolled in the ADN program.

HCN’s students principally receive on-campus instruction at one of HCN’s campuses and online for certain courses for those that prefer remote course learning.

As of December 31, 2023, approximately 65% of HCN students were enrolled in a PN program and 35% were enrolled in an ADN program.

HCN is institutionally accredited by the Accrediting Bureau for Health Education Schools, or ABHES, a national accrediting agency recognized by ED.

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GSUSA provides contract training to more than 100 federal government agency customers and through direct enrollment by federal, state, and municipal government employees, contractors, and non-government employees.

GSUSA provides career learning both in-person at its headquarters facility in Washington, D.C.

and at customer sites, as well as online.

GSUSA provides career learning online as well as in-person at its headquarters facility in Washington, D.C.

and at government and customer sites.

GSUSA offers a catalog of more than 300 courses specializing in foundational and continuing professional development, as well as leadership training and practice management through its Center for Leadership and Management and Government Audit Training Institute.

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Financial information regarding each of our reportable segments is reported and discussed in this Annual Report in the sections entitled “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The following information for our segments is as of December 31, 2022.

The following information for our segments is as of and for the year ended December 31, 2023.

2023 Developments and Future Financial Objectives

Acquisition Activity

We acquired GSUSA on January 1, 2022, advancing our focus on career learning that provides pathways to employment and career advancement, and began repositioning GSUSA and focusing it on a return to growth.

During 2022, we also continued work to integrate RU, which we acquired on September 1, 2021, including through certain restructuring activities.

Campus Expansions and Relocations

In October 2022, HCN opened a new campus in suburban Detroit.

The campus is now enrolling PN students from the Detroit area.

Additionally, effective in 2022, the Indiana State Board of Nursing approved an increase in the maximum enrollment at its Indianapolis campus to 200 students per calendar year as compared to 30 in 2021.

In July 2022, RU opened a consolidated RU Hennepin/Anoka campus in Minnesota by merging two existing campuses and relocating to a new space.

The campus offers over 55 career-focused programs across seven areas of study.

In 2023, HCN relocated its former Fairborn, Ohio campus, located in a suburb of Dayton, Ohio, to a new, larger and more convenient, location in Dayton to better serve its students.

HCN also intends to relocate its Toledo and Columbus, Ohio campuses to new, larger locations nearby.

These relocations are expected to be completed in the summer and fall of 2024, respectively.

In April 2023, RU completed the relocation of its Topeka, Kansas, campus to a new, larger location to expand its campus footprint and offer larger classrooms with improved nursing skills and simulation labs.

In addition, RU intends to combine two campuses located in Ocala, Florida, into a single, expanded campus to improve the student experience.

Insourcing of Marketing and Information Technology

RU has historically outsourced the vast majority of its information technology functions and marketing services through two contracts, one for each of marketing and information technology, with Collegis, LLC, or Collegis.

In October 2022, RU and Collegis mutually agreed to the termination of the marketing services contract effective January 31, 2023.

Outsourced information technology services under the Collegis information technology contract will continue through September 2024, when we intend to allow the contract to expire.

We have completed the transition of RU marketing in-house to our centralized marketing team and plan to transition all of the information technology services currently outsourced to Collegis back to our operations or to one or more other third-party vendors.

RU has historically outsourced the vast majority of its marketing and information technology functions through two contracts, one for each of marketing and information technology, with Collegis, LLC, or Collegis.

In October 2022, RU and Collegis mutually agreed to the termination of the marketing services contract, effective January 31, 2023, and completed the transition of RU marketing to our in-house centralized marketing team.

Outsourced information technology services under the Collegis information technology contract will continue through September 2024, when we intend to allow the contract to expire, and transition all information technology functions currently outsourced to Collegis back to our operations and to one or more third-party vendors.

In December 2023, we entered into an agreement to outsource certain of our information technology operations to a managed service provider, including service desk, end user support, and network support and operations.

Executive Leadership Changes

We made several changes and additions to our executive leadership team in 2022 with strategic hires aimed at bolstering our ability to deliver improved student experience and outcomes, accelerating growth and transformation, building human capital capabilities, and moving both APUS and RU into the future.

New members of executive leadership team include a new Executive Vice President and Chief Experience Officer, a new Executive Vice President and Chief Information Officer, a new Senior Vice President and Chief Human Resources Officer, a new President of APUS, a new Acting President of RU, and a new Acting President for GSUSA.

In addition, in January 2023, we announced a new President of GSUSA.

During 2023, we made strategic hires aimed at bolstering our ability to deliver improved student experience and outcomes, accelerating growth and transformation, including a new President of RU, a new President of GSUSA, and a new

Chief Marketing Officer.

Please refer to “Our Institutions and Our Operations – Information About our Executive Officers” below for additional information about our executive officers serving as of the date of this Annual Report.

Financial Highlights

On December 28, 2022, we issued $40.0 million of Series A Senior Preferred Stock, $0.01 par value per share, to affiliates of existing holders of our common stock.

In December 2022, we made prepayments totaling $65.0 million on our senior secured term loan facility, or the Term Loan.

As a result of this prepayment, we will not be required to make any quarterly principal payments until payment of the outstanding principal amount at maturity in September 2027.

Rasmussen University Regulatory Metrics

RU’s new leadership team focused in 2023 on improving various regulatory metrics at RU, particularly NCLEX pass rates.

We increased our focus on these metrics in 2023 in light of RU’s ADN enrollment declines, as a result of both voluntary and imposed enrollment caps in large part due to NCLEX pass rates below requisite state thresholds, as discussed further in the Risk Factors captioned “RU is currently on provisional certification with ED, and the terms of that provisional certification could limit its potential for growth” and “Continued declines in enrollments at RU could materially adversely affect RU’s and our profitability, financial condition, results of operations, and cash flows.” We believe that initiatives put in place by RU’s leadership during 2023, together with changes to the NCLEX that were implemented in April 2023, resulted in improvements to RU NCLEX pass rates, including improvements in the ADN program pass rates at nearly every campus in the second half of 2023 as compared to the first half of 2023.

We expect NCLEX pass rates and regulatory metrics more generally to be a continued area of focus and improvement in 2024.

90/10 Compliance Outlook

We had a sustained focus in 2023 on the “90/10 Rule, which is described under “Student Financing Sources and Related Regulations/Requirements – Department of Education – Regulation of Title IV Financial Aid Programs – Financial Responsibility” below.

While each of our institutions was in compliance with the 90/10 Rule for 2023, APUS’s relevant percentage for 2023 was 89%.

In 2023, enrollments from students who use TA funds trended upward, while enrollments from students who use non-federal educational assistance funds continued to decline, causing APUS’s 90/10 percentage to increase and move closer to the threshold.

Compliance with the “90/10” Rule will continue to be an area of focus, and despite our efforts, there can be no assurance that we will continue to be able to comply in future years, particularly at APUS.

See the Risk Factors captioned “If one or more of our institutions does not comply with the 90/10 Rule, it or they will lose eligibility to participate in federal student financial aid programs” and “Our student registrations, revenue, and cash flow have been adversely impacted and we could continue to experience adverse impacts as a result of the Army’s transition to new systems for soldiers to request TA” for more information.

Cost and Expense Reductions

During 2023, we initiated several cost and expense reduction efforts, including a reduction in force in the third quarter that resulted in the termination of 74 employees and the elimination of 57 open positions across a variety of roles and departments at APEI, RU, HCN and GSUSA.

The headcount reductions reflect our ongoing efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.

We incurred an aggregate of approximately $3.0 million of pretax cash expenses associated with employee severance costs as a result of this reduction in force, all of which were incurred in the third quarter of 2023.

The reduction in force is expected to result in pre-tax labor and benefit savings of approximately $15.5 million on an annualized basis.

Share Repurchase Program

On March 16, 2023, our Board of Directors confirmed the availability under an existing share repurchase program to repurchase up to approximately $8.0 million of shares of our common stock.

We fully expended this $8.0 million as of April 30, 2023, and repurchased a total of 1,335,357 shares of our common stock.

On November 27, 2023, the Board of Directors authorized a new program to repurchase up to an additional $10.0 million of shares of our common stock.

In the fourth quarter, we repurchased 180,409 shares of our common stock under this repurchase authorization for an aggregate purchase amount of $1.6 million.

In the aggregate, in 2023 we repurchased 1,515,766 shares of our common stock for $9.7 million.

In January 2024, we repurchased 251,146 shares of our common stock for an aggregate purchase amount of $2.8 million.

Effective February 1, 2024, we ceased purchases under this purchase authorization.

Financial Objectives

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• a continually changing regulatory environment;

• the prospect of enrollment declines, with overall fall 2022 enrollment down 0.7 percent as compared to fall 2021 and significantly below 2019 levels;

• rapid technological transformation, including through increasing demand for online offerings and the utilization of technology to enhance student learning.

• fluctuations in enrollment as evidenced by industry-wide undergraduate enrollment growth of 2.1% in the fall 2023 as compared to an overall industry-wide enrollment decline of 0.7% in the fall 2022;

• rapid technological transformation, including through increasing demand for online offerings and the utilization of technology to enhance student learning, and emerging artificial intelligence, or AI, technologies.

In addition to the characteristics outlined above, the U.S.

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APUS has focused on serving the military community since its founding, and the community continues to be a primary source of APUS students.

Approximately 2,500 institutions serve military students through participation in Department of Defense, or DoD, tuition assistance programs, or TA, including APUS.

Approximately 2,500 institutions serve military students through participation in Department of Defense, or DoD, tuition assistance, or TA, programs, including APUS.

APUS’s primary competitors for military students are other institutions offering online instruction and colleges and universities offering on-campus instruction near military installations.

We believe that APUS will continue to see competition in the military community from both not-for-profit and for-profit schools, as well as from the Armed Forces themselves, including through distance learning programs.

For example, the Navy recently launched the U.S.

Naval Community College, a community college supporting naval education for enlisted service members.

As of November 2022, the U.S.

Naval Community College had enrolled approximately 1,700 service members since March 2020 in two pilot programs, and it plans to eventually achieve the capability to accommodate up to 5,000 students.

While a number of schools with which APUS competes are participating partners with the U.S.

Naval Community College, as a for-profit institution, APUS is not an eligible partner.

For example, the Navy in 2019 launched the U.S.

Naval Community College, or the USNCC, a community college supporting naval education for enlisted service members.

The USNCC now provides education to approximately 2,600 service members, and it plans to eventually achieve the capability to accommodate up to 25,000 students.

While a number of schools with which APUS competes are participating partners with the USNCC, as a for-profit institution, APUS is not an eligible partner.

As traditional not-for-profit public and private schools advance online capabilities, we believe that they will also present increasing competition for APUS.

military is demonstrating increased levels of support for credentials other than degrees, which we believe could lead to enhanced competition from institutions serving military students.

For example, Credentialing Opportunities On-Line, or COOL, is a program for each of the military branches and DoD civilians that links military occupations and experiences to civilian credentials (e.g., occupational certifications, licenses, and apprenticeships).

The Army also offers an

expanded credentialing program called the Army Credentialing Assistance Program, or Army CA, which is designed to support soldiers who wish to pursue civilian credentials, licenses, and certifications that may lead directly to a specific job.

We believe other service branches may follow the Army’s example or pursue other approaches to enhancing support for credentialing, including, for example, the Coast Guard’s CA Program.

APUS was previously an approved training provider for Army CA programs but ceased offering courses under the Army CA program in November 2022.

Nursing Programs

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Because of the relatively local focus of these pre-licensure programs, our competitive environment is moderately fragmented and affected by various factors specific to the states and particular areas where campuses are located, including local supply and demand for nurses and nursing schools.

We are also continuing to focus on growing our post-licensure programs, for which the competitive environment is less fragmented and has larger competitors, including because RN to BSN and other post-licensure degrees are available online, as well as in traditional campus-based environments.

We are also continuing to focus on growing our post-licensure nursing programs, for which the competitive environment is less fragmented and has larger competitors, including because RN to BSN and other post-licensure degrees are available online as well as in traditional campus-based environments.

Other Public and Postsecondary Institutions

Within the broader postsecondary education market, our institutions compete primarily with not-for-profit, public, and private two-year and four-year colleges, as well as other for-profit schools, particularly those that offer online learning programs.

Due to an increase in online postsecondary offerings, we could face increased competition as students pursue degree and credential-based postsecondary education from a wider selection of online offerings.

Due to an increase in online postsecondary offerings, we face increased competition as students pursue degree and credential-based postsecondary education from a wider selection of online offerings.

For example, we anticipate increased competition from campus-based postsecondary institutions as they continue to increase online degree programs and develop more non-traditional programs.

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Many public competitors also benefit from longstanding name recognition and are able to directly recruit students in a more cost-effective manner, especially in their local markets.

Many private institutions are able to make larger investments in marketing, including because they charge higher tuition.

Many private institutions are able to make larger investments in marketing, as their cost of tuition is higher than tuition at our institutions.

Non-Traditional Competition

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• entities providing coding bootcamps or micro-credentials;

• non-degree granting institutions such as massive online course, or MOOC, providers.

• non-degree granting institutions such as massive online course providers.

We believe that our institutions will continue to face new competition from non-traditional programs.

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military community will continue to be an important market segment for online education.

We believe service members will continue to seek respected universities that provide military-focused support services coupled with an online curriculum and flexible scheduling.

We believe service members will continue to seek respected universities that provide military-focused support services coupled with an

online curriculum and flexible scheduling.

We believe service members are particularly interested in postsecondary credentials that offer both career advancement within the military and preparation for employment outside of the military.

military is demonstrating increased levels of support for credentials other than degrees.

, occupational certifications, licenses, and apprenticeships).

The Army also offers an expanded credentialing program called the Army Credentialing Assistance Program, or Army CA, which is designed to support soldiers who wish to pursue civilian credentials, licenses, and certifications that may lead directly to a specific job.

APUS is an approved training provider for Army CA.

Service members using these programs may be eligible for assistance in paying for credentials, licenses, and certifications.

Although utilization of our CA programs to date has been limited, we believe other service branches may follow the Army’s example or pursue other approaches to enhancing support for credentialing, including, for example, the Coast Guard’s CA Program, which has an annual combined cap on benefits higher than that of the Army.

There are currently approximately 400 approved Army CA providers, none of which we believe have material market share.

We believe that military veterans represent another important addressable market for online education.

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As these policies and campaigns lower barriers to non-military jobs and facilitate veteran-owned businesses, we believe online universities offer valuable educational opportunities for veterans regardless of where they live, work, or learn.

The expanding need for healthcare coupled with a nursing shortage is driving significant demand for nursing education.

Projected employment for both registered nurses and licensed practical nurses is expected to grow by approximately 6% annually from 2021 to 2031, according to the U.S.

The expanding need for healthcare coupled with a nursing shortage continues to drive significant demand for nursing education.

Projected employment for licensed practical nurses and registered nurses is expected to grow by approximately 5% and 6% annually, respectively, from 2022 to 2032, according to the U.S.

Bureau of Labor Statistics’ Occupational Outlook Handbook.

When factoring in the need to replace workers who transfer to different occupations or exit the labor force, such as to retire, the U.S.

Bureau of Labor Statistics projects more than 260,000 openings each year for registered nurses (203,200) and practical nurses (58,800) through 2031.

Bureau of Labor Statistics projects openings each year for registered nurses of approximately 193,100, and approximately 54,400 for practical nurses, through 2032.

There is significant unmet demand from qualified students for nursing educational programs.

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We believe employers and professional associations will seek partnerships with academic institutions to advance the skills and productivity of their workforce through higher education and career learning programs, which we see as an opportunity, particularly for APUS, RU, and GSUSA.

We also believe that there is an opportunity to expand the APU brand more broadly to attract students beyond its historical constituency.

We also believe that there is an opportunity to expand the APUS brand more broadly to attract students beyond its historical constituency.

Our Competitive Strengths

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In addition, as described in “Our Institutions and Operations – Human Capital” below, our institutions focus on excellence by hiring experienced faculty and continuing to develop their capabilities.

Providing affordable degree and certificate programs is an important element of our competitive strategy.

Providing affordable, quality degree and certificate programs is an important element of our competitive strategy.

The combined tuition and fees at APUS are generally less than the average in-state cost at a public university.

APUS’s low tuition and fees, in combination with APUS-funded tuition grants and book grants provided to all undergraduate students, and active-duty military students and their spouses and dependents at the master’s level, result in significant savings and mean that APUS students are not required to take on as much debt as they might at another institution.

APUS’s low tuition and fees, in combination with APUS-funded tuition grants and book grants provided to all undergraduate students result in significant savings and mean that APUS students are not required to take on as much debt as they might at another institution.

APUS’s generous transfer credit policy, and use of open educational resources, further reduce a student’s out-of-pocket costs.

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The depth and breadth of APUS’s and RU’s non-nursing program offerings are designed to effectively address the diverse needs of students who enter into education programs with vastly different educational and career backgrounds and goals.

APUS also utilizes Industry Advisory Councils to evaluate its current curriculum and determine the career relevance of programs and degrees, which facilitate efforts to connect APUS’s curriculum to the industries and the students it serves and to deliver a high-quality academic product.

For example, APUS utilizes Industry Advisory Councils to evaluate its current curriculum and determine the career relevance of programs and degrees, which facilitate efforts to connect APUS’s curriculum to the industries and the students it serves and to deliver a high-quality academic product.

RU and HCN, meanwhile, create new nurses to meet the significant imbalance of supply and demand that exists for nurses by preparing and training nursing students to enter the nursing profession as licensed nurses.

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APUS offers online delivery with monthly starts and academic support offerings are individualized to students’ needs, while RU offers CBE programs, a blend of online and in person courses for their nursing and other healthcare-related programs, and flexible start dates and online courses for other programs.

HCN offers programs that accommodate working adults by offering blended online and in-person courses for the PN and ADN programs, as well as daytime and evening/weekend options.

HCN offers PN and ADN programs that accommodate working adults by offering on-campus instruction, online instruction for certain courses, as well as daytime and evening/weekend options.

GSUSA offers virtual and in-person instructor-led, blended, and on demand online courses to accommodate the need for immediate application-specific training.

Market Leadership

Our status as a market leader in key areas we serve means that we operate from a position of strength.

Our status as a market leader in key areas we serve means that we operate from a position of strength in those areas.

APUS is the number one educator of active-duty military and of veterans.

Since its founding, APUS has broadened its focus to include other military communities, veterans, and public service and service-minded communities, with a focus on a broad purpose of “educating those who serve.” As of December 31, 2023, approximately 66% of APUS’s students self-reported that they served in the military on active duty at the time of initial enrollment, and approximately 11% of APUS’s students self-reported that they are a military veteran.

We are also the largest educator of ADN and PN pre-licensure nurses in the United States.

RU has more than 7,600 nursing students at its 22 campuses across six states and online with over 90% of those students pursuing a pre-licensure PN Degree, ADN Degree, or post-licensure BSN.

RU enrolls the largest number of ADN students in the United States and, together with HCN’s nearly 2,600 nursing students, we have the largest population of PN and ADN students in the country.

We are also a national leader in pre-licensure nursing education.

RU has more than 5,700 nursing students at its 22 campuses across six states and online with over 90% of those students pursuing a pre-licensure PN degree, ADN degree, or post-licensure BSN degree.

Finally, we are one of the largest providers of training to the federal and public employee workforces through GSUSA with its extensive portfolio of government agency customers and directly enrolled federal government employees.

Expansive Nursing Footprint

Our institutions train nurses online and at 30 campuses across nine states and also offer online programs.

Our institutions train nurses at 30 campuses across nine states and online.

Given the state and regulatory approvals necessary, the investment in physical campus facilities, the specialized programmatic knowledge and related accreditations, clinical placement requirements, the time to receive approval to grow nursing enrollments and various standards that nursing schools must meet, we believe nursing education – and in particular first or pre-licensure nursing education – provides us with opportunities to distinguish ourselves from our competitors.

In addition, we believe we are one of the only educators with a full “ladder” of nursing curriculum from PN to Doctoral degree.

In addition, we believe we are one of the only educators with a full “ladder” of nursing curriculum from PN to Doctoral degrees.

Our Business Strategy and Goals

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We intend to expand GSUSA into new domains and models.

We seek to grow and expand nursing provider partnerships such as the one HCN entered into in the fourth quarter of 2022 with a large national healthcare provider to provide tuition sponsorship in

exchange for a work commitment.

Among our institutions’ offerings are certificate programs, credentialing, and CBE programs.

We seek to enter into new, and expand existing nursing provider partnerships such as those at HCN.

For example, during the fourth quarter of 2022, HCN entered into a tuition scholarship program with a national healthcare provider to provide scholarships to ADN students at its Toledo, Ohio campus in exchange for a work commitment following graduation.

In the fall of 2023, HCN partnered with another national healthcare organization to provide similar scholarships to ADN students at its Columbus, Ohio campus.

Additionally, among our institutions’ offerings are certificate programs, credentialing, and CBE programs.

Transform the Company to Achieve Sustainable Growth

We aim to increase our public market scale by growing the revenue and expanding operating margins of the enterprise organically and inorganically.

We aim to increase our public market scale by growing the revenue of our enterprise organically and inorganically and delivering improved enterprise-wide operating margins.

We intend to develop capabilities to drive organic growth and plan to continue to assess and pursue strategic investments and acquisitions and integrate and grow them for inorganic growth.

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We also aim to deliver improved enterprise-wide operating margins by continuing to exercise financial discipline and taking steps such as our efforts focused on realigning our organizational structure, eliminating redundancies, and optimizing certain functions.

Focus on Regulatory Metrics

We strive to deliver a quality, competitive education, which goes hand-in-hand with demonstrating compliance with various regulatory standards and metrics.

We expect to continue to focus on the core elements of our business that are necessary to meet these standards and metrics.

For example, in our nursing programs, we continue to be focused on improving various achievement metrics, particularly around NCLEX pass rates and retention statistics, and at APUS, we continue to focus on making sure we comply with the 90/10 Rule.

Optimize Our Cost Structure Through the Shared Services Model

We aim to drive better, faster, more cost effective, responsible, scalable results for our institutions by delivering shared services to them, as noted in “Our Institutions and Operations” below.

We aim to deliver better, faster, more cost effective, responsible, scalable results for our institutions by providing shared services to them, as noted in “Our Institutions and Operations” below.

We believe that the shared services model promotes the efficient use of resources.

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General Academics

APUS offers 136 degree programs and 115 certificate programs.

APUS offers 137 degree programs and 111 certificate programs across five schools of study.

More than 1,800 distinct courses are available in either eight- or sixteen-week formats.

Most APUS academic terms begin on the first Monday of each month.

Most APUS academic terms begin on the first Monday of each

APUS’ certificate programs generally require a minimum of 18 credit hours and focus on a particular component of a broader degree program.

Among those programs are 16 undergraduate and 16 graduate NanoCerts programs, focused programs comprised of three academic courses in a related area of interest that provide skills necessary for career or professional development and result in a micro credential.

RU offers over 60 programs across six schools of study in addition to nursing.

Among those programs are 19 undergraduate and 18 graduate NanoCerts TM programs, focused programs comprised of three academic courses in a related area of interest that provide skills necessary for career or professional development and result in a micro credential.

RU offers over 60 programs across seven schools of study in addition to nursing.

RU offers more than 775 distinct courses in 5.5 or 11-week formats with terms beginning in January, April, July, and October of each year.

RU offers a comprehensive “ladder” of nursing degrees including a pre-licensure Diploma in PN, an ADN, and a BSN, as well as the post-licensure RN to BSN, Master of Science in Nursing and Doctorate of Nurse Practice.

RU offers a comprehensive “ladder” of nursing degrees, including a pre-licensure Diploma in PN, ADN degree, and a BSN degree, as well as the post-licensure RN to BSN degree, Master of Science in Nursing degree and Doctorate of Nurse Practice.

In addition, RU also offers a post-graduate nursing certificate.

HCN offers on-campus instruction leading to a Diploma in PN and an ADN, as well as a Direct Entry ADN option that offers an accelerated graduation pathway for students who meet certain transfer, academic and entrance exam requirements.

Portions of the programs are taught online.

HCN offers on-campus instruction leading to a Diploma in PN and an ADN degree, as well as a Direct Entry ADN degree option that offers an accelerated graduation pathway for students who meet certain transfer, academic and entrance exam requirements.

Portions of these programs are taught online.

Academic terms for HCN’s PN and ADN programs begin four times each year, with courses starting in January, April, July, and October.

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Student enrollment is defined as the number of unique active students, including those who take an approved leave of absence.

RU offers programs across a broad range of fields of study, but recent years have seen an increased focus on healthcare, specifically nursing education.

RU offers programs across a broad range of fields of study, with a focus on healthcare, specifically nursing education.

At RU, 81% of students are over the age of 25 and 73% are female.

As of December 31, 2023, approximately 5,700 students are pursuing nursing degrees at RU, over 90% of whom are enrolled in RU’s pre-licensure degree programs.

HCN provides nursing education to approximately 2,600 students at six campuses in Ohio, one campus in Indianapolis, and one in suburban Detroit.

HCN provides nursing education to approximately 3,100 students at eight campuses in three states.

The average HCN student is approximately 33 years old and 93% of HCN students are female.

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Students and sponsors of tuition reimbursement programs look to accreditation for quality assurance, and employers rely on institutions’ accredited status when evaluating a candidate’s credentials.

APUS and RU have institutional accreditation from HLC with an Open Pathway designation, which affords institutions greater opportunity to pursue institutional improvement projects than the alternative Standard Pathway designation.

HCN is institutionally accredited by ABHES.

In 2023, APUS transitioned from the Open Pathway designation to the Standard Pathway designation.

As a result of this transition, APUS will be subject to a focused site-visit in March 2024 and will be subject to a

comprehensive site-visit for the year four mid-cycle review under the Standard Pathway, to take place in 2025.

The reaffirmation of accreditation site visit date remains unchanged and will take place 2030-2031.

RU has institutional accreditation from HLC with an Open Pathway designation, with the next comprehensive evaluation for reaffirmation of accreditation scheduled for May 2026.

HCN is institutionally accredited by ABHES, and in February 2021, ABHES granted HCN continued accreditation through February 2027 for all programs at all campuses.

GSUSA is accredited by ACCET.

In addition to institutional accreditation, certain of our programs offered have received specialized accreditation.

For example, the Accreditation Council for Business Schools and Programs, or ACBSP, accredits approximately 15 different business-focused academic programs offered by APUS, and accredits APUS’s accounting program under a specialized accounting accreditation.

The Commission on Collegiate Nursing Education, or CCNE, accredits the Bachelor and Master of Science in Nursing programs.

For example, the Accreditation Council for Business Schools and Programs accredits approximately 15 different business-focused academic programs offered by APUS and accredits APUS’s accounting program under a specialized accounting accreditation.

The Commission on Collegiate Nursing Education accredits the Bachelor and Master of Science in Nursing programs at APUS and RU.

Certain programs offered by RU have received specialized accreditation as well.

For example, RU’s ADN and Licensed Practical Nursing programs are accredited by the Accrediting Commission for Education in Nursing.

The BSN and Master of Science in Nursing degree programs at RU are accredited by CCNE.

HCN’s PN program is accredited by the National League for Nursing Commission for Nursing Education Accreditation, or NLN CNEA.

HCN’s PN program is accredited by NLN CNEA.

RU and HCN’s locations and programs are approved by state agencies as well.

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Certain programs may have additional admissions standards and restrictions.

For example, RU and HCN require prospective nursing students to achieve qualifying entrance exam scores for certain programs.

Affordability and Cost of Attendance

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The combined tuition and fees at APUS are generally less than the average in-state cost at a public university.

APUS costs are about 25% less than the average in-state full-time undergraduate tuition, fees, and books at four-year public universities, based on the final 2021-2022 institutional data reported to the U.S.

Department of Education through The Integrated Postsecondary Education Data System.

This low tuition and fees, in combination with APUS-funded tuition grants and book grants provided to all undergraduate students, and to active-duty military students and their spouses and dependents at the master’s level, result in significant savings.

APUS costs are more than 25% less than the average in-state full-time undergraduate tuition, fees, and books at four-year public universities, based on the final 2022-2023 institutional data reported to ED through the Integrated Postsecondary Education Data System.

This low tuition and fees, in combination with APUS-funded tuition grants and book grants provided to all undergraduate students, resulted in significant savings to APUS students.

Additionally, APUS’s generous transfer credit policy, and use of open educational resources, further reduce a student’s out-of-pocket costs.

Tuition and fees at RU and HCN are also designed to be affordable and competitive with those of similar institutions.

Tuition and fees at RU and HCN are also designed to be affordable and competitive with those of similar institutions offering the same level of flexibility, accessibility, and student experience.

Tuition and Fees

At APUS, tuition for undergraduate courses is $285 per credit hour, tuition for master’s level classes is $370 per credit hour, and there is a technology fee of either $65 or $100 per course, depending on the course.

APUS implemented tuition and fee increases for its non-military and veteran students in the second and third quarters of 2023.

At APUS, following the tuition increases, tuition for undergraduate courses is $350 per credit hour, while tuition for master’s level classes is $425 per credit hour.

In general, a bachelor’s degree may be earned for $42,000 in tuition costs at current tuition rates, and APUS master’s degrees may be earned for $15,300 in tuition at current tuition rates.

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Because APUS is an exclusively online institution, there are no required resident fees, such as for parking, food service, student union, and recreation.

APUS charges students a technology fee but provides a grant to cover the technology fee for students using TA.

Students taking graduate courses at APUS are charged a technology fee of $85 per course.

When applicable, APUS students are charged certain additional fees, such as graduation, late registration, transcript request, and comprehensive examination fees.

APUS plans to adopt modest tuition and fee increases effective in the second quarter of 2023, with a corresponding increase in grants to military students.

In the second quarter of 2024, as part of the continuous improvement initiatives in education quality, APUS plans to implement a modest tuition increase to master’s students across all categories, including military, non-military, and veteran students.

RU’s costs vary among its programs and between part-time and full-time attendance.

In January 2023, RU implemented tuition increases for select programs to help offset the increased cost of delivering a quality education.

RU’s ADN program typically costs $409 per credit hour in addition to course fees.

Credit hour costs range from $199 per credit hour to $419 per credit hour for other undergraduate programs.

At the graduate level, RU offers five different master’s programs for $260 per credit hour or less.

Credit hour costs range from $199 per credit hour to

$419 per credit hour for other undergraduate programs.

At the graduate level, RU offers six different master’s programs for $205 per credit hour or less.

RU charges a $175 course technology and resource fee for each course.

Students may purchase required textbooks or e-books through RU for a flat fee of $15 for each textbook (traditional or e-book) for each course.

RU adopted modest tuition increases, which took effect on January 3, 2023, for select programs to help offset the increased costs of delivering a quality education.

HCN’s costs vary among its programs.

In the second quarter of 2023, HCN implemented a 5% increase in tuition and fees across all programs to offset the increased cost of delivering a quality, competitive education.

HCN’s PN program may be completed for approximately $19,600 in tuition and fees and the ADN program may be completed for approximately $27,800 in tuition and fees, depending on the campus location.

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HCN estimates that over the life of its programs, a student’s costs related to textbooks and supplies will be approximately $4,000 for the PN program and $6,000 for the ADN program.

HCN plans to implement a 5% increase in tuition and fees effective in the second quarter of 2023 across all programs.

At RU and HCN, tuition increases are adjusted to be consistent with the local campus markets.

Even inclusive of recent increases, RU and HCN’s tuition and fees are designed to be affordable and competitive when compared to the tuition and fees at similar institutions.

Grants and Other Fee Reduction Opportunities

To support APUS’s active-duty military students using TA, APUS provides an APUS-funded tuition grant so that undergraduate and master’s students who are eligible for TA benefits and their spouses and dependents have a net tuition of $250 per credit hour, which is the same amount as covered by TA and, when combined with the APUS funded book grant described below, means that active-duty military utilizing TA may attain an undergraduate or master’s degree at APUS for no out-of-pocket cost.

APUS’s tuition grant applied to approximately 71% of its total net course registrations in 2022.

veterans who qualify for 100% of their Post-9/11 Veterans Educational Assistance Act of 2008, or Post-9/11 GI Bill, benefits are expected to generally have no out-of-pocket expenses either.

Undergraduate students and all active-duty military students and their spouses and dependents enrolled in courses for academic credit at APUS receive textbooks and certain course materials at no additional cost to them through an APUS-funded institutional book-grant program.

APUS also utilizes open access and online library materials where appropriate and works with various publishers to reduce the cost of textbooks and course materials for both graduate students who pay for textbooks and course materials and for APUS who funds the book grant.

Prior to September 2023, to support APUS’s active-duty military students using TA, APUS provided an APUS-funded tuition grant so that undergraduate and master’s students who are eligible for TA benefits and their spouses and dependents had a net tuition of $250 per credit hour.

In September 2023, APUS removed the APUS-funded tuition grant and APUS began providing a Preferred Military Rate of $250 per credit hour for undergraduate and master’s level courses, for all U.S.

active-duty service members, National Guard members, Reservists, and military families.

Active-duty military students using TA at the undergraduate level are expected to generally have no out-of-pocket expenses.

In the second quarter of 2023, coinciding with the tuition increases described above, APUS added a 10% Veteran Grant for veterans and veteran’s family members, on standard undergraduate and master’s level courses.

In addition, veterans who qualify for 100% of their Post-9/11 Veterans Educational Assistance Act of 2008, or Post-9/11 GI Bill, benefits are expected to generally have no out-of-pocket expenses either.

Active-duty military undergraduate students and their spouses and dependents enrolled in courses for academic credit at APUS receive textbooks and certain course materials at no additional cost to them through an APUS-funded institutional book-grant program.

At RU, students can lower their total cost of attendance through self-directed assessments, which provide savings by permitting students who demonstrate proficiency in a subject to test out of courses.

Self-directed assessments, when available, may be attempted for a prepaid fee, which is generally $149 per attempt.

HCN students may apply performance-based grants and needs-based grants toward the balance of their tuition.

HCN students may apply performance-based grants and needs-based grants toward the balance of their tuition after all other funding sources.

HCN offers an institutional affordability grant to students demonstrating financial need to cover the difference between the total cost of tuition and fees less the amount of all eligible financial aid resources.

The grant is designed to limit a student’s monthly payment to $200 through an award of up to $200 per month, or $600 per term after consideration of financial aid, employer tuition reimbursement, and other financial resources.

RU and HCN both offer their students an extended payment plan option.

The extended payment plans are designed to assist students with educational costs including tuition and fees.

HCN offers its students an extended payment plan option.

The extended payment plan is designed to assist students with educational costs including tuition and fees.

Payment plans require ongoing payments while the student is enrolled in a program and extend after the last day of attendance or graduation.

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Most students rely on some form of financial aid in addition to their individual resources.

At APUS, students utilizing DoD’s TA programs accounted for 47%, those using VA education benefits 21%, and those utilizing ED’s Title IV programs 18% of net course registrations in 2022.

We believe that the ability of our students to participate in these programs is essential to APUS’s success.

At RU, students utilizing ED’s Title IV programs as their primary source of payment accounted for approximately 74%, those utilizing state grants, cash, or private/alternative loans accounted for approximately 24%, and those using VA education benefits approximately 2% in 2022.

At APUS, students utilizing DoD’s TA programs as their primary source of payment accounted for 48%, those utilizing VA education benefits 22%, those utilizing ED’s Title IV programs 17%, and those utilizing cash and other sources 13%, of

revenue in 2023.

At RU, students utilizing ED’s Title IV programs as their primary source of payment accounted for 75%, those utilizing cash and other sources 23%, and those utilizing VA education benefits 2%, of revenue in 2023.

In addition, most HCN students rely on some form of financial aid in addition to their individual resources.

We believe that the ability of our students to participate in these programs is essential to the success of APUS, RU, and HCN.

Participation in TA, VA education benefits, and Title IV programs adds to our institutions’ regulatory burden and results in increased regulatory scrutiny, as described more fully below in “Regulatory Environment – Student Financing Sources and Related Regulations/Requirements”.

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We also carry out initiatives intended to improve the educational outcomes of our students.

For example, RU recently established a Center of Nursing Excellence that is dedicated to helping students pass the NCLEX exam the first time by identifying student-specific challenge areas and providing customized tutoring resources and faculty training to help shore up gaps in student knowledge.

RU plans to integrate NCLEX testing simulation and preparation tools throughout the curriculum and to conduct a curriculum assessment to identify areas where RU can better enable student mastery and success.

For example, RU’s Council for Nursing Excellence is dedicated to helping students pass the NCLEX exam the first time by identifying student-specific challenge areas and providing customized tutoring resources and faculty training.

We believe these initiatives contributed to improved NCLEX scores at certain campuses in 2023.

RU also plans to integrate NCLEX testing simulation and preparation tools throughout the curriculum and to conduct a curriculum assessment to identify areas where RU can better enable student mastery and success.

Career Development

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We strive to link students directly with employers where we can.

For example, beginning in the fourth quarter of 2022, HCN entered into a partnership with a large national healthcare provider to assist certain HCN students in funding their tuition costs.

The healthcare provider is fully funding the tuition costs of students it selects from HCN’s ADN program at its HCN’s Toledo, Ohio campus in exchange for the students agreeing to work for the provider for an agreed time period following graduation.

We plan to launch additional healthcare partnerships for RU and HCN in 2023.

In the fall of 2023, HCN partnered with another national healthcare organization to provide similar scholarships to ADN students at its Columbus, Ohio campus.

Marketing and Branding

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We aim to market to students wherever they may be, through their chosen media or marketing channel, and in the geographies where they are located.

Our approach includes in-person and relationship-based marketing as well as digital (including search, company-owned and external content, and social media), and more traditional television, radio, and print marketing efforts.

We also work with partners we believe can provide us with better access to the students we aim to reach.

Almost 30% of our RU enrollments are associated with a partner relationship.

We have agreements with more than 260 employers whose employees pursue an education at RU.

Additionally, we provide more than 130 APUS partner organizations with services to maximize strategic workforce development goals.

This includes partnerships with community colleges, which prepare students for transfer opportunities to APUS for bachelor’s degree programs.

We also have begun establishing new partnerships with healthcare providers to further career outcomes and defray costs of education, as discussed more fully in “Our Institutions – Career Development” above.

Our approach includes in-person and relationship-based marketing as well as digital (including search, company-owned and external content, social media, and streaming services), and more traditional media television, radio, and print marketing efforts.

We also work with partners we believe can provide us with better access to students who will persist in our institutions’ programs.

Nearly 25% of our RU enrollments are associated with an alliance or partner relationship.

We have agreements with over 300 employers whose employees pursue an education at RU.

At APUS, this includes partnerships with community colleges, which prepare students for transfer opportunities to APUS for bachelor’s degree programs.

At RU and HCN, we have begun establishing new partnerships with healthcare providers to further career outcomes and defray costs of education, as discussed more fully in “Our Institutions – Career Development” above.

Marketing efforts tailored for our institutions consider prospective and current students, including their respective educational goals.

To that end, APUS marketing has historically had a relationship-based aspect focused on building long-term relationships with businesses, professional organizations, and individuals in the military, military-affiliated, and public service communities.

To that end, APUS marketing has historically had a relationship-based focus on building long-term relationships with businesses, professional organizations, and individuals in the military, military-affiliated, and public service communities.

We also have programs at APUS that aim to assist members of the military as they transition into private sector jobs.

RU and HCN nursing program marketing includes leveraging relationships with and marketing to the healthcare community, and in late 2022 we increased our non-nursing marketing for RU in response to demand, which continued throughout 2023 and which we expect will continue as part of our 2024 marketing strategy.

In 2022, we began efforts to centralize our marketing organization.

Our centralized team is currently providing all marketing and branding services for APUS and GSUSA and providing many of these services for HCN.

Our centralized team is currently providing all marketing and branding services through a shared service model to APUS and GSUSA, and providing many of these services for HCN.

RU historically relied on Collegis for a variety of outsourced marketing services.

In October 2022, RU and Collegis mutually agreed to the termination of the marketing services contract effective January 31, 2023, and we have completed the transition of RU marketing in-house to our centralized marketing team.

We are also developing marketing expertise that spans a variety of functional areas and to extend our use of marketing technology and analytics.

We currently use technology and analytics to improve marketing mix, audience targeting, new initiatives, messaging, and creative decisions, as well as advertising development, delivery, and testing.

In 2023, to support all of our institutions, we also hired subject matter experts in all key marketing functional areas.

Information Technology

Information technology systems are essential to our student experience and our business operations.

APEI provides information technology services to APUS, RU, HCN, and GSUSA through a shared services model.

APEI provides information technology services to our institutions through a shared services model.

In addition, RU is party to a service agreement with Collegis to provide information technology services through September 2024.

RU currently relies on Collegis for a variety of outsourced information technology functions, including data center, learning management system, user support, and network and voice services, and its technology infrastructure is currently hosted, managed, and supported by Collegis.

Our Ongoing Technology Transformation

We are in the midst a multi-year technology transformation program to enable us to enhance the learning experience for students, to better accommodate new flexible learning modalities, and to improve the operational effectiveness of our enterprise.

We are also currently migrating key applications, systems, and data to the cloud rather than hosting in our own co-located data centers.

With the recent acquisitions of RU and GSUSA, we are developing and executing plans to incorporate these institutions into this transformation program as well, and looking for ways to incorporate their systems, infrastructure, and processes into our standard technology stack.

Our Ongoing Technology Transition

We are in the midst of a multi-year technology transformation program to enable us to enhance the learning experience for students, better accommodate new flexible learning modalities, and improve the operational effectiveness of our enterprise.

In April 2022, we notified Collegis that we intend to permit RU’s contract with Collegis to expire by its terms in September 2024.

We plan to insource all of the technology and services currently provided by Collegis or to cloud services or third-party vendors over which we will have management oversight.

As part of the transition away from Collegis, we plan to look more broadly for opportunities further improve operational effectiveness across our information technology operations and for opportunities to rationalize our technology portfolio to create a more consistent, standardized technology stack.

We plan to insource all the technology and services currently provided by Collegis to cloud services or third-party vendors over which we will have management oversight.

As part of the transition from Collegis, we plan to continue looking more broadly for opportunities to further improve operational effectiveness across our information technology operations and rationalize our technology portfolio.

For example, in December 2023, we entered into an agreement to outsource a number of our information technology operations, including some that were previously being handled by Collegis, to a managed service provider, including service desk, end user support, network support and operations.

Student Information and Instructional Delivery

Our core enterprise systems are (i) our student information and services systems, or SIS, platforms which our institutions use to interact with and provide support to students in areas such as admissions, registration, tuition payment, grade reporting, progress toward degrees, and various other functions, and (ii) our learning management system, or LMS, platforms, which our institutions use to deliver course content and support teaching, learning, and collaboration.

We have a legacy customized SIS at APUS that we refer to as Partnership At a Distance™, or PAD, and proprietary information systems and processes to support PAD, into which we have invested significant time and money.

PAD is designed to enable APUS to provide each student with individualized support at appropriate times from pre-enrollment through and beyond graduation, including student advising, administrative support, and community networking.

We continually evaluate PAD for possible changes and upgrades and anticipate that we will eventually make significant changes to or replace this system.

Our core enterprise systems are (i) our student information and services systems, or SIS, platforms which our institutions use to interact with and provide support to students in areas such as admissions, registration, tuition payment, grade reporting, progress toward degrees, and various other functions, (ii) our learning management systems, or LMS, platforms, which our institutions use to deliver course content and support teaching, learning, and collaboration, and (iii) our customer relationship management systems, or CRM, which manage our admissions functions.

At APUS, we have a legacy customized SIS that we refer to as Partnership at a Distance™, or PAD, and proprietary information systems and processes to support PAD.

RU uses Anthology Campus Nexus as its SIS.

The RU SIS environment is currently hosted with Collegis, which maintains all systems, support, and hosting.

RU’s and APUS’s admissions function are managed inside of Salesforce and connected to Anthology for RU and PAD for APUS to ensure all pertinent information is synchronized appropriately.

HCN and GSUSA currently have their own SIS platforms, but we plan to consolidate the separate platforms used by HCN and GSUSA to a standard platform for those institutions beginning in 2024.

More broadly, we continue to review and assess our student information and services platforms and their capabilities, including whether to consolidate to a standard platform across more or all of our institutions.

In 2021, we completed work to consolidate HCN and APUS onto a single, cloud-based LMS platform, Brightspace by D2L.

The RU SIS environment is currently hosted with Collegis, which maintains all systems, support, and hosting for RU.

APUS and RU admissions functions are managed inside of Salesforce and connected to PAD for APUS and Anthology for RU to ensure all pertinent information is synchronized appropriately.

HCN and GSUSA have their own SIS platforms.

In 2024, we plan to replace the existing SIS

platform used by GSUSA and will also begin moving HCN to a new SIS platform.

We continually evaluate PAD for changes and upgrades and anticipate that we will eventually make significant changes to or replace this system.

In 2021, we consolidated APUS and HCN onto a single, cloud based LMS platform, Brightspace by D2L.

RU uses Blackboard Ultra as its LMS platform.

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All RU support for Blackboard Ultra is currently provided by Collegis.

In addition to our student information and services systems and our LMS platforms, we also have several other systems that support the student experience, financial aid processing, financial management, human resources processes, marketing, and decision support.

We are continuing to consolidate APUS’s customer relationship management systems onto a single platform, the first phases of which were completed in 2022.

In early 2023, we will be launching a new native mobile application to improve the student experience at APUS.

In early 2023, at APUS we launched a new native mobile application to improve the student experience.

The APUS mobile application provides current and future students with university information and access to academic tools via mobile and tablet, 24/7.

Key features include registration, academic dashboard, task Manager, program tracker, and real-time notifications.

In addition to our student information and services systems, LMS platforms, and CRM systems, we also have several other systems that support the student experience, financial aid processing, fiscal management, human resources processes, marketing, and decision support.

Our Information Technology Infrastructure

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Student access to our systems is provided through redundant data carriers.

RU’s network is fully redundant through a software-defined wide area

network infrastructure.

RU’s network is fully redundant through a software-defined wide area network infrastructure.

We intend to continue to migrate much of our infrastructure and core applications to a cloud computing model with the goal of improving the reliability, scalability, agility, and security of our core infrastructure and applications.

Our Information Security Efforts

The performance, reliability, and security of the networks and technology infrastructure we use or rely on is critical to our operations, our institutions’ reputation, and our ability to attract and retain students.

As such, we have a dedicated Chief Information Security Officer in addition to our Chief Information Officer, and our Board of Directors reviews our cybersecurity and other information technology risks and our plans to mitigate them.

In 2022, we hired additional information security employees and implemented 24x7 security monitoring by a third-party service provider.

We use external vendors to perform security assessments on a periodic basis to review and assess our information security and utilize this information to audit ourselves, to monitor the security of our technology infrastructure, and to assess whether and how to prioritize the allocation of scarce resources to protect data and systems.

We also require third-party vendors to maintain a level of security that is acceptable to us and work closely with vendors to address potential and actual security concerns and attacks.

For more information on our information technology investments and their effects on our results of operations, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview”, and for more information regarding risks related to our information technology, refer to “Risk Factors – Risks Related to Our Technology Infrastructure.”

Human Capital

Strategy and Values

Our ability to deliver on our Company mission and to continue to transform our enterprise to focus on quality student outcomes, and on sustainable growth is tightly aligned with our human capital strategy.

Our ability to deliver on our mission and to continue to transform our enterprise to focus on quality student outcomes and on sustainable growth is tightly aligned with our human capital strategy.

Our performance depends on the talents, experience, and efforts of our employees, and on our ability to foster a culture and practice of high performance, innovation, cooperation, integrity, and respect.

We seek to be a destination for high-potential employees and desire to build a bench of future leaders by developing best-in-class human capital capabilities.

During 2022, our key human capital efforts focused on centralizing our human capital function, implementing a common talent acquisition methodology, and improving responses to human capital inquiries.

We also began implementing a streamlined and proactive approach to employee communication to drive connectivity, engagement, and efficiencies.

During 2023, our key human capital efforts focused on centralizing certain components of our human capital strategy, including implementing a common talent acquisition methodology and common talent management and talent review process, as well as centralizing and improving responses to human capital inquiries through our HR Operations AskHR team.

We also continue to implement a streamlined and proactive approach to employee communication to drive connectivity, engagement, and efficiencies.

As of December 31, 2023, APEI’s employee population comprised the following:

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Total 724 1,669 2,393 3,287 357 6,037

Our employees have diverse backgrounds, influenced in part by the geography in which our headquarters, administrative facilities, and campuses are located, and by the communities we serve, in particular nursing, military, military-affiliated, and veteran communities.

Our employees have diverse backgrounds, influenced in part by the geography in which our headquarters, administrative facilities, and campuses are located, and by the communities we serve, in particular military, military-affiliated, veteran, and nursing communities.

As of December 31, 2023, our employee diversity was as follows:

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(1) Consists of employees self-identifying as female.

(2) Consists of employees self-identifying as Black or African American, Hispanic, Asian American, Native American, or more than one race.

Diversity and inclusion are at the core of our values, and we believe that reflects the expectations of students we serve.

In the first quarter of 2023, we launched an enterprise-wide, cross-functional Inclusion and Impact Council that includes members of executive leadership and focuses on driving awareness and harmonization around diversity, equity, inclusion, and belonging initiatives.

(2) Consists of employees self-identifying as Black or African American, Hispanic, Asian American, Native American, or more than one race or ethnicity.

Diversity and inclusion is a business imperative at the core of our values, and we believe that diversity and inclusion reflects the expectations of students we serve.

In the first quarter of 2023, we launched an enterprise-wide, cross-functional Inclusion and Impact Council that includes members of executive leadership, as well as inclusion champions from across all of our education units, and focuses on driving awareness and harmonization around diversity, equity, inclusion, and belonging initiatives.

To support our diversity and inclusion efforts, we also have diversity and inclusion task forces and committees at our institutions.

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We believe that current job market dynamics, including low unemployment, have further increased the challenge of hiring and employee retention.

Overall, turnover of our employees during 2022 increased when compared to 2021.

Excluding RU and GSUSA, which were not part of the organization for all of 2021, turnover in 2022 increased approximately 14% to 24%, depending on segment.

For 2022, 8.3% of full-time employee terminations were voluntary and 19.6% were involuntary.

Turnover in 2021 was approximately 6% to 10% higher than in 2020, depending on segment.

We strive to retain our talent and closely track retention among our employees, both faculty and staff.

In 2023, we had full-time employee turnover of approximately 19%, of which 73% was voluntary and 27% was involuntary.

In 2022, we had full-time employee turnover of approximately 28%, of which, 70% was voluntary and 30% was involuntary.

Although we have taken additional steps to retain our current faculty and source and recruit talent, there can be no assurance that our efforts will be successful.

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We have implemented a centralized talent and transformation team to focus on improving internal learning and development practices and succession planning to ensure that we cultivate skills needed to deliver high quality student outcomes and help grow our operations.

In 2022, we invested in both change management and integration talent at the Company level to assist in further integrating our institutions, and we implemented a consistent compliance training approach across the organization.

We are committed to working to ensure that new hires and employees are fully trained on key compliance issues in a timely manner, and we review all required compliance trainings to ensure the training is comprehensive.

In 2023, we executed an enterprise-wide talent review for all vice-president and above employees to ensure a consistent review of talent and more meaningful development plans for those leaders, as well as enhanced succession planning.

We also invested in both change management and integration talent at the Company level to assist in further integrating our institutions, and we continued our centralized and consistent compliance training approach across the organization.

We are committed to working to ensure that new hires and employees are fully trained on key compliance issues at hire and also on an annual basis during the duration of employment.

We also review all required compliance trainings annually to ensure the training is comprehensive.

Staffing our Institutions

We believe that hiring and retaining well-educated and qualified faculty members is important to our success.

We have centralized more of our talent acquisition function in an effort to improve talent search efficiency, increase the consistency of our sourcing practices, and strengthen hiring processes.

This centralization and new leadership has significantly reduced our time to fill metrics and improved our ability to assess talent needs company-wide.

Within the first six months after centralizing hiring for all staff across APEI, APUS, RU, and GSUSA and all faculty at RU, the average time to fill new positions decreased by 28%.

We continue to centralize more of our talent acquisition function in an effort to improve talent search efficiency, increase the consistency of our sourcing practices, and strengthen hiring processes.

This centralization has significantly reduced our time to fill metrics and improved our ability to assess talent needs company-wide.

At APUS, approximately 65% of our full-time faculty have a terminal degree in their field of study, and virtually all undergraduate faculty members hold graduate degrees.

Many APUS faculty members have relevant experience at other universities and within military, corporate, and government institutions.

At RU and HCN, all nursing faculty have earned a BSN or higher.

Many APUS faculty members have relevant experience at other universities and within military, corporate, and government

institutions.

In addition to having the necessary educational requirements, RU and HCN seek faculty members who have demonstrated experience in the field of nursing.

Employee Engagement and Relations

We measure employee engagement, including faculty, on an ongoing basis by soliciting feedback, including a company-wide engagement survey for all employees in 2022, in order to understand the views of our employees.

We measure employee engagement, including faculty, on an ongoing basis by soliciting feedback, including a company-wide annual employee engagement survey for all employees, in order to understand the views of our employees.

The results from engagement surveys are used to implement programs and processes designed to enhance employee engagement and improve the employee and faculty experience.

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We are committed to the health and well-being of our employees and assess our well-being initiatives and marketplace trends on an ongoing basis.

Beginning in 2022, we began to increase our focus on employee well-being.

For example, we enlarged our Total Rewards Team, which is focused on benefits and well-being, we harmonized paid-time off policies across the Company, and we started quarterly benefits town hall meetings hosted by executive leadership.

In 2023, we added paid parental leave to support our employees and their families and as an additional retention tool.

Since the abatement of the COVID-19 pandemic, we have allowed employees to return to a hybrid work setting, and we continue monitoring guidelines and regulations and updating our policies accordingly.

Beginning in 2022, and continuing in 2023, we have increased our focus on employee well-being and have enhanced our Total Rewards Team, which is focused on benefits and well-being.

In 2023, we added paid parental leave to support our employees and their families and additional paid time off, including time for volunteerism, as additional retention tools.

Since the abatement of the COVID-19 pandemic, we have allowed employees to return to a hybrid work setting.

Employees are continuing to follow a blended model of working onsite and remotely, and we have committed to determining the optimal mix of site-based, flexible, and fully remote work models on a department and role basis.

Driven in part by the immediate need to respond to the impact from Hurricane Ian, in the fourth quarter of 2022, we began developing a new company-wide disaster response protocol in an effort to ensure smooth execution of assistance, recovery efforts, and leadership response focused not just on operational matters, but on supporting our employees.

Community Impact

We intend for our Inclusion and Impact Council to lead efforts to ensure that we positively impact the communities in which our employees work and live, including by organizing volunteer opportunities.

Beginning in 2023, we are providing full-time employees, faculty, and staff with eight hours of additional paid time off for volunteering and giving back to society.

Beginning in 2023, we provided full-time employees, faculty, and staff with eight hours of additional paid time off for volunteering and giving back to society.

Information About our Executive Officers

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Name Age Position

Angela Selden 57 President and Chief Executive Officer, APEI

Selden 58 President and Chief Executive Officer, APEI

Sunderland, Jr., CPA 63 Executive Vice President, Chief Financial Officer, APEI

MacGibbon 60 Executive Vice President, Chief Information Officer, APEI

Tognola 52 Executive Vice President, Chief Experience Officer, APEI

Beckett 56 Senior Vice President, General Counsel and Secretary, APEI

Axenson 48 Senior Vice President, Chief Human Resources Officer, APEI

Karmela Gaffney 56 Senior Vice President, and Chief Marketing Officer

Fernandes 47 President, APUS

Javier Miyares 76 Acting President, RU

Singer 69 President and Chief Academic Officer, RU

Wilkins 67 Chief Executive Officer, HCN

Angela Selden joined us in September 2019 as President and Chief Executive Officer and a member of our Board of Directors.

Selden joined us in September 2019 as President and Chief Executive Officer and a member of our Board of Directors.

Selden had previously served as Chief Executive Officer of DIGARC, LLC, an education technology provider to higher education institutions, since October 2016.

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Prior to her role at Baird, Ms.

Selden served as Chief Executive Officer

and Executive Co-Chairman of Arise Virtual Solutions, Inc., a virtual workforce solutions outsourcer from January 2005 until August 2011.

Selden served as Chief Executive Officer and Executive Co-Chairman of Arise Virtual Solutions, Inc., a virtual workforce solutions outsourcer from January 2005 until

Earlier in her career, Ms.

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MacGibbon began his career in the US Navy, serving four years as an Avionics technician.

Tognola joined us in January 2022 as Executive Vice President and Chief Experience Officer, having previously served as the Senior Vice President, Commercial Operations, Chief Marketing Officer and Chief Operating Officer of Walden University, a subsidiary of Laureate Education Inc., from January 2017 until January 2022.

Prior to that, Mr.

Tognola served as the Vice President, Global Digital Marketing and Enrollment/Sales and then Divisional Vice President, Global Digital Marketing and Sales, of Laureate Education, Inc.

from 2011 until 2016.

Earlier, he served in a variety of marketing roles for 20x200.com, Gogo Inc., Medco Health Solutions, Prudential Financial, and AT&T.

Beckett joined us in April 2011 as Director, Legal Affairs for APUS, in January 2012 became Vice President, Legal Affairs, and since January 2016, has served as our Senior Vice President and General Counsel, and Secretary since June 2016.

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Axenson also previously held various other human capital and legal roles at Exelon/Constellation Energy, an energy provider, and served as an associate attorney at Gibson, Dunn & Crutcher LLP.

Fernandes joined APUS as President in September 2022.

Karmela Gaffney joined us in July 2023 as Acting Chief Marketing Officer before being hired for the role full-time in December 2023.

Prior to joining APEI, Ms.

Gaffney served as the Chief Marketing Officer of Academic Partnerships from 2020 to 2022 and Senior Vice President of Digital and Integrated Marketing at the same company from 2018 until 2020.

Prior to this, Ms.

Gaffney was Vice President, eCommerce and Phoenix.edu at University of Phoenix from 2015 to 2018 and was Vice President, Digital Commerce at Choice Hotels International from 2013 to 2015.

Gaffney also previously held various leadership roles at Best Western Hotels & Resorts.

Fernandes joined APUS as President in August 2022.

Prior to joining APUS, Mr.

Fernandes served at Ilumno, a company that partners with universities in Latin America to expand access to higher education throughout the region, as President and Chief Executive Officer from May 2019 to September 2022, Executive Vice President, Global Operations and Strategic Alliances from April 2018 to May 2019, Executive Vice President, Strategic Alliances from May 2017 to April 2018, Senior Vice President, Global Operations from September 2016 to May 2017, Chief Marketing and Operations Officer from September 2015 to September 2016, Senior Vice President Marketing, Enrollment and Student Services from January 2014 to September 2015 and Senior Vice President Marketing, Enrollment from January 2013 to January 2014.

Fernandes served at Ilumno, a company that partners with universities in Latin America to expand access to higher education throughout the region, as President and Chief Executive Officer from May 2019 to August 2022, Executive Vice President, Global Operations and Strategic Alliances from April 2018 to May 2019, Executive Vice President, Strategic Alliances from May 2017 to April 2018, Senior Vice President, Global Operations from September 2016 to May 2017, Chief Marketing and Operations Officer from September 2015 to September 2016, Senior Vice President Marketing, Enrollment and Student Services from January 2014 to September 2015 and Senior Vice President Marketing, Enrollment from January 2013 to January 2014.

Fernandes has also held various leadership roles at Overseas Leisure Group and Bosch.

Javier Miyares joined RU as Acting President in June 2022.

Prior to his appointment as Acting President, Mr.

Miyares served as President of University of Maryland Global Campus from 2019 to 2020.

In addition, Mr.

Miyares served in various capacities at the University of Maryland University College, including President and Acting President from 2012 to 2019, Senior Vice President for Institutional Effectiveness from 2011 to 2012 and Vice President for Planning, Research and Accountability from 2001 to 2011.

Prior to this, while at University System of Maryland, Mr.

Miyares was the Associate Vice

Chancellor for Finance and Administration from 1999 to 2001, the Assistant Vice Chancellor for Academic Affairs from 1994 to 1999, and the Director or Institutional Studies and Analysis from 1991 to 1994.

Singer joined us in April 2023 as President and Chief Academic Officer of RU and as a non-voting member of our RU Board of Directors.

Prior to joining RU, Paula spent 27 years at Laureate Education, Inc.

where she retired in January 2022 as the CEO of Laureate Online and Walden University.

During her tenure with Laureate Education, Inc.

Singer served as chairman of Walden University for 19 years.

Singer is the co-founder and principal owner of Nurture Nest Montessori School and serves as a board director at the University of Connecticut Foundation.

Wilkins rejoined us in May 2019 as the Chief Executive Officer of HCN, a position he previously held from December 2013 until his retirement in December 2015.

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Prior to serving as the Chief Financial Officer of APEI, Mr.

Wilkins had various executive roles, including serving as the Chief Financial Officer of Strayer Education, Inc., now Strategic Education, Inc.

Wilkins had various executive roles, including serving as the Chief Financial Officer, at Strayer Education, Inc., now Strategic Education, Inc.

Intellectual Property

We and our institutions own and exercise rights associated with patents, copyrights, trademarks, service marks, domain names, agreements, and registrations to protect our intellectual property.

Our institutions own all course syllabi and course and instructional materials developed by their faculty and employees and, as such, these course materials may be used by our institutions in current and future courses as needed to facilitate instruction and may be modified by our institutions to meet evolving course or curriculum requirements.

Our institutions own or license all course syllabi and course and instructional materials developed by their faculty and employees and, as such, these course materials may be used by our institutions in current and future courses as needed to facilitate instruction and may be modified by our institutions to meet evolving course or curriculum requirements.

In general, our institutions do not assert ownership claims to scholarly works of their faculty, such as articles and books, which were not developed as course materials.

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Our institutions own the copyright for a work by a faculty member where there has been express agreement on such ownership, if the institutions compensated the faculty member for the particular product, or if the institutions funded the research in whole or in part.

We or our institutions have secured or claim rights to trademarks for various names and terms used in our and their respective businesses, including rights in “American Public Education, Inc.,” “American Public University System,” “American Military University,” “American Public University,” “Rasmussen University” and others.

In connection with our acquisition of HCN, we received a royalty-free, irrevocable, exclusive, transferable, sublicensable license to use the name “Hondros College of Nursing” and, instead of “Nursing,” any other qualifier directly related to nursing, medicine, or healthcare in connection with the business and operations of HCN.

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APUS, RU, and HCN are approved to participate in TA programs administered by DoD and veterans’ education benefits programs administered by the VA and are therefore also subject to oversight by those agencies.

Regulations, standards, and policies of these agencies address the vast majority of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, and financial operations and condition .

We are also regulated in some cases other federal agencies including the Consumer Financial Protection Bureau, or CFPB, and Federal Trade Commission, or FTC.

standards, and policies of these agencies address the vast majority of our operations, including our educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, and financial operations and condition.

We are also regulated in some cases by other federal agencies including the Consumer Financial Protection Bureau, or CFPB, and Federal Trade Commission, or FTC.

The postsecondary education regulatory environment is complex and continues to evolve.

Changes in or new interpretations of law, regulations, standards, and policies could have material consequences for our institutions’ accreditation, authorization to operate in various states, permissible activities, receipt of funds under student financial assistance programs, and costs of doing business.

The postsecondary education regulatory environment has also changed and may change in the future as a result of U.S.

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APUS’s next reaffirmation of accreditation is scheduled for 2030-2031.

APUS is accredited with the Open Pathway designation, which affords institutions greater opportunity to pursue institutional improvement projects than the alternative Standard Pathway designation.

HLC’s focused visit will result in a written report addressing the topics of concern identified in the letter calling for the focused visit.

The focused visit team report will include a recommendation to accept the report or may call for additional monitoring, sanction, show-cause order, or withdrawal of accreditation.

Although APUS would have the opportunity to respond prior to any HLC action on the report, we cannot be sure that the HLC team will not identify deficiencies at APUS during the focused visit or call for negative accreditation-related action against APUS as a result.

APUS has a Standard Pathway designation, having transitioned from the Open Pathway in 2023 because of HLC’s decision to conduct a focused visit.

All institutions on the Standard Pathway must undergo a mid-cycle comprehensive evaluation.

APUS is currently scheduled for its mid-cycle comprehensive evaluation site visit in 2025.

• RU is institutionally accredited by HLC.

RU’s next comprehensive evaluation for reaffirmation of accreditation is scheduled for 2025-2026.

RU’s next comprehensive evaluation for reaffirmation of accreditation is scheduled for May 2026.

RU is accredited with the Open Pathway designation.

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Under ABHES policy, ABHES may withdraw accreditation at any time if it determines that an institution fails to demonstrate at least a 70% retention rate for each program, a 70% placement rate for each program, and a 70% pass rate on mandatory licensing and credentialing examinations or fails to meet the state-mandated results for credentialing or licensure.

Alternatively, ABHES may in its discretion provide an opportunity for a program that is not meeting ABHES’ outcomes thresholds to come into compliance within a period

of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or other good cause.

In prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’s student achievement measures, and as a result ABHES has placed certain locations and programs on outcomes reporting status and required action plans.

For the reporting year ended June 30, 2022, the PN program at the Akron, Cincinnati, Cleveland, Columbus, Dayton, and Toledo campuses, and the ADN program at the Akron campus, were below the benchmark for retention.

ABHES previously asked HCN to provide updated rates for the period July 1, 2021 through March 31, 2022 and an updated action plan to address any rate that remained below 70% in that period.

HCN expects that ABHES will require programs below benchmark to provide similar reports based on the retention rate from the period between July 1, 2022 through March 31, 2023.

The PN program at the Cincinnati, Cleveland, Columbus, and Dayton campuses were below benchmark in both 2020-2021 and 2021-2022, and in February 2023, ABHES placed the PN program at each of these campuses on program-specific warning status, which directs HCN to justify why approval of each program should not be withdrawn, which at a minimum will require HCN to demonstrate that it has developed and implemented a corrective action plan.

For more information on the risks associated with these rates and program-specific warning status, refer to the risk factor in “Risk Factors” with the caption beginning “A failure of HCN to satisfy ABHES accreditation standards...”.

Alternatively, ABHES may in its discretion provide an opportunity for a program that is not meeting ABHES’ outcomes thresholds to come into compliance within a period of time specified by ABHES, and ABHES may extend the period for achieving compliance if a program demonstrates improvement over time or for other good cause.

In prior years, several HCN programs at certain HCN campuses have failed to satisfy ABHES’s student achievement measures, and as a result ABHES has placed specific programs at certain campus locations on program-specific warning or outcomes reporting status and required action plans.

As a result of retention rates being below the 70% benchmark for 2021-2022 reporting year, which was the second consecutive full reporting year, ABHES placed the PN programs at the Cincinnati, Cleveland, Columbus, and Dayton campuses on program-specific warning status in January 2023.

Due to the Toledo PN and Akron ADN program retention rates falling below the 70% benchmark for 2021-2022 reporting year, which was the first full reporting year, ABHES imposed additional reporting requirements for these programs.

As a result of failing to meet the threshold benchmark, ABHES required HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2022-2023 reporting year by May 2023.

The reports submitted in response to this requirement demonstrated that the PN program at the Cincinnati, Cleveland, Columbus, and Dayton campuses and the ADN program at the Akron campus were above the 70% retention benchmark through the first three quarters of the 2022-2023 reporting year.

As a result, the Cincinnati, Cleveland, Columbus, and Dayton PN programs were removed from program-specific warning status, and ABHES informed HCN that no additional information was required for the ADN program at the Akron campus.

However, HCN reported that the retention rate for the PN program at the Toledo campus was below the 70% benchmark through the first three quarters of the 2022-2023 reporting year.

Consequently, the Toledo PN program was placed on outcomes reporting status, and required to provide an additional report and action plan in October 2023, which HCN submitted.

For the reporting year ended June 30, 2023, the PN program at the Cleveland, Columbus, Dayton, and Toledo campuses, as well as the ADN program at the Akron and Dayton campuses, were below the 70% benchmark for retention.

As a result, ABHES has continued the Toledo PN program on outcomes reporting status, due to its retention rate falling below the 70% benchmark.

ABHES is also requiring additional reporting for the Cleveland PN, Columbus PN, Dayton PN, Dayton ADN, and Akron ADN programs.

In conjunction with these actions, ABHES is requiring HCN to submit reports for each of these programs demonstrating their retention rate through the first three quarters of the 2023-2024 reporting year by May 2024.

If the Cleveland PN, Columbus PN, Dayton PN, Dayton ADN, and Akron ADN programs do not meet the 70% retention benchmark by the third quarter of the 2023-2024 reporting year, ABHES will likely place these programs on outcomes reporting status.

If the Toledo PN program does not meet the 70% retention benchmark by the third quarter of the 2023-2024 reporting year, ABHES will likely place the program on program-specific warning status.

For more information on the risks associated with these rates, refer to the risk factor in “Risk Factors” with the caption beginning “A failure of HCN to satisfy ABHES accreditation standards...”.

• GSUSA is institutionally accredited by ACCET.

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In addition to institutional accreditation, our institutions have obtained programmatic accreditation or professional recognition for certain programs, as described more fully above in “Our Institutions and Operations – Our Institutions – Academics – Accreditation”.

Among other standards and requirements, programmatic accreditors may utilize benchmarks for student outcomes in the programs they accredit and may require the institution to address outcomes that fail to satisfy those benchmarks or may take other action based on such matters.

Among other standards and requirements, programmatic accreditors may utilize benchmarks for

student outcomes in the programs they accredit and may require the institution to address outcomes that fail to satisfy those benchmarks or may take other action based on such matters.

If one of our institutions fails to satisfy the standards of these programmatic accrediting agencies or professional organizations for the relevant programs, the institutions could be subject to restrictions or could lose the programmatic accreditation or professional recognition for those programs, which could result in materially reduced student enrollments, prevent the institution from offering the programs in certain states where programmatic accreditation is required, or prevent our students from seeking and obtaining licensure or employment.

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The current candidacy is set to expire in July 2024.

In September 2021, ACEN granted RU’s ADN program in Bloomington, Minnesota continued accreditation with conditions, and in September 2022, ACEN granted RU’s ADN and PN programs in Moorhead, Minnesota and RU’s ADN program in Overland Park, Kansas continued accreditation with conditions, in each case because the program experienced first-time NCLEX pass rates below ACEN’s required threshold.

As further discussed in “State Authorization/Licensure – State Authorization/Licensure of Our Institutions” below, recently enacted legislation has resulted in the removal of all Illinois nursing programs, including RU’s Illinois ADN program, from probationary status for a period of three years.

However, there were several bills introduced in the Illinois legislature in February 2024 seeking to modify this change in legislation.

Furthermore, there can be no assurance that the removal from probationary status of RU’s Illinois ADN program will be viewed favorably by ACEN or another nursing program accreditor or would result in RU’s Illinois ADN program obtaining ACEN accreditation following the February 2024 site visit.

RU’s Bloomington, Minnesota ADN program has been subject to adverse action and heightened scrutiny from ACEN, which is its programmatic accreditor, and other regulators as a result of continued failure to meet applicable accreditor and regulatory requirements.

As more fully discussed in the Risk Factor with the caption beginning “RU’s planned closure of its Bloomington, Minnesota ADN program…” in December 2023, RU informed the Minnesota Board of Nursing, or MBN, that it intends to voluntarily close the Bloomington, Minnesota ADN program on June 15, 2024.

The MBN voted to approve the voluntary closure of the Bloomington, Minnesota ADN program at its February 1, 2024 meeting.

Due to previous self-imposed enrollment caps and the pause on new enrollments, enrollment in this program currently represents less than 2% of RU’s current total enrollment.

For all students enrolled in the Bloomington, Minnesota ADN program graduating after June 2024, their enrollment record will be transferred to RU’s St.

Cloud, Minnesota ADN program.

However, there can be no assurance that any or all remaining students in the program will transfer to the St.

Cloud campus.

In September 2022, ACEN granted RU’s ADN and PN programs in Moorhead, Minnesota and RU’s ADN program in Overland Park, Kansas continued accreditation with conditions, in each case because the program experienced first-time NCLEX pass rates below ACEN’s required threshold.

For the two Moorhead, Minnesota programs, ACEN also identified evidence of noncompliance with respect to analysis and use of assessment data in program decision-making.

The ADN programs have two years, and the PN program has 18 months, from the date the conditions were imposed, to demonstrate compliance with all criteria related to the standard for which the programs were found to be in noncompliance.

If compliance is not achieved by the end of the monitoring period, ACEN may determine to deny continuing accreditation absent good cause.

If compliance is not achieved by the end of the monitoring period, ACEN may deny continuing accreditation absent good cause.

In February 2024, RU’s Moorhead, Minnesota PN program submitted to ACEN a follow-up report and an application for continuing accreditation for good cause.

If ACEN determines areas of non-compliance remain, ACEN could withdraw the PN program’s accreditation or grant it continuing accreditation for good cause.

RU’s Moorhead, Minnesota PN program is currently approved with the MBN, but first-time NCLEX pass rates have been below the standard for three consecutive years.

RU expects that the MBN will place RU’s Moorhead, Minnesota PN program on conditional approval status and issue a corrective action order following the MBN’s April 2024 Board meeting.

State Authorization/Licensure

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The growth of online education has led and may further lead to new laws and regulations and new interpretations of existing laws and regulations.

New laws, regulations, or interpretations, including with respect to whether our institutions’ activities constitute a physical presence or otherwise may require authorization or licensure, could increase our cost of doing business and affect our ability to recruit students in particular states, which could negatively affect enrollments and revenue and have a material adverse effect on our business.

New laws, regulations, or

interpretations, including with respect to whether our institutions’ activities constitute a physical presence or otherwise may require authorization or licensure, could increase our cost of doing business and affect our ability to recruit students in particular states, which could negatively affect enrollments and revenue and have a material adverse effect on our business.

Changes in our business activities could lead states that do not currently require our institutions to be authorized to require such authorization.

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If ED determines that an institution does not have the required state approval, the institution will be ineligible to participate in Title IV programs.

If one of our institutions were to lose its ability to participate in Title IV programs in connection with “home” state authorization requirements, it would also lose its ability to participate in TA and VA, be unable to operate in the state and grant credentials, and lose institutional accreditation.

If one of our institutions were to lose its ability to participate in Title IV programs in connection with home state authorization requirements, it would also lose its ability to participate in TA and VA, be unable to operate in the state, grant credentials, and lose institutional accreditation.

State Authorization of Online Education

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ED regulations also now specify the required methodology for determining the state in which a student is located for purposes of satisfying state authorization requirements for distance education courses and require an institution to disclose certain information related to whether programs leading to professional licensure meet applicable state requirements, regardless of program modality.

State Authorization and Professional Licensure

Beginning July 1, 2024, new ED regulations will require institutions that offer postsecondary education programs leading to employment in an occupation that requires licensure or certification to meet certain additional requirements in order for those programs to maintain eligibility to participate in Title IV programs.

In each state in which the institution is located, in which students enrolled in distance education are located, or where a student enrolled after July 1, 2024 attests that they intend to seek employment, the program must:

(1) meet all applicable federal or state agency accreditation or pre-accreditation requirements, including as a condition of employment in the occupation for which the program prepares the students;

(2) satisfy the applicable state education requirements for professional licensure or certification so that a student seeking employment may qualify to take any licensure or certification exam needed to practice or find employment in the state;

and (3) comply with all applicable state laws related to closure.

State Authorization/Licensure of Our Institutions

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APUS also has obtained authorization to operate in California, which is the only state that is a non-SARA jurisdiction.

Until June 30, 2021, APUS was also required to be certified by the State Council of Higher Education for Virginia, or SCHEV, because it had administrative offices in Manassas, Virginia.

However, effective May 31, 2021, APUS terminated its lease for administrative offices in Virginia, and APUS therefore did not renew its certification its SCHEV certification before it expired on June 30, 2021.

RU is headquartered in Bloomington, Minnesota, and has 22 campuses across Florida, Illinois, Kansas, Minnesota, North Dakota, and Wisconsin.

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In addition, the nursing education programs offered by RU and HCN are approved by the relevant state boards of nursing.

RU and HCN participate in SARA.

To maintain regulatory approval from the state board of nursing or equivalent body in the states that we operate, an educational program must maintain a certain pass rate, as defined by the state, of first-time test takers of the NCLEX.

RU and HCN participate in SARA and RU has also obtained authorization to operate in California, which is the only state that is a non-SARA jurisdiction.

HCN does not offer online programs in California.

To maintain regulatory approval from the state board of nursing or equivalent body in the states that we operate, an educational program must maintain a certain pass rate on the relevant licensure exam, as defined by the state.

If a program does not attain this pass rate, the program may face various consequences, including development and implementation of a plan of corrective action, issuance of a corrective order, or revocation of approval pursuant to an adjudication proceeding.

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In addition, if the program’s pass rate is lower than one standard deviation below the average national pass rate for three consecutive years, the program may be subject to additional oversight or a change in accreditation status.

In recent years, a number of programs at certain RU campuses or in certain states, including its Bloomington, Minnesota, Illinois, Kansas, and Fort Myers, Florida ADN programs and its Moorhead, Minnesota PN program, as well as HCN’s Ohio ADN program, have not met state-established first-time NCLEX benchmarks for consecutive years.

A number of programs at certain RU campuses and in certain states, including its Bloomington and Moorhead, Minnesota, Fort Myers, Florida, Ocala, Florida, Tampa/Brandon, Florida, and Illinois and Kansas ADN programs and its Moorhead, Minnesota PN program, as well as HCN’s Ohio ADN program, have not met state-established first-time NCLEX benchmarks for consecutive years.

We believe that low pass rates may be the result of a number of factors, including, without limitation, the academic preparedness of our students, curriculum gaps, changes in the mode of course delivery including the use of virtual courses, testing failures and inconsistencies, imbalances in enrollment and resources, and changes in admission standards.

As a result of the Bloomington program’s pass rates, the Minnesota Board of Nursing, or MBN, conducted a survey of the program and found that RU had not complied with certain MBN rules.

In August 2022, RU entered into a stipulation and consent stemming from the survey findings that requires the program to comply with the established first-time NCLEX pass rate by the end of 2023, maintain a specified student to faculty ratio in 2023, comply with MBN rules, and provide the MBN with quarterly status reports in 2023, with a potential penalty for non-compliance up to and including withdrawal of approval of the program.

In addition, as a result of the order, the Minnesota Office of Higher Education, or MOHE, has informed RU of certain expectations it has with respect to the ADN program, including that RU must identify a clinical site for each student that is no more than 50 miles from the student’s home and must establish pathways for students to continue their education at a non-RU campus if the ADN program loses MBN approval.

RU also fulfilled two information and documentation requests to MOHE in the Fall 2022 academic term and must continuously provide to MOHE NCLEX scores and copies of any reports submitted to MBN or ACEN as they become available.

In February 2022, RU’s Illinois ADN program was placed on probationary status by the IDFPR as a result of which RU is required to temporarily reduce admitted students in the program by 25% and has two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate.

If after two years the pass rate does not satisfy the required standard, the program will be reevaluated by the IDFPR for a determination as to whether the program will be allowed to continue on probation or whether it should be disapproved.

An Illinois statute also requires nursing programs to have achieved accreditation by the end of 2022 in order to meet state approval requirements.

For more information, please refer to the Risk Factor that begins with the caption “Failure to improve certain of our programs’ NCLEX pass rates...”

A stipulation and consent order with the MBN required RU’s Bloomington, Minnesota ADN program to, among other things, reach applicable NCLEX pass rate standards by the end of 2023 and maintain a specified student to faculty ratio in 2023, with a potential penalty up to and including withdrawal of program approval.

The Bloomington, Minnesota ADN program did not reach the applicable NCLEX pass rates by the end of 2023.

As a result, on December 29, 2023, RU informed the MBN that it intended to voluntarily close the Bloomington, Minnesota ADN program on June 15, 2024.

The MBN approved the voluntary closure of the Bloomington, Minnesota ADN program at its February 1, 2024 meeting.

For all students enrolled in the Bloomington, Minnesota ADN program graduating after June 2024, their enrollment record will be transferred to RU’s St.

Cloud, Minnesota ADN.

However, there can be no assurance that any or all remaining students in the program will transfer to the St.

Cloud campus.

In February 2022, RU’s Illinois ADN program was placed on probationary status by the IDFPR.

Therefore, RU is required to temporarily reduce admitted students in the program by 25% and has two years to demonstrate evidence of implementing strategies to correct deficiencies and satisfy the required NCLEX pass rate.

The requirement provided that after two years if the pass rate does not satisfy the required standard, the program will be reevaluated by the IDFPR for a determination as to whether the program will be allowed to continue on probation or whether it should be disapproved.

An Illinois statute also required nursing programs to have achieved accreditation by the end of 2022 in order to meet state approval requirements.

RU’s Illinois ADN program is currently in candidacy status with ACEN and was deemed by IDFPR to meet the state’s accreditation requirement based on such candidacy status, but actual accreditation has not yet been granted.

The current candidacy status is set to expire in July 2024.

Although the IDFPR has indicated that candidacy status satisfies this requirement, the IDFPR could change its position.

See also “Accreditation – Programmatic Accreditation and Professional Recognition” above.

The State of Illinois enacted legislation in August 2023, which took effect on January 1, 2024, that we believe could positively impact RU’s Illinois ADN program by providing the program with additional time to improve NCLEX pass rates.

The legislation changed the Illinois NCLEX pass rate requirements from a one-year measurement based on first attempts only to a three-year average that includes all test attempts and temporarily removed all nursing programs, including RU’s Illinois ADN program, from probationary status for a period of three years.

The IDFPR’s Board of Nursing now publicly lists RU as approved with no reference to probation.

However, there can be no assurance that the IDFPR’s Board of Nursing will not seek to impose different or additional requirements in connection with this change in legislation or that additional legislation will not be enacted that imposes new requirements that are more restrictive than what is currently in place.

Furthermore, there can be no assurance that the resulting removal from probationary status of RU’s Illinois ADN program may be viewed favorably by ACEN or another nursing program accreditor and may result in RU’s Illinois ADN program obtaining ACEN accreditation following a site visit in February 2024.

Kansas regulations were amended, effective January 2022, to increase the threshold first-time pass rate to 80% and change corrective actions for noncompliance.

In April 2022, RU’s Kansas ADN program was issued a notice of concern by the Kansas Board of Nursing, or KBN, requiring RU to submit to the KBN a plan of action to improve its NCLEX pass rates.

The Kansas ADN program has until April 2024 to increase its NCLEX pass rate to the regulatory standard.

Kansas regulations were amended effective January 2022 to increase threshold pass rates and change corrective actions for noncompliance.

The Kansas ADN program experienced pass rates below the amended threshold in 2022.

It is unknown which corrective action standards the KBN may apply, but under the amended standards it could take action up to directing the program to cease admissions.

RU’s Kansas ADN program’s first-time pass rate exceeded the threshold pass rate for 2023.

In February 2023, the Florida Board of Nursing, or FBN, placed RU’s Fort Myers, Florida ADN program on probation until its pass rate reaches the applicable threshold for a calendar year.

RU is required to disclose this status to active and prospective students.

If the program fails to achieve the required NCLEX pass rate within two years following placement on probation, FBN may extend the program’s status for a year, provided demonstrated progress.

If the program fails to achieve the required NCLEX pass rate within two years following placement on probation, FBN may extend the program’s status for a year if the program is demonstrating progress toward achievement.

However, absent further extension or achievement of the required rate by the end of the extension, Florida law provides that FBN shall terminate the program.

HCN’s ADN program has been on provisional approval status in Ohio since March 2017 due to not meeting the first-time pass rate standard for four consecutive years.

In February 2024, FBN also placed RU’s Ocala, Florida and Tampa/Brandon, Florida ADN programs on probation – a status that must be disclosed to active and prospective students – until the programs’ pass rates reach the applicable threshold for a calendar year.

RU was required to present an action plan to FBN on February 7, 2024, detailing benchmarks to measure progress toward achieving the required NCLEX pass rate.

In January 2024, legislation that would significantly overhaul the regulation of Florida nursing programs in ways that could materially adversely impact RU’s Florida ADN and PN programs was introduced in the Florida senate, but at this time there can be no assurance that the legislation will be enacted as drafted or at all.

Rasmussen University had its annual review in January 2024, with the Florida Commission for Independent Education, or FCIE, where it waived a decision.

Rasmussen is expected to appear on the May 2024, agenda where FCIE will review Florida campus NCLEX scores and campus income statements.

Based on FCIE review, the FCIE may place Rasmussen on a provisional license due to recent NCLEX pass rates and campus income statements.

If placed on provisional status, the Florida program would have one year to increase its NCLEX scores as well as improve its financials.

If Rasmussen is unable to improve NCLEX scores and financials over time, this situation could have an adverse impact on their ability to enroll students and eventually our ability to continue offering our programs in Florida.

HCN’s ADN program has been on provisional approval status in Ohio since March 2017 due to not meeting the first-time pass rate standard for five consecutive years.

The Ohio Board of Nursing, or OBN, will consider restoring a program to full approval status if the program meets the first-time pass rate standard for at least two consecutive years.

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Additionally, HCN will host a site visit from OBN in 2024 after which OBN may reconsider the provisional approval status.

If a program on provisional approval fails to meet OBN requirements at the end of the time period established for provisional approval, OBN may propose to continue provisional approval for a set time period or may propose to withdraw approval.

RU and HCN have been implementing changes to their instruction of the ADN program, including programmatic certification improvement plans at RU and curriculum, admissions, and academic achievement and course retake policy changes at HCN, in order to help prepare students and graduates for successful performance on the NCLEX.

If a program on provisional approval fails to meet OBN requirements at the end of the time period established for provisional approval, in this case as of June 2024, OBN may propose to continue provisional approval for a set time period or may propose to withdraw approval.

RU and HCN have been implementing changes to their ADN programs, including programmatic certification improvement plans at RU, and curriculum, academic achievement, and course retake policy changes at HCN, in order to help prepare students and graduates for successful performance on the NCLEX exam.

However, there is no assurance that these changes will be successful in the required time periods or will not have negative effects on RU’s or HCN’s enrollment.

If RU and HCN are unable to improve NCLEX scores over time, and in some cases by the deadlines imposed on their programs at certain campuses and in certain states as discussed above, this situation could have an adverse impact on their ability to enroll students and eventually our ability to continue offering the ADN programs associated with the applicable campuses.

Failure to comply with state authorization or licensure requirements has impacted and could in the future restrict our institutions’ ability to recruit or enroll students or result in other sanctions, including fines and penalties.

New laws, regulations, interpretations, or changed circumstances related to our institutions’ educational programs could increase our cost of doing business and affect our ability to recruit students and offer programs in particular states, which could, in turn, adversely affect our institutions’ enrollments and revenue and have a material effect on our business.

our institutions’ enrollments and revenue and have a material effect on our business.

Additional information regarding the current impacts and potential risks associated with our NCLEX pass rates is provided in the “Risk Factors” section of this Annual Report.

Student Financing Sources and Related Regulations/Requirements

Our students finance their education through a combination of Title IV programs, TA, education benefits administered by the VA, private loans, corporate reimbursement programs, individual resources, and institutional grants, and in the case of RU and HCN, an extended payment plan option.

Participation in federal student aid programs, including those administered by the DoD and VA, and the extended payment plan option at RU and HCN, adds to the regulation of our operations.

In particular, the Higher Education Act of 1964, as amended, or the HEA, and related ED regulations subject us to significant scrutiny in the form of numerous standards we must satisfy in order to participate in and administer Title IV programs.

Participation in federal student aid programs, including those administered by the DoD and VA, and the extended payment plan option at HCN, adds to the regulation of our operations.

Department of Education

The Higher Education Act of 1965, as amended, or the HEA, and related ED regulations subject us to significant scrutiny in the form of numerous standards we must satisfy in order to participate in and administer Title IV programs.

The federal government provides support for postsecondary education through the Title IV programs in the form of grants and loans to eligible students who can use those funds to enroll in an eligible educational program at any institution that has been certified by ED.

An institution will be certified to participate in the Title IV programs only if, among other things, it enters into a written program participation agreement, or PPA, with ED, which conditions participation in Title IV programs upon compliance with ED regulations and any additional conditions specified in the PPA.

ED recently released a final rule modifying and expanding the current financial responsibility, administrative capability, and certification regulations, which takes effect July 1, 2024.

Under the modified regulations, institutions will be required to meet additional financial responsibility criteria and must report certain “financial responsibility” events to ED.

Such events include certain mandatory and discretionary triggers that capture financial circumstances that may not be reflected in an institution’s financial statements, including instances where an institution faces a potential loss of Title IV funding.

Under the new rule, if ED determines that an institution has 90/10 Rule violations, high borrower default rates, or certain pending legal and administrative actions, it will require the institution to post “financial protection”, such as a letter of credit.

ED may also require the institution to post financial protection if it determines that certain discretionary triggers may have an adverse effect on the financial condition of the institution, such as pending accrediting agency or government agency actions, high annual dropout rates, or pending borrower defense claims.

If ED requires financial protection as a result of more than one mandatory or discretionary trigger, ED will require separate financial protection for each individual trigger.

In addition to financial protection, ED may require institutions that fail to meet these financial responsibility criteria to participate in Title IV programs under a provisional certification.

ED may also impose additional requirements on the institution’s participation in Title IV programs, such as restrictions on enrollment, addition of new programs, or acquisitions.

Higher Education Act

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Congress previously considered comprehensive legislation to reauthorize the HEA, including proposals from Republicans and Democrats, referred to as the Student Aid Improvement Act and the College Affordability Act, respectively, and Congress could consider such legislation again in the future.

We cannot predict whether, in what form, or when, the two houses of Congress will reauthorize the HEA or whether, or when, the President will sign reauthorization legislation.

Amendments to the HEA could occur as part of reauthorization, which could require us to modify our business practices and increase administrative costs, thereby negatively impacting our results of operations.

We cannot predict whether, in what form, or when, HEA reauthorization legislation will be enacted.

Modifications to the HEA could occur as part of reauthorization, which could require us to modify our business practices and increase administrative costs, thereby negatively impacting our results of operations.

Types of Title IV Financial Aid Programs .

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The Title IV programs are subject to Congressional action in terms of appropriations and other legislation that may affect funding levels, student eligibility, and other requirements.

For example, the Pell Grant program could be subject to cuts or changes in the future, and cuts in ED’s administrative budget could lead to delays in student eligibility determinations and delays in origination and processing of federal student loans.

For example, the Pell Grant program could be subject to cuts or

changes in the future, and cuts in ED’s administrative budget could lead to delays in student eligibility determinations and delays in origination and processing of federal student loans.

Regulation of Title IV Financial Aid Programs

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An institution may come under review when it expands its activities in certain ways, such as opening an additional location, adding a new program, or, in certain cases, when it modifies academic credentials that it offers.

New ED regulations, effective July 1, 2024, will implement supplementary performance measures that ED will consider when determining whether to certify or condition an institution’s participation in Title IV programs.

Among other requirements, ED may consider amounts spent on instruction and instructional activities, academic support, and support services, compared to the amounts spent on recruiting activities, advertising, and other pre-enrollment expenditures.

In addition, if a program is designed to meet educational requirements for a specific professional license or certification that is required for employment in an occupation, and the institution is required by an accrediting agency or state to report passage rates for the licensure exam for the program, ED may consider such passage rates.

ED may place an institution on provisional certification status if ED finds that the institution does not fully satisfy all Title IV requirements and in certain other circumstances, such as when an institution undergoes a change in ownership resulting in a change of control.

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In June 2020, APUS timely applied for recertification to participate in Title IV programs.

ED subsequently notified APUS that it had completed its review of APUS’s application and had granted APUS provisional certification until June 30, 2023.

APUS must apply for recertification by March 31, 2023.

ED issued APUS a provisional program participation agreement, or PPPA, outlining the terms of provisional certification.

As described in the PPPA, ED granted approval on a provisional basis because APUS was subject to an open program review at the time of renewal.

ED subsequently notified APUS that it had completed its review of APUS’s application and had granted APUS provisional certification until June 30, 2023, because APUS was subject to an open program review at the time of renewal.

That program review was closed in January 2021 with no findings, penalties, or further action required.

In July 2021, ED notified RU that in connection with RU’s March 2019 change in ownership that preceded our acquisition of RU, ED was imposing certain temporary growth restrictions on the institution, including imposing limitations on new programs and locations and imposing a cap on the number of students that participate in Title IV programs that can be enrolled.

ED also continued to require RU to submit periodic financial and Title IV enrollment reports, a requirement first imposed in connection with the financial responsibility letter of credit described below.

In September 2021, RU submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership.

ED and RU entered into a Temporary Provisional Program Participation Agreement, or TPPPA, effective as of October 14, 2021, that allows RU to continue disbursing Title IV funds while ED reviews the change in ownership application.

The TPPPA continues the growth restrictions that ED imposed as a result of the March 2019 change in ownership, including the enrollment cap.

The TPPPA specifies that after ED reviews and accepts financial statements and compliance audits for one complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU may seek removal of the enrollment cap and approval for new programs that replace current programs.

The TPPPA also specifies that at least until after ED reviews and accepts financial statements and compliance audits that cover the second complete fiscal year of RU’s Title IV participation under our ownership, RU must seek pre-approval for new locations, new programs that are not replacing current programs, and other changes.

The growth restrictions under the TPPPA could limit or adversely affect RU’s growth opportunities, including restricting its ability to serve additional students, particularly additional nursing students, and limiting its ability to continue to evolve to address current needs by providing new or changed programs.

APUS applied for recertification in March 2023.

APUS’s recertification application is still pending, and APUS remains on provisional certification with ED .

In July 2023, ED began a program review of APUS’s administration of Title IV programs during the 2021-2022 and 2022-2023 award years, which includes, among other things, a review of compliance with the 90/10 Rule.

APUS has not yet received a program review report from ED.

Accordingly, at this time, we cannot predict the outcome of the APUS program review, when it will be completed, whether there will be any adverse findings in the resulting program review report, what findings there may be related to 90/10 Rule compliance, if any, or whether ED will place any liability or other limitations on APUS as a result of the review.

In July 2021, in connection with RU’s March 2019 change in ownership that preceded our acquisition of RU, ED imposed certain temporary growth restrictions on RU, including limitations on new programs and locations and a cap on enrollments of students who participate in Title IV programs.

Additionally, ED required RU to submit periodic financial and enrollment reports and a financial responsibility letter of credit.

In connection with the Rasmussen Acquisition, RU timely submitted a change in ownership and control application to ED seeking approval to participate in the Title IV programs under our ownership and, effective October 2021, ED and RU entered into a Temporary Provisional Program Participation Agreement, or TPPPA, that allowed RU to continue disbursing Title IV funds while ED reviewed the change in ownership application.

The TPPPA continued the restrictions that ED imposed as a result of the March 2019 change in ownership.

August 2023, ED notified RU that it had approved RU’s continued participation in the Title IV programs under APEI ownership under a Provisional Program Participation Agreement, or PPPA.

The PPPA continues to impose certain growth restrictions on RU that were included in the TPPPA, including limitations on new programs and locations and the enrollment of students that participate in Title IV programs.

ED continues the prior requirement that RU submit periodic financial and Title IV enrollment reports.

The PPPA also imposes new reporting requirements related to accrediting agency actions, government actions, class actions, and student complaints.

The PPPA specifies that after ED reviews and accepts financial statements and compliance audits for one complete fiscal year of RU’s Title IV participation under APEI’s ownership, RU may seek approval for new programs that replace current programs.

Although one complete fiscal year of RU’s Title IV participation under APEI’s ownership has passed, and we believe that we may now seek approval for new programs that replace current programs, we have not yet confirmed with ED that it has accepted the financial statements and compliance audits for such purpose.

The PPPA also specifies that after ED reviews and accepts financial statements and compliance audits that cover the second complete fiscal year of RU’s Title IV participation under our ownership, RU must seek pre-approval for new locations, new programs that are not replacing current programs, and other changes.

For the second and third fiscal years, RU is also subject to enrollment growth limitations, after which RU can request ED that release RU from further enrollment restrictions.

The PPPA no longer requires RU to post the financial responsibility letter of credit that ED had imposed based on the 2019 change in ownership and control of RU, although this letter of credit has not yet been released.

We believe we have met all obligations for the release of the letter of credit.

In June 2021, HCN timely applied for recertification to participate in Title IV programs.

ED subsequently notified HCN that it had been granted provisional certification until September 30, 2023.

HCN must apply for recertification by June 30, 2023.

As described in the PPPA, ED granted approval on a provisional basis because HCN was subject to an open program review at the time of recertification.

As described in “Compliance with Regulatory Standards and Effect of Regulatory Violations – Compliance Reviews”, in July 2022, HCN received a final program review determination from ED, and in September 2022, ED notified HCN that it had closed the program review and no further action was required.

ED subsequently notified HCN that it had been granted Provisional Certification for all Title IV programs until September 30, 2023.

ED granted approval on a Provisional basis because HCN was subject to an open program review at the time of recertification.

As described in “Compliance with Regulatory Standards and Effect of Regulatory Violations – Compliance Reviews,” in July 2022, HCN received a final program review determination from ED, and in September 2022, ED notified HCN that it had closed the program review and no further action was required though the provisional designation remained.

In June 2023, HCN again timely applied for recertification.

ED subsequently notified HCN that it had been granted non-provisional participation in all Title IV programs effective August 15, 2023 and expiring June 30, 2026.

Co-Signature Requirements.

A participating institution must sign a Program Participation Agreement with ED as a condition to participation in Title IV programs.

New regulations, effective July 1, 2024, codify a current ED policy requiring signatures from corporations or other legal entities that have, or could have, a direct or indirect effect on the institution’s financial responsibility.

Under the new regulations, entities with a direct or indirect ownership interest and the power to exercise control over the institution must co-sign the Program Participation Agreement.

Co-signers agree that they are jointly and severally liable for the participating institution’s Title IV liabilities.

Administrative Capability.

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These criteria relate to, among other things, institutional staffing, operational standards such as procedures for disbursing and safeguarding Title IV program funds, timely submission of accurate reports to ED, referring to ED’s Office of Inspector General, or ED OIG, credible information that a student or employees with Title IV responsibilities may have engaged in fraud or illegal conduct in connection with Title IV program administration, and various other procedural matters.

As described above, due to new regulations, effective July 1, 2024, ED may find that an institution has failed the administrative capability requirements if the institution does not provide adequate financial aid counseling or career services, has been subject to a negative action by a state or federal agency, court, or accreditor, fails to verify high school diplomas, or does not timely place students in geographically accessible clinical or externship opportunities.

If an institution fails to satisfy any of the administrative capability requirements, ED may require the repayment of Title IV program funds, transfer the institution from the “advance” system of payment of Title IV program funds to heightened cash monitoring status, or to the “reimbursement” method of payment, place the institution on provisional certification status, or commence a proceeding to impose a fine or to limit, suspend, or terminate the participation of the institution in Title IV programs.

Financial Responsibility.

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and (3) net income ratio (which measures the institution’s profitability or ability to operate within its means).

Generally, an institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible.

A composite score between 1.0 and 1.4 is considered by ED to be in the “zone”, and the “zone alternative” permits institutions to demonstrate financial responsibility by meeting specific monitoring requirements.

Generally, an institution’s financial ratios must yield a

composite score of at least 1.5 for the institution to be deemed financially responsible.

A composite score between 1.0 and 1.4 is considered by ED to be in the “zone.” An institution in the “zone” may still participate in the Title IV programs as a financially responsible institution through the “zone alternative” or the “financial protection alternative” as set forth in ED regulations.

Under the zone alternative, an institution:

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and must provide timely information to ED regarding certain oversight and financial events.

As of September 30, 2020, prior to the Rasmussen Acquisition, RU had a composite score equal to 1.4.

RU elected to post a letter of credit with ED totaling $23.1 million, which represents 10% of the Title IV program funds received by RU during its most recently completed fiscal year.

Upon the closing of the Rasmussen Acquisition, APEI was required to fund this letter of credit using a restricted deposit account that required a deposit of 105%, or $24.2 million, to secure the RU letter of credit.

Under the TPPPA for RU described above, a letter of credit will continue to be required at least until ED reviews and accepts financial statements and compliance audits that cover one complete fiscal year of RU’s Title IV participation under APEI’s ownership.

Additionally, RU is required to make Title IV disbursements to eligible students and parents under the

heightened cash monitoring payment method, or HCM1.

Under HCM1, RU must first make Title IV disbursements to eligible students and parents and pay any credit balances before the institution requests or receives funds for the amount of those disbursements from ED.

Under the financial protection alternative, the institution must provide financial protection of at least 50% of the Title IV funding that it received during its most recently completed fiscal year.

ED may also apply the financial responsibility standards to other entities under common ownership with an eligible institution.

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Because ED does not review each of our institution’s financial statements separately, a determination by ED that our consolidated financial statements do not satisfy the “financial responsibility” requirements could cause all of our institutions to lose access to Title IV program funding or result in other penalties or conditions on continued participation.

In September 2019, ED published amendments to its financial responsibility standards that took effect July 1, 2020.

Although our consolidated composite score is expected to be above 1.5 at our next financial responsibility test, there is no assurance that it will remain at 1.5 or above in the future or that if it falls in the “zone” in the future that we will be able to demonstrate financial responsibility.

On March 4, 2024, ED notified us that in calculating our composite score for the fiscal year-ended December 31, 2022, it excluded our deferred tax assets from its calculation of our assets.

As a result, ED calculated that we had a 2022 consolidated composite score of 1.1 and our institutions were therefore in the “zone.” We disagree with ED’s calculation and conclusion and intend to submit a timely response to ED supporting our position that our deferred tax assets should not be excluded from the calculation and that our composite score was above 1.5 for the year-ended December 31, 2022.

However, there can be no assurance that ED will agree with our position.

If ED does not accept our position, we intend to comply with the zone alternative requirements.

Under the zone alternative requirements, we would be required to:

(i) make Title IV disbursements to eligible students and parents under the heightened cash monitoring payment method, or HCM1, pursuant to which we would be required to first make disbursements to eligible students and parents and pay any credit balances before we request or receive funds from ED for the amount of those disbursements;

(ii) notify ED of certain events, such as an adverse action taken by any of our institution’s accreditors or state authorizing agencies;

(iii) provide regular reports to ED relating to our institution’s current operations and future plans;

and (iv) require our auditors to express an opinion on our compliance with the requirements under the zone alternative.

Institutions with composite scores below 1.5 do not qualify for approval from SARA unless, in the case of scores above 1.0, the home state exercises its discretion to consider additional financial information.

Eligibility for SARA is determined separately for each of our institutions by the SARA portal agency in the institution’s home state.

If the respective SARA portal agency for APUS, RU, or HCN were not to renew the institution’s approval due to a low composite score, we would need to obtain approval or exemptions in states in which the affected institution offers distance education programs or discontinue the affected institution’s offerings to students in such states.

In addition, some states have adopted financial standards that are similar to ED’s composite score, which means an affected institution may be unable to obtain licensure in that state if it were to lose SARA participation.

And, because composite scores are viewed as a measure of financial responsibility, other regulators or accreditors could consider a composite score that is in “zone” negatively, which could have an impact on their interactions with us and what they permit us to do.

As of September 30, 2020, prior to the Rasmussen Acquisition, RU had a composite score equal to 1.4.

RU elected to post a letter of credit with ED totaling $23.1 million, which represented 10% of the Title IV program funds received by RU during its then most recently completed fiscal year.

Upon the closing of the Rasmussen Acquisition, RU was required to fund this letter of credit using a restricted deposit account that required a deposit of 105%, or $24.2 million, to secure the RU letter of credit.

Under the TPPPA for RU described above, ED continued to require a letter of credit at least until ED reviews and accepts financial statements and compliance audits that cover one complete fiscal year of RU’s Title IV participation under APEI’s ownership.

We believe we have met all obligations for the release of the letter of credit, but we understand from communications with ED that financial statements for the year ended December 31, 2022 remain under review by ED.

Additionally, RU continues to be required to make Title IV disbursements to eligible students and parents under HCM1.

In September 2019, ED published modifications to its financial responsibility standards that took effect July 1, 2020.

We refer to these regulations as the 2019 Borrower Defense Regulations.

The 2019 Borrower Defense Regulations identify certain conditions or other triggering events that have or may have an adverse material effect on the institution’s financial condition, in response to which ED would or could require that the institution submit some form of financial protection, such as a letter of credit, to ED.

The 2019 Borrower Defense Regulations identify

certain conditions or other triggering events that have or may have an adverse material effect on the institution’s financial condition, in response to which ED would or could require that the institution submit some form of financial protection, such as a letter of credit, to ED.

Triggering events are characterized as either mandatory or discretionary.

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ED may consider an institution not to be financially responsible if an institution experiences a discretionary triggering event.

If the institution is subject to two or more of these discretionary triggering events, ED will consider the institution to be subject to a mandatory triggering event and therefore unable to meet its financial or administrative obligations.

For each triggering event, to demonstrate that the institution remains financially responsible, the institution may submit evidence that the triggering event has been resolved, that the institution has insurance that will cover part or all of the debt or liabilities, or that the triggering event has not or will not have a material adverse effect on the institution.

If ED determines that one of our institutions is not financially responsible because of one or more triggering events, the institution would be required to provide an irrevocable letter of credit equal to at least 10% of the amount of federal student financial aid funds received by the institution for the past year.

ED has indicated a target date of April 2023 for publication of proposed regulations to amend the current financial responsibility standards.

In October 2023, ED published modifications to its financial responsibility standards that take effect on July 1, 2024.

These revised standards include, among other requirements, an expanded list of conditions or other triggering events for which ED could require financial protection, such as a letter of credit.

In addition, if ED requires financial protection as a result of more than one mandatory or discretionary trigger, it will require separate financial protection for each individual trigger.

The American Rescue Plan Act, or ARPA, which was enacted in March 2021, modifies the HEA’s 90/10 Rule to require that a for-profit institution derive not less than 10 percent of its revenue from sources other than “federal education assistance funds”.

ED published final regulations in October 2022 that address ARPA’s modifications to the 90/10 Rule.

The new regulations provide that for fiscal years beginning on or after January 1, 2023, and therefore for our institutions the year ended December 31, 2023, federal funds used to calculate the “90%” side of the ratio include Title IV funds and any other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges.

ED confirmed that the 90/10 Rule would no longer permit institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio.

As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages increased, particularly at APUS.

In March 2021, the Army launched ArmyIgnitED, to replace GoArmyED as its system for processing the Army’s TA funds for participating institutions.

Issues related to the launch of ArmyIgnitED resulted in cash payments from the Army to APUS that were expected in 2021 and 2022 to be received in 2023, which, together with the change to the 90/10 Rule, enrollment growth among service members as compared to declines in students who use non-federal educational assistance funds and the delayed receipt of funds have caused and may continue to cause, APUS’s 90/10 Rule percentage to increase, making it more difficult to satisfy the 90/10 Rule.

While each of our institutions was in compliance with the 90/10 Rule for 2023, with APUS’s relevant percentage for 2023 being 89%, there can be no assurance that we will continue to be able to comply in future years, particularly at APUS.

See the Risk Factor captioned “If one or more of our institutions does not comply with the 90/10 Rule, it or they will lose eligibility to participate in federal student financial aid programs” for more information.

The final regulations also include other requirements, including:

institutions must request and disburse Title IV funds before the end of the fiscal year (or, for institutions operating under the reimbursement method or the heightened cash monitoring method, make disbursements by the end of the fiscal year and report the funds in the “90%” side of the ratio for that fiscal year);

institutions are restricted in when and how they can count institutional loans and alternative financing arrangements as non-federal revenue;

institutions may, under certain circumstances, include non-federal revenue from non-Title IV programs in their 90/10 calculation;

and institutions must notify ED and students in a timely manner if they fail the 90/10 Rule.

The “90/10 Rule.” Under the so-called “90/10 Rule”, a for-profit institution is prohibited from deriving more than 90% of its revenue (as computed by ED) on a cash accounting basis (except for certain institutional loans) from Title IV programs for any fiscal year.

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An institution that fails to satisfy the rule for two consecutive fiscal years becomes ineligible to participate in Title IV programs for at least two fiscal years and is required to demonstrate compliance with Title IV eligibility and certification requirements for at least two additional fiscal years prior to resuming Title IV program participation.

Such institution would also lose the ability to participate in TA because DoD requires institutions to participate in the Title IV programs in order to participate in TA.

Ineligibility of any one or more of our institutions to participate in Title IV programs and TA would have a material adverse effect on our enrollments, revenue, results of operations, and cash flows.

See the Risk Factor with the caption beginning “If one or more of our institutions does not comply…” for more information.

Using the applicable 90/10 formula, the following table contains the percentage of cash-basis revenue earned from Title IV program funds:

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HCN 81% 80% 84%

The American Rescue Plan Act or ARPA, which was enacted in March 2021, modifies the HEA’s 90/10 Rule to require that a for-profit institution derive not less than 10 percent of its revenue from sources other than “federal education assistance funds”.

ARPA provides that the amendment applies to institutional fiscal years beginning on or after January 1, 2023.

ED published final regulations in October 2022 that address ARPA’s amendments to the 90/10 Rule.

The regulations provide that for fiscal years beginning on or after January 1, 2023, federal funds used to calculate the “90” side of the ratio include Title IV funds and any other educational assistance funds provided by a federal agency directly to an institution or a student, including the federal portion of any grant funds provided by or administered by a non-federal agency, except for non-Title IV federal funds provided directly to a student to cover expenses other than tuition, fees, and other institutional charges.

ED confirmed that the 90/10 Rule would no longer permit institutions to count federal aid for veterans and service members as part of the “10%” side of the ratio.

As a result, effective January 1, 2023, TA and VA benefits are included in the “90%” side of the ratio, and our institutions’ 90/10 Rule percentages will increase, particularly at APUS.

for that fiscal year);

institutions are restricted in when and how they can count institutional loans and alternative financing arrangements as non-federal revenue;

institutions may, under certain circumstances, include non-federal revenue from non-Title IV programs in their 90/10 calculation;

and institutions must notify ED and students in a timely manner if they fail the 90/10 Rule.

Incentive Payment Rule.

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The incentive payment rule also influences how our institutions are able to compensate and motivate their employees.

Student Loan Defaults.

Under the HEA, an educational institution may lose its eligibility to participate in Title IV programs if defaults on the repayment of federal loans by its students exceed 30% for each of three consecutive years, or 40% in any one year.

An institution’s cohort default rate is calculated as the percentage of borrowers who entered repayment in the relevant fiscal year who default before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment.

If an institution’s cohort default rate is equal to or greater than 30%, it must establish a default prevention task force.

In October 2022, ED released official three-year cohort default rates for federal fiscal year 2019.

Cohort Default Rate.

To remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain levels.

Pursuant to requirements of the HEA, if the cohort default rate for any year exceeds 40% in any single year, or exceeds 30% for three consecutive years, an institution loses eligibility to participate in Title IV programs.

If an institution’s cohort default rate is equal to or greater than 30% in any year, it must establish a default prevention task force and develop a default prevention plan with measurable objectives for improving the cohort default rate.

In September 2023, ED released final official cohort default rates for institutions for federal fiscal year 2020 with ED reporting a zero percent cohort default rate for APUS, RU, and HCN.

These cohort default rates were favorably impacted by regulatory relief provided in connection with the COVID-19 pandemic pursuant to which borrowers with Title IV program student loans were not required to make payments on their federal loans.

As explained further in “Student Loan Defaults” below, interest accrual on federal student loans resumed on September 1, 2023, and payments became due beginning October 1, 2023, which may lead to higher default rates in the future.

The final official ED cohort default rates for APUS, RU, and HCN for the federal fiscal years 2018, 2019 and 2020 are as follows:

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HCN 8.1% 1.1% 0.0%

If one or more of our institutions has a default rate in excess of allowable levels, it could result in that institution’s or those institutions’ loss of eligibility to participate in Title IV programs or incurring additional costs related to default prevention.

In March 2020, in connection with the COVID-19 pandemic, ED implemented a temporary freeze on payments and interest accruals for federal student loans that is expected to continue pending implementation of ED’s broader debt relief program or resolution of associated litigation.

During this period of temporary relief, we would expect borrowers to be substantially less likely to default on federal student loans, which may have artificially lowered our institutions’ cohort default rates for federal fiscal year 2019 and may similarly artificially lower our institutions’ cohort default rates for federal fiscal years occurring during the forbearance period.

Upon expiration of the temporary freeze, borrowers will again need to make repayments on loans and loans will again accrue interest, which may lead to higher cohort default rates.

Student Loan Defaults.

Government policies to minimize the adverse economic impact of the COVID-19 pandemic have artificially lowered our institutions’ cohort default rates, which nevertheless may be higher than otherwise expected as a result of the pandemic.

Congress and ED implemented a temporary freeze on student loan payments and interest accruals, which means borrowers are less likely to default on their loans and our institutions’ cohort default rates are lower not because borrowers are making timely repayments but because the government is allowing them not to make payments.

In June 2023, the Fiscal Responsibility Act was enacted, ending the freeze on payments and interest accruals.

Accordingly, interest accrual on federal student loans resumed on September 1, 2023, and payments became due beginning October 1, 2023, which may lead to an increase in defaults and therefore an increase in our institutions’ cohort default rates.

ED has announced a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period will not be considered delinquent, reported to

credit bureaus, placed in default, or referred to debt collection agencies.

ED has also announced other actions intended to provide debt relief and support for student loan borrowers, such as instituting a new income-driven repayment plan.

However, there can be no assurance that our institutions’ cohort default rates will benefit from these efforts, and the eventual end of the “on-ramp” period may also lead to an increase in defaults.

If one of our institutions loses its eligibility to participate in Title IV programs because of high student loan default rates, students would no longer be eligible to use Title IV program funds at that institution, which would significantly reduce that institution’s enrollments and revenue and cash flows and have a material adverse effect on our results of operations.

In addition, if Congress or ED restricts permitted types of default prevention assistance, the default rates of our former students may be negatively impacted.

Congress could also increase the measuring period, which could also negatively impact student default rates.

Gainful Employment Regulations .

Pursuant to new gainful employment, or GE, regulations, that will take effect July 1, 2024, ED will determine the Title IV eligibility of GE programs based in part on satisfaction of specified performance levels of two measures defined by GE regulations:

the debt-to-earnings rates (which include two rates, the discretionary debt-to-earnings rate and the annual debt-to-earnings rate) and the earnings premium measure.

ED previously released a data set, referred to as the program performance data, or the PPD, that includes calculations of the two metrics for certain programs.

The methodology ED used to produce the PPD differs from the methodology that will be used under the final GE regulations, primarily due to data limitations.

However, out of the 30 RU programs, 47 APUS programs, and three HCN programs (including one no longer offered at HCN) that ED assessed in the PPD, six current RU programs and three APUS programs failed one or both of the new measures.

The six RU programs failing in the PPD represent 8.5% of total student enrollment for the three months ended December 31, 2023.

The three APUS programs failing in the PPD represent 2.1% of total net course registrations for the three months ended December 31, 2023.

Programs that fail to achieve the specified performance levels of the GE measures in two of any three successive years for which the debt-to-earnings rates or the earnings premium measure are calculated would lose access to Title IV funding.

Under the GE regulations, the failure of any of our institutions’ programs to satisfy the required specified performance levels could adversely impact those institutions and programs.

We expect that the earliest a program could lose eligibility is July 1, 2026.

In addition, programs that fail any of the metrics in a year will be required to warn enrolled and prospective students that the program risks losing access to Title IV funding.

At this time, it is difficult to predict whether our institutions’ programs will satisfy the performance levels of future GE metrics, including whether the programs identified as failing in the PPD will in fact fail or whether other programs will fail or pass.

Third-Party Servicers.

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An institution must report to ED new contracts with or any significant modifications to contracts with third-party servicers and other matters related to third-party servicers.

If any third-party servicer engaged by one of our institutions does not comply with

applicable statutes and regulations, our institution may be liable for its actions, and our institution could lose its eligibility to participate in Title IV programs.

ED recently issued new guidance that significantly expands the types of activities and functions that constitute third-party servicer activities for Title IV purposes, including, for example, recruitment and retention services, provision of software products and services that involve Title IV administration activities, and provision of educational content and instruction.

The guidance, with respect to which ED has invited comments, also states ED’s position that an institution may not contract with a vendor that is a third-party servicer for Title IV purposes if the vendor (or its subcontractors) is located outside the U.S.

If any third-party servicer engaged by one of our institutions does not comply with applicable statutes and regulations, our institution may be liable for its actions, and our institution could lose its eligibility to participate in Title IV programs.

ED recently issued and subsequently retracted guidance that would have significantly expanded the types of activities and functions that constitute third-party servicer activities for Title IV purposes and stated ED’s position that an institution may not contract with a third-party servicer for Title IV purposes if the servicer (or its subcontractors) is located outside the U.S.

or is owned or operated by an individual who is not a U.S.

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permanent resident.

Our institutions must assess their arrangements with third parties to determine whether a vendor must now be treated as a third-party servicer based on the guidance, and such assessment may lead to a need to modify or end existing contracts and establish new contracts.

In a November 2023 press release, ED indicated that it intends to issue updated guidance in early 2024 with an effective date at least six months after its publication.

Once final guidance is published, our institutions must assess their arrangements with third parties to determine whether a vendor must now be treated as a third-party servicer based on the guidance, and such assessment may lead to a need to modify or end existing contracts and establish new contracts.

Title IV Return of Funds.

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If the student withdraws after the 60% threshold, then the student has earned 100% of the Title IV program funds.

The institution must return to the appropriate Title IV programs, in a specified order, the lesser of (i) the unearned Title IV program funds or (ii) the institutional charges incurred by the student for the period multiplied by the percentage of unearned Title IV program funds.

An institution must return the funds no later than 45 days after the date of the institution’s determination that a student withdrew.

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In July 2022, HCN issued a final program review determination with respect to all findings, resulting in total liabilities of approximately $12,000.

Misrepresentation.

Under the HEA and its implementing regulations, ED may fine, suspend or terminate the participation in Title IV programs by an institution that engages in substantial misrepresentation regarding the nature of its education program, its financial charges, or the employability of its graduates.

The rule covers both acts and omissions of fact.

On August 15, 2023 the U.S.

Department of Education recertified HCN's Title IV Program Participation Agreement with no restrictions and removed the prior provisional classification.

Substantial Misrepresentation.

Under the HEA and its implementing regulations, ED may take action against an institution in the event of substantial misrepresentation by the institution concerning the nature of its educational programs, its financial charges, or the employability of its graduates.

As part of the 2022 Borrower Defense Regulations, ED modified the substantial misrepresentation rule to explicitly include certain “omissions of fact” as a basis for a misrepresentation claim or borrower defense to repayment, or BDTR, claim.

If ED determines that an institution has engaged in substantial misrepresentation regarding the nature of its education program, its financial charges, or the employability of its graduates, ED may:

(i) if the institution is provisionally certified, as our institutions currently are, revoke an institution’s program participation agreement or impose limitations on its participation in Title IV programs;

(ii) deny participation applications made on behalf of the institution;

or (iii) initiate a proceeding against the institution to fine the institution or to limit, suspend, or terminate the institution’s participation in Title IV programs.

The Clery Act .

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Borrower Defenses .

Under the HEA, ED regulations may specify which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment, or BDTR, of a Direct Loan.

ED’s previous regulations permitted a borrower to assert a BDTR of a Direct Loan if the institution’s acts or omissions give rise to a cause of action against the institution under state law.

Under the HEA, ED is authorized to specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a BDTR of a loan under the Direct Loan Program, or a Direct Loan.

ED may initiate a proceeding to collect from an institution the amount of relief resulting from a borrower defense claim.

Prior to 2016, ED’s regulations permitted a borrower to assert a BDTR of a Direct Loan if the institution’s acts or omissions give rise to a cause of action against the institution under state law.

In November 2016, ED published the 2016 Borrower Defense Regulations, which address, among other matters, which acts or omissions of an institution of higher education a student borrower or group of borrowers may assert as a defense to repayment of a Direct Loan.

For Direct Loans first disbursed on or after July 1, 2017, the 2016 Borrower Defense Regulations created a new federal standard for BDTR of Direct Loans, new limitation periods for such claims, and new processes for resolution of such claims.

The 2016 Borrower Defense Regulations were in effect until the 2019 Borrower Defense Regulations went into effect July 1, 2020.

In September 2019, ED published the 2019 Borrower Defense Regulations, which, among other things, modify the BDTR for Direct Loans made on or after July 1, 2020, the limitation periods for such claims, and the processes for resolution of such claims.

The 2016 Borrower Defense Regulations continue to apply to all Direct Loans made on or after July 1, 2017 and before July 1, 2020, with certain exceptions pursuant to the 2019 Borrower Defense

The 2019 Borrower Defense Regulations apply to all Direct Loans made on or after July 1, 2020 and before July 1, 2023 due to the 2022 Borrower Defense Regulations explained below.

The 2016 Borrower Defense Regulations were in effect from July 1, 2017 until July 1, 2020 when ED published new BDTR regulations.

In September 2019, ED published the 2019 Borrower Defense Regulations, which, among other things, modify the standard for BDTR of Direct Loans made on or after July 1, 2020, the limitation periods for such claims, and the processes for resolution of such claims.

The 2016 Borrower Defense Regulations continue to apply to all Direct Loans made on or after July 1, 2017 and before July 1, 2020, with certain exceptions pursuant to the 2019 Borrower Defense Regulations.

The 2019 Borrower Defense Regulations apply to all Direct Loans made on or after July 1, 2020 and before July 1, 2023, when ED again published new BDTR regulations.

In March 2021, ED announced a revised approach for determining relief for borrowers who successfully assert borrower relief claims.

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This policy rescinded the prior administration’s formula that generally granted only partial loan relief for borrower defense claims.

Under the 2016 and the 2019 Borrower Defense Regulations, ED may initiate a separate proceeding to collect from an institution the amount of relief granted based on a BDTR claim.

If ED determines that borrowers of Direct Loans who attended our institutions have a defense to repayment of their Direct Loans, our repayment liability to ED could have a material adverse effect on our financial condition, results of operations, and cash flows.

Under the 2016 Borrower Defense Regulations and the 2019 Borrower Defense Regulations, ED may initiate a separate proceeding to collect from an institution the amount of relief granted based on a BDTR claim.

On November 1, 2022, ED published final regulations with an effective date of July 1, 2023 to address BDTR, loan discharge, pre-dispute arbitration and class-action waivers, among other issues, or the 2022 Borrower Defense Regulations.

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apply to all future and pending BDTR claims as of July 1, 2023 instead of standards varying based on the date of the borrower’s first loan disbursement;

allow students to assert borrower defenses related to Direct Consolidation Loans;

define what kinds of misconduct could lead to borrower defense discharges (substantial misrepresentation, substantial omission of fact, breach of contract, aggressive and deceptive recruitment, and certain judgments or final ED actions);

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The 2022 Borrower Defense Regulations indicate that ED will hold colleges accountable for the cost of discharges, including by establishing a recoupment process separate from the approval of BDTR claims and making a recoupment determination based on the standards in place at the time the loan was first disbursed.

The effective date of the 2022 Borrower Defense Regulations is currently enjoined nationwide by court order, which means ED currently cannot apply the 2022 Borrower Defense Regulations to any institution.

As a result of the 2022 Borrower Defense Regulations injunction, ED announced that while it will not adjudicate any borrower defense applications under the 2022 Borrower Defense Regulations unless and until the effective date is reinstated, it will continue to adjudicate borrower defense applications under the 2016 Borrower Regulations and 2019 Borrower Defense Regulations if required pursuant to a court ordered settlement.

In 2022, ED joined a class settlement agreement that would result in a blanket grant of automatic, presumptive relief for all BDTR applications filed by students at certain institutions through June 22, 2022, but our institutions were not included in the blanket grant of relief.

The class settlement agreement would also provide certain expedited review of borrower defense claims related to institutions excluded from the automatic relief list, as well as for borrowers who applied during the period after execution of the settlement and before final approval.

Borrowers had to have submitted an application by November 15, 2022 in order to receive expedited review.

In December 2023, RU received from ED 338 BDTR claims, all of which had submission dates between June 23, 2022 and November 15, 2022 for students attending RU between 2000 and 2022, seeking in the aggregate a discharge of approximately $6.1 million in loans.

In December 2023, HCN received from ED 77 BDTR claims, all of which were dated between June 23, 2022 and November 15, 2022 for students attending HCN between 2007 and 2022, seeking in the aggregate a discharge of approximately $1.4 million in loans.

RU and HCN dispute the validity of these claims and have filed responses to them with ED.

We are unable to predict whether ED will grant BDTR relief for the claims, or if so, whether it will seek recoupment from RU and/or HCN.

While we have not received any claims with respect to APUS at this time, we believe is it reasonably likely that we will receive claims in the future.

Refer to the Risk Factor captioned “ED rules related to BDTR claims may create significant liability that could have an adverse effect on our business” for additional information.

Closed School Loan Discharge.

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the liability was reduced on appeal to $77,569.

RU may also face closed school discharge liabilities as a result of the 2021 consolidation of two Florida campuses.

RU may also face closed school discharge liabilities as a result of the 2021 consolidation of two Florida campuses and the 2022 consolidation of two Minnesota campuses.

The 2022 Borrower Defense Regulations will provide for automatic discharges to any borrower who was enrolled within 180 days prior to a school’s closure and who did not complete their education at the school or through an approved teach-out agreement at another school within one year after the closure of their original school.

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Dispute Resolution .

The 2019 Borrower Defense Regulations also generally removed prohibitions on pre-dispute arbitration agreements or class action waivers contained in the 2016 Borrower Defense Regulations and required institutions whose students must enter into pre-dispute arbitration agreements or class action waivers as a condition of enrollment to disclose publicly those requirements in an easily accessible format and prohibited such institutions from requiring a student to participate in arbitration or any internal dispute resolution process prior to filing a BDTR application with ED.

The 2022 Borrower Defense Regulations prohibit institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of educational services for which the loan was obtained.

COVID-19 Financial Aid Matters.

ED has issued several guidance documents regarding the appropriate use of monetary relief provided to higher education institutions in connection with the COVID-19 pandemic and related reporting requirements regarding regulatory flexibility in the administration of federal student aid as a result of challenges related to COVID-19.

These guidance documents provide institutions further information on allowable practices for the administration of federal work study, measurement of satisfactory academic progress, and proper return of unearned federal student aid to ED.

In addition, ED implemented a temporary freeze on payments and interest accruals for federal student loans.

This administrative forbearance period began on March 20, 2020 and was extended several times.

On November 22, 2022, ED announced that the administrative forbearance would continue pending implementation of ED’s broader debt relief program or resolution of associated litigation.

Specifically, payments will resume 60 days after ED is permitted to implement the program or the litigation is resolved.

If the program has not been implemented and the litigation has not been resolved by June 30, 2023, payments will resume 60 days after that date.

We cannot predict the extent to which the ongoing effects of the COVID-19 pandemic or related regulatory or legislative activity may impact us or our institutions in the future.

The 2016 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2017 and before July 1, 2020, prohibit requiring students to initially engage in an institutions’ internal complaint processes, prohibit pre-dispute arbitration agreements, and class action lawsuit waivers, and require notification to ED of arbitration filings and awards, for claims that may form the basis for a BDTR.

The 2019 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2020 and before July 1, 2023, generally remove these prohibitions but require institutions whose students must enter into pre-dispute arbitration agreements or class action waivers to disclose publicly those requirements, and prohibit requiring a student to participate in arbitration or any internal dispute resolution process prior to filing a BDTR application with ED.

The 2022 Borrower Defense Regulations, which apply to all Direct Loans made on or after July 1, 2023 and to all BDTR claims pending as of that date, prohibit institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of

educational services for which the loan was obtained.

However, the effective date of the 2022 Borrower Defense Regulations is currently enjoined nationwide by court order, which means ED currently cannot apply the 2022 Borrower Defense Regulations to any institution, including the new dispute resolution rules.

Other Department of Education Regulation

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The CCPA has the potential for significant civil penalties for failing to comply as well as a private right of action and statutory damages for data breaches that are the result of unreasonable security.

The California Privacy Rights Act, or CPRA, will expand the CCPA’s requirements when it becomes effective in 2023 and other comprehensive state privacy laws with varying requirements also come into effect in 2023.

The California Privacy Rights Act, or CPRA, expands the CCPA’s requirements and provides certain rights to consumers to correct personal information and limit its disclosure.

Other comprehensive state privacy laws that our institutions may be subject to with varying requirements also came into effect in 2023.

Our collection of personal information relating to individuals in the European Union, or EU, may implicate the EU’s comprehensive General Data Protection Regulation, or GDPR.

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Regulations that were effective July 2021 provide institutions additional flexibility in offering distance education and competency-based education programs.

Definitions in the rule clarify the instructional requirements that distance education programs must abide in order to remain eligible for Title IV disbursements.

Definitions in the rule clarify the instructional requirements that

distance education programs must abide in order to remain eligible for Title IV disbursements.

Failure to comply with these standards could lead to adverse actions by ED.

Department of Defense

Regulation of Tuition and Credentialing Assistance

Regulation of Tuition

Service members of the U.S.

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Service members may use TA to pursue postsecondary degrees at institutions that are accredited by accrediting agencies recognized by ED.

APUS participates in TA, and for students in APUS undergraduate, and beginning January 2020, for students in APUS master’s programs, APUS provided grants so that APUS tuition rates per credit hour can be 100% covered by TA provided that the student does not exceed the annual limits per student.

RU and HCN also participate in TA.

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Because we do not have contracts with the DoD to provide instruction at overseas locations, service members who begin their first postsecondary education program after arrival at an applicable overseas location may not use TA to pay for their education in our programs until after they have already successfully completed a course with an institution that has entered into a contract to provide voluntary education programs at that overseas location.

Service members who were already enrolled in one of our programs before arriving at an overseas location may continue to receive TA for the in-progress program, but they will be encouraged to enroll in courses provided by institutions that provide programs at the applicable overseas duty location.

DoD requires educational institutions to meet certain criteria, including generally having at least 20 students on base, and to request access in writing that outlines among other things the specific purpose of the visit, in order to access installations solely to provide counseling, and the Air Force expressly prohibits education institutions from holding regular or recurring office hours on installations solely to provide counseling.

DoD requires educational institutions to meet certain criteria, including generally having at least 20 students on base, and to request access in writing that outlines among other things the specific purpose of the visit, in order to access installations solely to provide counseling, and generally prohibits education institutions from holding regular or recurring office hours on installations solely to provide counseling.

This limits APUS’s ability to support existing students and serve new students.

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Additional information regarding the potential risks associated with the DoD MOUs is provided in the “Risk Factors” section of this Annual Report.

Several federal government agencies have established an online student complaint system for service members, veterans, and their families to report negative experiences at education institutions and training programs administering the Post-9/11 Veterans Educational Assistance Act of 2008, or Post-9/11 GI Bill, TA, and other military-related education benefit programs.

Several federal government agencies have established an online student complaint system for service members, veterans, and their families to report negative experiences at education institutions and training programs administering the Post-9/11 GI Bill, TA, and other military-related education benefit programs.

An institution having recurring substantive complaints, or demonstrating an unwillingness to resolve complaints, may face a range of penalties, including revocation of its MOU and removal from participation in TA.

In addition to TA, branches of the U.S.

military offer CA, which links soldiers to and in many cases provides funds for approved training courses or exams related to occupational licenses or certifications, and associated books, supplies and materials.

Students in the military may use both TA and CA, subject to a combined cap on benefits.

COOL is a program for each of the military branches and DoD civilians that links military occupations and experiences to civilian credentials ( e.g.

, occupational certifications, licenses, and apprenticeships).

While benefits vary by service, service members may be eligible for assistance in paying for certifications, including by prior payment ( e.g.

, vouchers) or service member reimbursement.

Students must meet certain eligibility requirements in order to receive CA, including in some cases service time, experience, and TA

eligibility requirements.

The Army additionally offers an expanded credentialing program designed to support soldiers who wish to pursue civilian credentials, licenses, and certifications that lead directly to a specific job, including in areas outside of a soldier’s Military Occupational Specialty.

Through Army CA, soldiers can request funding for fees associated with qualifying programs listed on Army COOL.

APUS is an approved training provider for Army CA programs.

Students in the Army utilizing both Army CA and TA are subject to an annual combined cap on benefits of $4,000.

We believe other service branches may follow the Army’s example or pursue other approaches to enhancing support for credentialing, including, for example, the Coast Guard’s CA Program, which has an annual combined cap on benefits of $9,000.

Department of Defense Funding

A series of automatic federal budget cuts, known as sequestration, have impacted certain federal student aid programs since fiscal year 2013 and have been extended through fiscal year 2030.

As a result of uncertainty about the availability of funding, several military branches initially suspended and later announced changes to their TA programs.

As a result of uncertainty about the availability of

funding, several military branches initially suspended and later announced changes to their TA programs.

For example, the Army now requires service members to complete one year of service after graduation from Advanced Individual Training in order to be eligible for TA, and the Army and the Coast Guard have both reduced the total per service member annual benefits.

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In addition, eligible sailors can only use TA to fund two courses each quarter of the fiscal year, and reservists on one-year orders are ineligible for TA.

In 2024, Congress approved an approximately 5.9% increase in the funds appropriated for DoD federal student aid programs;

however, it is unclear whether the increased funding will encourage the military branches to expand service member eligibility for TA programs, or the amount of the service member annual benefit.

We expect each military branch and the DoD to continually evaluate their approach to education funding, and the resulting changes could have an impact on the funds available to service members to pursue their education at our institutions.

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The VA administers education benefits provided by federal law, including the Montgomery GI Bill, or GI Bill, and the Post-9/11 GI Bill.

APUS, RU and HCN are approved to provide education to veterans and members of the selective reserve and their dependents by the state approving agencies where the campus is located.

APUS, RU and HCN are approved to provide education to veterans and members of the selective reserve and their dependents in West Virginia for APUS, and by the state approving agencies in states where RU and HCN campuses are located.

In order for an institution to participate in VA education benefits, it must be a participant in the Title IV programs.

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Section 1018 of the Isakson Roe Act mandates that schools that receive veterans education benefits:

(i) provide VA students with information on total cost of an education program, an estimate of debt the student will have upon graduation, graduation rates, requirements to obtain any

license, certification, or approval for which the course of education is designed to provide preparation, and certain other information;

(i) provide VA students with information on total cost of an education program, an estimate of debt the student will have upon graduation, graduation rates, requirements to obtain any license, certification, or approval for which the course of education is designed to provide preparation, and certain other information;

(ii) inform VA students of the availability and potential eligibility of federal financial aid before packaging or arranging private student loans or alternative financing programs;

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Subsequently, the REMOTE Act delayed the effective date of the Isakson Roe Act’s Section 1018 requirements to August 1, 2022, and institutions were permitted to seek a one-academic-year waiver of that deadline beginning June 15, 2022.

RU did not seek a waiver of the August 1, 2021 compliance deadline and believes it satisfied Section 1018 requirements by that deadline.

RU did not seek a waiver of the August 1, 2021 compliance deadline, and it satisfied Section 1018 requirements by that deadline.

In September 2021, APUS and HCN received waivers for the requirements of Section 1018 for the period August 1, 2021 through July 31, 2022.

APUS and HCN did not seek additional waiver extensions and believe they satisfied Section 1018 requirements by July 31, 2022.

The Training in High-Demand Roles to Improve Veteran Employment Act, or the THRIVE Act, enacted in June 2021, amended provisions related to veterans education programs found in the American Rescue Plan Act of 2021 and the Isakson Roe Act.

APUS and HCN did not seek additional waiver extensions, and they satisfied Section 1018 requirements by July 31, 2022.

The legislation requires the VA to work with the Department of Labor to determine the list of high-demand occupations for rapid retraining assistance, excludes programs pursued solely through distance learning on a half-time basis or less from the housing stipend available to those in the retraining program, and requires the Government Accountability Office to report on the outcomes and effectiveness of retraining programs.

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As a condition to an institution’s participation in the Title IV programs, the institution must adopt a code of conduct pertaining to student loans, including alternative loans.

RU and HCN both offer their students an extended payment plan option.

The extended payment plans are designed to assist students with educational costs including tuition and fees.

The extended payment plans are subject to various federal and state laws and regulations, such as the Truth in Lending Act as implemented in Regulation Z, the Equal Credit Opportunity Act

as implemented in Regulation B and the Unfair, Deceptive or Abusive Acts or Practices provisions of Title X of the Dodd-Frank Act.

HCN offers its students an extended payment plan option.

The extended payment plan is designed to assist students with educational costs including tuition and fees.

The extended payment plan is subject to various federal and state laws and regulations, such as the Truth in Lending Act as implemented in Regulation Z, the Equal Credit Opportunity Act as implemented in Regulation B and the Unfair, Deceptive or Abusive Acts or Practices provisions of Title X of the Dodd-Frank Act.

Beginning January 1, 2020, HCN began offering an institutional affordability grant to students demonstrating financial need to cover the difference between the total cost of tuition and fees less the amount of all eligible financial aid resources.

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The CFPB has pursued enforcement actions against certain for-profit institutions of higher education and has released several reports that directly address issues related to institutions of higher education.

In October 2021, the CFPB Education Loan Ombudsman released its annual report analyzing approximately 1,900 private student loan complaints and approximately 3,400 federal student loan complaints received between September 1, 2020 and August 31, 2021.

In October 2022, the annual report analyzed approximately 2,960 private student loan complaints (an increase of approximately 56% compared to prior-year data) and approximately 5,450 federal student loan complaints (an increase of approximately 60% compared to prior-year data).

In October 2023, the CFPB Education Loan Ombudsman released its annual report analyzed approximately 2,350 private student loan complaints (a decrease of approximately 21% compared to prior-year data) and approximately 6,934 federal student loan complaints (an increase of approximately 27% compared to prior-year data).

The CFPB indicated that almost nine in ten complaints involved problems consumers had dealing with their loan servicer.

We do not know what enforcement actions the CFPB may pursue, or what steps Congress or federal agencies may take, in response to these reports and whether such actions, if any, will have an adverse effect on our business or results of operations.

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In September 2022, RU received a program review report from ED that asserted 14 findings of noncompliance with Title IV rules, including rules related to Title IV administration, policies, and consumer information and reporting requirements, and the federal work study, Pell Grant, and Federal Supplemental Educational Opportunity Grant programs.

The program review required RU to do a review in connection with the federal work study finding, prepare policies and procedures, return small amounts of funds to two students, provide training, and take other actions in connection with the findings, and to provide a response, which RU timely provided.

ED will review the response and then issue a final program review determination specifying any liabilities.

At this time, we cannot predict the outcome of the RU program review, when it will be completed, or whether ED will place any liability or other limitations on RU as a result of the review.

The program review required RU to do a review in connection with the federal work study finding, prepare policies

and procedures, return small amounts of funds to two students, provide training, and take other actions in connection with the findings, and to provide a response, which RU timely provided.

In July 2023, ED officially closed the program review by issuing a final program review determination and indicating that 12 of the findings were considered resolved with no liabilities.

The remaining two findings related to Title IV administration had established liabilities of less than $100.

ED determined that the total liability was minimal as it was under the $1,000 threshold so no recoupment was required;

however, RU was responsible for, and has taken all steps necessary in ensuring that adequate corrective procedures had been implemented.

In July 2022, HCN received from ED the final program review determination from a review that had been pending since June 2017, and in September 2022 ED notified HCN that it had closed the program review, and no further action was required.

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HCN was required to do a full file review in connection with the return of Title IV funds finding, to have the review tested by an independent auditor, and to prepare policies and procedures and take other actions in connection with the findings.

Total liabilities were approximately $12,000.

The total liability for this finding was $11,714.10, consisting of $11,538.00 principal owed to ED and $176.10 for the cost of funds associated with the unreturned funds.

In order to participate in TA, institutions must agree to participate in DoD’s Voluntary Education Institutional Compliance Program, or ICP.

An institution that, through the ICP, is found noncompliant with DoD requirements and demonstrates an unwillingness to resolve a finding may be subject to a range of penalties from a written warning to termination of the institution’s participation in TA.

APUS has previously been subject to ICP reviews.

APUS and RS have previously been subject to ICP reviews.

For example, in February 2020, DoD informed APUS that it was one of 250 institutions selected for ICP review in 2020.

Upon request, in May 2020, APUS submitted a self-assessment in connection with the ICP.

On November 30, 2020, DoD issued a report finding that APUS did not clearly articulate certain policies or clearly make certain disclosures.

As required, APUS submitted its corrective action plan and related evidentiary support and in April 2021, APUS was informed that the review had been completed and no further actions are required.

Potential Effect of Regulatory Violations

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We may be required to guarantee all or part of such alternative assistance or might incur other additional costs in connection with securing alternative sources of financial aid.

Accordingly, the loss of our eligibility to participate in Title IV programs, or a reduction in the amount of available federal

student financial aid, would be expected to have a material adverse effect on our financial condition and results of operations even if we could arrange or provide alternative sources of revenue or student financial aid.

Accordingly, the loss of our eligibility to participate in Title IV programs, or a reduction in the amount of available federal student financial aid, would be expected to have a material adverse effect on our financial condition and results of operations even if we could arrange or provide alternative sources of revenue or student financial aid.

In addition to the actions that may be brought against us as a result of our institutions’ participation in Title IV programs, we also may be subject, from time to time, to complaints and lawsuits relating to regulatory compliance brought not only by our regulatory agencies, but also by other government agencies and third parties, such as present or former students or employees and other members of the public.

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HCN is regulated by ABHES, and the state agencies in Ohio, Indiana, and Michigan.

GSUSA is regulated by the Accrediting Council for Continuing Education & Training, as well as a district agency in the District of Columbia.

Change in Ownership Resulting in a Change of Control

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ED may, as a condition of participation in Title IV programs, require prior approval of new locations, programs, or otherwise restrict the number of programs an institution may add.

ED’s regulations require institutions to report and, in certain cases (such as when an institution is provisionally certified such as ours), to seek approval for a new additional campus location at which at least 50% of a program will be offered if the institution wants to disburse Title IV program funds to students enrolled at that location.

ED’s regulations require institutions to report and, in certain cases (such as when an institution is provisionally certified such as APUS and RU), to seek approval for a new additional campus location at which at least 50% of a program will be offered if the institution wants to disburse Title IV program funds to students enrolled at that location.

Institutions are responsible for knowing whether they need approval, and institutions that add locations and programs and disburse Title IV program funds in connection with those locations and programs without having obtained any necessary approval may be subject to administrative repayments and other sanctions.

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The new campus location must satisfy all other applicable requirements for institutional eligibility, including approval by the relevant state authorizing agency and the institution’s accrediting agency.

Provisionally certified institutions of higher education such as ours, and institutions on HCM1 like RU, must seek prior approval from ED to offer new academic programs eligible for Title IV program funds and to open new locations at which Title IV program funds will be disbursed.

Provisionally certified institutions of higher education such as APUS and RU, and institutions on HCM1 like RU, must seek prior approval from ED to offer new academic programs eligible for Title IV program funds and to open new locations at which Title IV program funds will be disbursed.

A fully certified degree-granting institution generally is not obligated to obtain ED’s prior approval for a new location, an additional program leading to a degree at the same level previously approved by ED, or a new program that both prepares students for gainful employment in the same or related recognized occupation as an education program that has previously been designated as an eligible program at that institution and meets certain minimum-length requirements.

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In addition, we may be subject to audits and investigations relating to these contracts, and any violations could result in civil and criminal penalties and administrative sanctions, including termination of contract, refund or suspension of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business.

Our GSA Schedule contract is set to expire on March 4, 2024, and GSUSA is preparing its application for a new GSA Schedule contract.

If a new contract is not entered into, GSUSA’s government business would be materially adversely impacted.

Information about risks associated with GSUSA’s contracts being governed by the FAR is provided in the “Risk Factors” section of this Annual Report.

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Due to the substantial amount of federal funds disbursed to schools through Title IV programs, TA and education benefits administered by the VA, the large number of students and institutions participating in these programs, and significant political interest in the cost of education, Congress continues to show interest in regulation and oversight of institutions of higher education, especially those that are for-profit.

In addition, ED held negotiated rulemaking sessions from January through March 2022 to address other topics for which proposed or final regulations have not yet been issued, including ability to benefit provisions, certification procedures for participation in Title IV programs, financial responsibility requirements, gainful employment program requirements, and standards of administrative capability.

In addition, ED announced its intent to hold negotiated rulemaking sessions in 2024 to address other topics for which proposed or final regulations have not yet been issued, including the recognition of accrediting agencies, institutional eligibility, return of Title IV funds, cash management, and third-party servicers.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business