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GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale.
−Removed: GCE’s most significant university partner is Grand Canyon University (“GCU”), an Arizona non-profit corporation that operates a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across nine colleges both online and on ground at its campus in Phoenix, Arizona and at four off-campus classroom and laboratory sites.
+Added: GCE’s most significant university partner is Grand Canyon University (“GCU”), an Arizona non-profit corporation that operates a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online and on ground at its campus in Phoenix, Arizona and at six off-campus classroom and laboratory sites.
As of December 31, 2023, GCE provided education services and support to approximately 121,000 students with more than 117,000 students enrolled in GCU’s programs, emphases and certificates.
−Removed: In January 2019, GCE began providing education services to numerous university partners across the United States through our wholly owned subsidiary, Orbis Education Services LLC (“Orbis Education”), which we acquired on January 22, 2019 (the “Acquisition”).
−Removed: Since the Acquisition, GCE, together with Orbis Education, has continued to add additional university partners.
−Removed: In the healthcare field, we work in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry.
+Added: In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education Services LLC (“ Orbis Education”), which we acquired in 2019 (the “Acquisition”).
+Added: In the healthcare field, we wo rk in partnership with universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry.
In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs.
−Removed: As of December 31, 2022, GCE provided education services to 27 university partners across the United States.
−Removed: We plan to continue to add additional university partners and to roll out additional programs with both our existing partners and with new partners.
+Added: As of December 31, 2023, GCE provides education services to 25 university partners across the United States .
+Added: We seek to add additional university partners and to roll out additional programs with both our existing partners and with new partners.
We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or as is the case for our most significant partner, GCU, both healthcare and other programs.
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GCE is an education services company with 25 university partners as of December 31, 2023.
−Removed: We have invested over $291.8 million in the last 14 years in technology which includes the cost to develop systems that automate key processes and enable us to scale these processes to hundreds of thousands of students.
+Added: We have invested more than $300 million in the last 15 years in technology which includes the cost to develop systems that automate key processes and enable us to scale these processes to hundreds of thousands of students.
GCE is capable of supporting not just core academic functions, technology and marketing but many additional key processes that surround those functions, such as faculty recruiting and training, admissions, financial aid, accounting, and technical support.
We provide these services to our university partners pursuant to master services agreements that define the scope of our engagement, the types of services provided and other key terms of the engagement.
+Added: Our investments also include the cost to build our off-site classroom and laboratory sites (including the specialized equipment) that are used by our university partners to educate healthcare students.
Suite of Services
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Technology and Academic Services
−Removed: We provide technology and academic services that can include the ongoing maintenance of our university partners’ educational infrastructure, including online course delivery and management, student records, assessment,
−Removed: customer relations management and other internal administrative systems.
+Added: We provide technology and academic services that can include the ongoing maintenance of our university partners’ educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems.
These services can also include curriculum conversion, support for content development, support for faculty and related training and development, technical support, rent and occupancy costs for university partners’ simulation and skills labs, and assistance with state regulatory compliance.
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Technology Services may include the following:
−Removed: ● Learning Management System (“LMS”) - GCE designed and offers to its university partners a new LMS, called Halo.
−Removed: GCU started utilizing Halo in the Fall of 2021 and has completed the transition of all of its students to the new LMS.
+Added: ● Learning Management System (“LMS”) - GCE designed and offers to its university partners its own proprietary LMS, called Halo.
+Added: All of GCU’s students, online and ground use this LMS.
The basic functionality includes an interactive course syllabus, discussion questions and forums, instruction interaction, class quizzes, group assignments, written assignment submission and rubrics, grading, participation, attendance and integration with our student information system.
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The platform provides in-depth analytics that allow us to closely monitor student success and the quality of instructional resources.
−Removed: GCE also designed its previous learning management system, LoudCloud which GCU used beginning in 2011.
+Added: GCE also designed its previous learning management system, LoudCloud which GCU used prior to HALO.
● Internal administration - We utilize a commercial customer relations management development platform to distribute, manage, track, and report on all interactions with prospective student leads as well as all active and inactive students.
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● Infrastructure - We operate two data centers, one at GCU’s campus and one at another Phoenix-area location.
+Added: Our infrastructure supports IT for GCE and we can provide it for our customers.
All of our servers are networked, and we have redundant data backup.
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We evaluate all faculty according to university partner standards and provide evaluation results, if requested.
−Removed: Many of the health sciences specific faculty development resources are accredited by the International Association for
−Removed: Continuing Education and Training (“IACET”) and the American Nurses Credentialing Center (“ANCC”) allowing faculty to earn continuing education credits.
+Added: Many of the health sciences specific faculty development resources are accredited by the International Association for Continuing Education and Training (“IACET”) and the American Nurses Credentialing Center (“ANCC”) allowing faculty to earn continuing education credits.
● Class Scheduling – GCE has a class scheduling department and has developed a proprietary system to provide these services to our university partners.
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The laboratories contain the latest in skills and simulation learning technology;
−Removed: including computer-based scenarios, hands-on work with physical simulators and internally developed Mixed Reality (“MR”) with state-of-the-art technology, which help students gain unique experiences in an alternative clinical setting.
+Added: including computer-based scenarios, hands-on work with physical simulators and internally developed Mixed Reality with state-of-the-art technology, which help students gain unique experiences in an alternative clinical setting.
Counseling Services and Support
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● Field Experience Counseling – For university partner students pursuing programs that lead to external credentials (e.g., teaching, nursing, counseling, social work, theology, etc.), GCE leverages a growing nationwide network of approved healthcare facilities, schools, preceptors, and supervisors to ensure that all students are able to meet program-specific requirements.
−Removed: Each student is assigned a counselor before or during their first course, and several prescribed appointments with their counselor are scheduled throughout the student’s program to ensure that all state-specific progression
−Removed: requirements are met well in advance of deadlines.
+Added: Each student is assigned a counselor before or during their first course, and several prescribed appointments with their counselor are scheduled throughout the student’s program to ensure that all state-specific progression requirements are met well in advance of deadlines.
GCE assists in gathering all required documentation, verifying it as official, and storing it as part of the student’s record.
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Social Responsibility and Human Capital Development
−Removed: Social responsibility and human capital development are significant focuses of the Company.
+Added: Social responsibility and human capital development are a significant focus of the Company.
Our efforts are led by our Chief Executive Officer and a portion of his compensation is tied to our success in these areas.
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● Most university professors have no formal training in teaching, learning or course design;
−Removed: ● Universities are under significant financial pressure, which has only been enhanced during 2020 and 2021 due to the pandemic and a declining number of high school graduates attending college.
+Added: ● Universities are under significant financial pressure, which has only been enhanced due to the pandemic and a declining number of high school graduates attending college.
We provide the capital, technology and expertise to our university partners to lessen the challenges in each of the areas listed above (see Item 1.
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● Furthering Job Creation - We, along with GCU have launched a number of new business enterprises that have reduced costs, provided management opportunities for recent graduates and employment opportunities for students and neighborhood residents, while spurring economic growth in the area.
−Removed: ● Special Olympics - We participate in the annual Plane Pull Challenge, which benefits Special Olympics Indiana (SOIN) athletes.
−Removed: The “Orbeasts” go head-to-head in a tug of war with a Boeing FedEx 757 jetliner in SOIN’s largest single-day fundraiser.
−Removed: This event offers a unique opportunity for organizations to team build and work together to raise important funds for SOIN athletes.
−Removed: The vision of Special Olympics Indiana is that sport will open hearts and minds towards people with intellectual disabilities and create inclusive communities across the state and throughout the world.
● Youth Opportunity Foundation - Our employees volunteer and donate time and funds to the Youth Opportunity Foundation which provides advocacy, clinical treatment, education and workforce development for at-risk young people in underprivileged areas.
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● Funding of Student Tuition Organizations - GCE contributes to private school tuition organizations, which are entities that allocate financial contributions toward tuition assistance and scholarships for disadvantaged students to attend Arizona private schools.
−Removed: In each of 2022 and 2021, we contributed $5.0 million to these organizations.
+Added: In 2023 and 2022, we contributed $3.5 million and $5.0 million, respectively, to these organizations.
● Encouraging Employee Giving - We participate in Donate to Elevate, a program that encourages employees to participate in the Arizona individual tax credit program, which allows individual taxpayers to contribute money in lieu of state income tax payments to benefit private schools and other non-profit entities in Arizona, as well as local public schools and public charter schools.
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GCE’s commitment to fostering diversity in its community is evident in the following:
−Removed: ● Our Diversity Statement - Grand Canyon Education is a faith-friendly shared services provider that embraces a world-view which outlines a responsibility to both charity and stewardship which simply stated is, ‘to love others as yourself’.
+Added: ● Our Diversity Statement - Grand Canyon Education is a faith-friendly shared services provider that embraces a worldview which outlines a responsibility to both charity and stewardship which simply stated is, ‘to love others as yourself’.
We are a community of people who value the pursuit of truth and find great understanding in the convergence of differing viewpoints, backgrounds and ideas.
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● Our Diverse Leadership - Our ability to attract and retain diverse talent is reflected at both the Board and management levels.
−Removed: Three of our six directors are women and two directors identify with an underrepresented diverse ethnicity.
+Added: Three of our five directors are women and one director identifies with an underrepresented diverse ethnicity.
In addition, for all of our employees at the level of manager and above totaling 618 persons, 72.2% are held by women and other diverse persons, collectively, an increase of 4.9% over 2022.
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As of December 31, 2023, GCE employed approximately 4,068 professional and administrative personnel, including technical and academic advisors, counseling advisors, marketing and communication professionals, and personnel that handle financial aid processing, information technology, human resources, corporate accounting, finance, and other administrative functions.
−Removed: In addition, at December 31, 2022, GCE employed approximately 1,580
−Removed: part-time employees most of whom are student workers.
+Added: In addition, as of December 31, 2023, GCE employed approximately 1,732 part-time employees most of whom are student workers.
None of our employees are a party to any collective bargaining or similar agreement with us.
We consider our relations with our employees to be strong.
−Removed: ● Our Hiring Practices and Policies - GCE ensures company diversity through hiring policies and practices that support diversity such as the Equal Employment Opportunity Policy, Nondiscrimination and Anti-Harassment Policy and Complaint Procedure, and the Disability Accommodation Policy.
+Added: ● Our Hiring Practices and Policies - GCE is committed to hiring policies and practices that promote diversity and to identifying the most qualified candidate for a given position.
+Added: GCE ensures company diversity through hiring policies and practices that support diversity such as the Equal Employment Opportunity Policy, Nondiscrimination and Anti-Harassment Policy and Complaint Procedure, and the
+Added: Disability Accommodation Policy.
We post all open positions to a variety of diversity-related job boards to ensure we attract diverse candidates.
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The top five selected in the survey by employees were Employee Health and Wellbeing (56%), Community Engagement (55%), Human Capital Management (51%), Workforce Diversity and Engagement (33%) and Professional Integrity (32%).
+Added: Whistleblower hotline – GCE has a whistleblower hotline available to both internal and external parties.
+Added: The whistleblower policy is disclosed on the GCE intranet for employees and disclosed on the GCE investor relations website for external parties.
+Added: Hotline activity is managed by a third party and all claims are reviewed and monitored by the Chief Risk Officer and General Counsel.
+Added: All claims are discussed at the quarterly Audit Committee meetings.
Environmental Awareness
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GCE owns a four-story 325,000 square foot administrative building, which includes office space for approximately 2,700 employees, and a parking garage at our headquarters in Phoenix, Arizona.
−Removed: We constructed these facilities in 2016 and, as with every one of our projects over the past 12 years, we designed them to maximize energy efficiency and minimize electricity usage and environmental impact, which ultimately lowers our operating costs.
+Added: We constructed these facilities in 2016 and, as with every one of our projects over the past 12 years, we designed them to maximize energy
+Added: efficiency and minimize electricity usage and environmental impact, which ultimately lowers our operating costs.
Our headquarters building includes the following design features:
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Due to our significant investment in infrastructure, since March 2020, when the World Health Organization declared the COVID-19 a global pandemic, a significant portion of our diverse workforce is continuing to work remotely.
−Removed: This has not only allowed our employees to remain physically safe but has also resulted in savings in the areas of waste, janitorial costs, and travel costs related to business travel and commuting.
+Added: This has not only increased employee satisfaction but has also resulted in savings in the areas of waste, janitorial costs, and travel costs related to business travel and commuting.
Our off-campus classroom and laboratory sites are all designed with the same efficient footprint in the 40 sites opened as of December 31, 2023.
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We believe that we have low climate risk with respect to our physical environment (e.g., fires, drought, hailstorms, increasing weather pattern changes).
−Removed: Approximately 90% of our workforce is continuing to work remotely.
+Added: A significant percentage of our workforce is continuing to work remotely.
We have insurance policies in place to cover any damage for our property, plant and equipment.
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The following highlights certain key aspects of our corporate governance framework:
−Removed: ● We Have an Independent and Diverse Board - Five of our six directors are independent.
−Removed: Three of our six directors are diverse persons, and two of our directors identify with an under-represented diverse ethnicity.
+Added: ● We Have an Independent and Diverse Board - Four of our five directors are independent.
+Added: Three of our five directors are diverse persons, and one of our directors identifies with an under-represented diverse ethnicity.
● We Have Majority Voting for Directors - We have adopted majority voting for directors pursuant to which nominees who fail to achieve an affirmative majority of votes cast must submit their resignation.
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● We Do Not Have a “Poison Pill” - We do not maintain a stockholder rights plan.
−Removed: Cybersecurity Controls
−Removed: ● Our Audit Committee is tasked with oversight of the cybersecurity controls in place at the Company.
−Removed: ● The Company employs a dedicated Chief Information Security Officer (“CISO”), with an experienced and competent security team, and works closely with the Chief Risk Officer to provide risk reporting and ensure security and compliance.
−Removed: The Company regularly engages third party experts to perform cybersecurity assessments.
−Removed: These assessments are normally performed on an annual basis.
−Removed: Reports are sent to the Audit Committee monthly, and Security, Risk and Compliance updates are provided quarterly.
−Removed: ● The Company has implemented policies and procedures for all employees including:
−Removed: o Information security/cybersecurity policies, which are internally available for all employees;
−Removed: o Information security/cybersecurity awareness training;
−Removed: o A clear escalation process which employees can follow in the event an employee notices something suspicious;
−Removed: o Information security/cybersecurity is part of the employee performance evaluations and/or disciplinary actions.
−Removed: ● The Company maintains a cyber insurance policy.
−Removed: The Company has not had a security breach and has not incurred any expenses for a security breach in the past three years.
−Removed: Other Corporate Policy Matters
−Removed: ● Whistleblower hotline – GCE has a whistleblower hotline available to both internal and external parties.
−Removed: The whistleblower policy is disclosed on the GCE intranet for employees and disclosed on the GCE investor relations website for external parties.
−Removed: Hotline activity is managed by a third party and all claims are reviewed and monitored by the Chief Risk Officer and General Counsel.
−Removed: All claims are discussed at the quarterly Audit Committee meetings.
Our service revenue normally fluctuates due to changes in our university partners’ enrollment which tends to be higher in the Spring and Fall periods and lower in the Summer.
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These services include marketing and recruitment, enrollment management, curriculum development, online course design, student retention support, technology infrastructure, and student and faculty call center support.
−Removed: Among the largest companies in this sector are Pearson Online Learning Services, Wiley Education Services, and 2U.
+Added: The largest companies in this sector have historically been Pearson Online Learning Services, Wiley Education Services, and 2U.
The education services market, particularly with regard to those companies that help traditional universities develop new degree programs often delivered online, has historically been characterized by a full-service, revenue-sharing model, based on the premise that most traditional institutions are not only operationally unprepared to offer these programs at scale but also are not equipped to make the significant upfront investments necessary to develop these programs organically.
In recent years, an alternative unbundled fee-for-service model has emerged, in which the companies offer the same services, or some subset of services, for the market price of those services.
−Removed: Finally, other industry providers affiliate with university partners to offer massive open online courses, which are aimed at unlimited participation and open access via the web at little or no cost to the student.
+Added: Finally, other
+Added: industry providers affiliate with university partners to offer massive open online courses, which are aimed at unlimited participation and open access via the web at little or no cost to the student.
The education services market is changing and expanding.
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REGULATION OF OUR EDUCATION SERVICES BUSINESS
−Removed: Institutions of higher education in America are subject to extensive regulation by state post-secondary, licensure and certification agencies, accrediting commissions, and the federal government through the United States Department of Education (“ED”) under the Higher Education Act (“HEA”).
−Removed: The regulations, standards, and policies of these agencies cover the vast majority of operations of colleges and universities, including educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, financial operations, athletics and financial condition.
−Removed: The HEA and the regulations promulgated thereunder are frequently revised, repealed or expanded.
−Removed: Congress historically has reauthorized and amended the HEA in regular intervals, approximately every five to seven years.
−Removed: The re-authorization process is currently under way.
−Removed: The re-authorization of the HEA could alter the regulatory landscape of the higher education industry, and thereby impact the manner in which we conduct business and serve our university partners.
−Removed: In addition, ED is independently conducting an ongoing series of rulemakings intended to assure the integrity of the Title IV programs.
−Removed: ED also frequently issues formal and informal guidance instructing institutions of higher education and other covered entities how to comply with various federal laws and regulations.
−Removed: ED guidance is subject to frequent change and may impact our business model.
−Removed: Prior to July 1, 2018, GCE, operated GCU.
+Added: Prior to July 1, 2018, GCE, owned and operated GCU.
On July 1, 2018, GCE sold GCU to an independent, Arizona non-profit corporation (the “Transaction”).
−Removed: As a result of the Transaction, we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs.
−Removed: Instead, we operate as an education service
−Removed: company to institutions of higher education that do participate in Title IV programs.
+Added: As a result of the Transaction, we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs regulated and overseen by ED under the Higher Education Act (“HEA”).
+Added: Instead, we operate as an education service company to institutions of higher education that do participate in Title IV programs.
Nevertheless, we are required to comply with certain regulations promulgated by ED for the following reasons:
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In addition, as more fully described below, we are subject to some of the regulations imposed on our university partners by virtue of the nature of the services we provide.
−Removed: This area is evolving, however, and the scope of services covered by regulations may change.
+Added: The HEA and the regulations promulgated thereunder are frequently revised, repealed or expanded and the scope of services covered by regulations may evolve and change over time.
+Added: Congress historically has reauthorized and amended the HEA in regular intervals, approximately every five to seven years.
+Added: The re-authorization process is currently under way.
+Added: The re-authorization of the HEA could alter the regulatory landscape of the higher education industry, and thereby impact the manner in which we conduct business and serve our university partners.
+Added: In addition, ED is independently conducting an ongoing series of rulemakings intended to assure the integrity of the Title IV programs.
+Added: also frequently issues formal and informal guidance instructing institutions of higher education and other covered entities how to comply with various federal laws and regulations.
+Added: For example, on February 15, 2023, ED released DCL 23-03, a guidance document expanding the definition of what activities are considered as third-party servicer activities.
+Added: After substantial community outreach to ED, on April 11, 2023, ED notified the public that guidance in this area would be delayed.
+Added: On November 28, 2023, ED issued a press release seeking nominations for another negotiated rulemaking panel where it said, “the Department intends to issue updated guidance on Third Party Servicers in early 2024.” Regarding data security matters, in Electronic Announcement GEN 23-09, ED stated “The Department will issue guidance on NIST 800-171 compliance in a future Electronic Announcement.” All ED guidance is subject to frequent change and may impact our business model.
+Added: We are also regulated (depending upon the applicable activity being regulated) by other federal agencies or departments including the Securities and Exchange Commission (“SEC”), the Internal Revenue Service (“IRS”), and the Federal Trade Commission (“FTC”).
REGULATION OF OUR UNIVERSITY PARTNERS
+Added: Institutions of higher education in America are subject to extensive regulation by state post-secondary, licensure and certification agencies, accrediting commissions, and the federal government through ED under the HEA, as well as (depending upon the applicable activity being regulated) other federal agencies and departments including the U.S.
+Added: Department of Veterans Affairs (“VA”), the FTC, the IRS, and for institutions who issue bonds, the SEC.
+Added: The regulations, standards, and policies of these agencies cover the vast majority of operations of colleges and universities, including educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, financing and financial operations, athletics and financial condition.
Our current university partners and all likely future university partners are required to be authorized by appropriate state post-secondary, licensure, and certification authorities.
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SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts.
−Removed: GCU is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA).
+Added: GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA).
There is a yearly renewal for participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate.
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University partners other than GCU may be accredited by different accrediting bodies that are likely to have standards that are different from those of the HLC.
−Removed: Moreover, other university partners may also hold various programmatic accreditations that set additional requirements related to specific programs.
+Added: Moreover, our other university partners hold various programmatic accreditations that set additional requirements related to specific programs, including for their nursing programs.
As we work with university partners in different regions we will need to work with those accrediting bodies and tailor our services to meet the requirements of those accreditors.
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Congress must reauthorize the HEA on a periodic basis, usually every five to six years, and the most recent reauthorization through September 30, 2013, occurred in August 2008.
−Removed: The reauthorized HEA reauthorized all of the Title IV programs in which institutions participate but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to student loan default rates and the formula for determining the maximum amount of revenue that institutions are permitted to derive from the Title IV programs.
+Added: The reauthorized HEA
+Added: reauthorized all of the Title IV programs in which institutions participate but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to student loan default rates and the formula for determining the maximum amount of revenue that institutions are permitted to derive from the Title IV programs.
In addition, members of Congress periodically introduce legislation that would impact Title IV programs and the higher education industry generally.
Because a significant percentage of our revenue is indirectly derived from the Title IV programs, any action by Congress that significantly reduces Title IV program funding or the ability of our university partners to participate in the Title IV programs could reduce the ability of some students to finance their education at our university partner institutions and materially decrease their student enrollment.
−Removed: On March 27, 2020, former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.
−Removed: Among other things, the $2.2 trillion bill established some flexibilities related to the processing of federal student financial aid, established a higher education emergency fund, and created relief for some federal student loan borrowers.
−Removed: Through the CARES Act, institutions of higher education were provided relief from conducting a return to Title IV (R2T4) calculation in cases where the student withdrew because of the COVID-19 pandemic, including removing the requirement that the institution return unearned funds to ED and providing loan cancellation for the portion of the Direct Loan associated with a payment period that the student did not complete due to the COVID-19 pandemic.
−Removed: The CARES Act also allows institutions to exclude from satisfactory academic progress calculations any attempted credits that the student did not complete due to the COVID-19 pandemic, without requiring an appeal from the student.
−Removed: Additionally, under the legislation, institutions are permitted to transfer up to 100% of Federal Work-Study (“FWS”) funds into their Federal Supplemental Educational Opportunity Grant (“FSEOG”) allocation and are granted a waiver of the 2019/2020 and 2020/2021 non-federal share institutional match.
−Removed: Institutions may continue to make FWS payments to student employees who are unable to meet their employment obligations due to the COVID-19 pandemic.
−Removed: ED issued sub-regulatory guidance to institutions regarding implementation of the provisions included in the CARES Act.
−Removed: The CARES Act also suspended payments and interest accrual on federal student loans until September 30, 2020, in addition to suspending involuntary collections such as wage garnishment, tax refund reductions, and reductions of federal benefits like Social Security benefits during the same timeframe.
−Removed: On March 30, 2021, the Secretary of Education also extended student loan relief to all Federal Family Education Loans (“FFEL”) not previously covered.
−Removed: Through a series of administrative actions, student loan relief has been extended, including on August 24, 2022, when ED announced, “a final extension of the pause on student loan repayment, interest, and collections through June 30, 2023.”
−Removed: Finally, the CARES Act allocated $14 billion to higher education through the creation of the Education Stabilization Fund.
−Removed: Fifty percent of the emergency funds received by institutions must go directly to students in the form of emergency financial aid grants to cover expenses related to the disruption of campus operations due to the COVID-19 pandemic.
−Removed: Students who were previously enrolled in exclusively online courses prior to March 13, 2020 are not eligible for these grants.
−Removed: Institutions may use remaining emergency funds not given to students for costs associated with significant changes to the delivery of instruction due to the COVID-19 pandemic, as long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities, including marketing and advertising;
−Removed: or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.
−Removed: Institutions received funds under the Education Stabilization Fund based on a formula that factors in their relative percentage of full-time, Federal Pell Grant-eligible students who were not exclusively enrolled in online education prior to the emergency period.
−Removed: On April 9, 2020, ED published guidance and funding levels for the Education Stabilization Fund.
Consolidated Appropriations Act, 2021.
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The legislation also extends until January 1, 2026 expanded employer-provided educational assistance permitting employers to pay up to $5,250 toward an employee’s federal student loans as a tax-free benefit.
−Removed: In addition, the legislation includes a number of higher education-related provisions, including:
−Removed: adopting the FAFSA Simplification Act, which includes eliminating the “expected family contribution” from the Free Application for Federal Student Aid (“FAFSA”) and replacing it with a “Student Aid Index;” expanding eligibility for Pell Grants;
−Removed: restoring Pell Grant eligibility for incarcerated students attending non-profit institutions;
−Removed: restoring quarters/semesters of Pell eligibility to students who have successfully asserted a borrower defense to repayment;
−Removed: repealing the limitation on lifetime subsidized loan eligibility (known as “Subsidized Usage Limit Applies,” or SULA);
−Removed: and significantly simplifying the FAFSA form.
−Removed: The ED published a FAFSA Simplification Information webpage on October 14, 2022 and is expected to provide institutions with guidance on the higher education provisions included in the Consolidated Appropriations Act of 2021, which take effect on July 1, 2023.
−Removed: According to a tweet from the official account of the National Association of Student Financial Aid Administrators (“NASFAA”), on February 7, 2023, at a NASFAA conference, the ED did not commit to an October 1, 2023 launch date for the FAFSA for 2024-2024, although the ED said it would be offered in the fourth quarter of 2023.
−Removed: It is unclear what, if any, this delay will have on our business.
−Removed: We will continue to monitor this situation.
The bill also provided $22.7 billion for higher education institutions and students impacted by COVID-19 in which all of our university partners were eligible.
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and prohibiting more than three unsolicited recruiting contacts during any one-month period.
−Removed: provisions became effective August 1, 2021.
+Added: Most provisions became effective August 1, 2021.
Institutions were permitted to seek waivers for certain sections of the new law if they were not able to satisfy compliance requirements by August 1, 2021.
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The THRIVE Act requires the VA to take disciplinary action if a person with whom an institution has a recruiting or educational services agreement violates the VA’s incentive compensation bans.
−Removed: On December 21, 2021, President Biden signed into law the Responsible Education Mitigating Options and Technical Extensions (“REMOTE”) Act, which amended provisions of the Veterans Health Care and Benefits Improvement Act, the American Rescue Plan Act, and the THRIVE Act.
+Added: On December 21, 2021, President Biden signed into law the Responsible Education Mitigating Options and Technical Extensions Act, which amended provisions of the Veterans Health Care and Benefits Improvement Act, the American Rescue Plan Act, and the THRIVE Act.
The law includes changes to help institutions satisfy the Veterans Health Care and Benefits Improvement Act’s requirements by using the College Financing Plan template, in addition to extending some COVID-related flexibilities previously granted amid the pandemic.
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institutions of higher education can continue to use incentive compensation to recruit foreign students without losing GI Bill funding for their students.
−Removed: Ensuring the Best Schools for Veterans Act of 2022
−Removed: On August 26, 2022, President Biden signed into law the Ensuring the Best Schools for Veterans Act of 2022, which amended prior statutory language and made modifications to how the VA operationalizes the 85/15 requirement (that is, the rule that generally forbids use of Department of Veterans Affairs benefits for students enrolling in a program in which more than 85% of students enrolled in the program have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA).
−Removed: Among other things, the law clarifies that reporting associated with the 85/15 requirement does not apply to institutions at which 35% or fewer students receive GI bill benefits.
−Removed: The law also exempts programs for which fewer than 10 students have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA.
Consolidated Appropriations Act, 2022.
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The bill also dictated ED requirements related to federal loan servicing, including appropriations for just over $2 billion for expenses related to the administration of the federal loan program, and made a number of changes to the FAFSA Simplification Act.
+Added: Ensuring the Best Schools for Veterans Act of 2022.
+Added: On August 26, 2022, President Biden signed into law the Ensuring the Best Schools for Veterans Act of 2022, which amended prior statutory language and made modifications to how the VA operationalizes the 85/15 requirement (that is, the rule that generally forbids use of Department of Veterans Affairs benefits for students enrolling in a program in which more than 85% of students enrolled in the program have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA).
+Added: Among other things, the law clarifies that reporting associated with the 85/15 requirement does not apply to institutions at which 35% or fewer students receive GI bill benefits.
+Added: The law also exempts programs for which fewer than 10 students have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA.
Eligibility and certification procedures .
Each institution must apply periodically to ED for continued certification to participate in the Title IV programs.
−Removed: Such recertification generally is required every six years, but may be
−Removed: required earlier, including when an institution undergoes a change in control.
+Added: Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control.
To the extent ED suspends, limits, modifies, conditions, or terminates any client institution’s eligibility to participate in the Title IV programs, that action is likely to have a negative impact on our business.
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In November 2019, GCU received a new provisional Program Participation Agreement (“PPA”), which granted GCU the ability to participate in the Title IV programs on a provisional basis through September 30, 2022.
−Removed: As required, GCU filed a renewal application three months in advance of the scheduled expiration date.
−Removed: ED has not made a decision on its recertification application, and therefore its provisional certification to participate in the Title IV programs has been automatically extended on a month-to-month basis until ED makes its decision.
−Removed: Institutions are routinely given a month-to-month extension on their PPA until ED has completed its review of the application.
−Removed: For example, when GCU’s provisional PPA expired in June 2008, it continued to receive a month-to-month extension between that date and April 2011 when ED issued it a new, provisional PPA.
−Removed: For a school that is certified on a provisional basis, ED may revoke the institution’s certification without advance notice or advance opportunity for the institution to challenge that action.
−Removed: For a school that is provisionally certified on a month-to-month basis, like GCU, ED may allow the institution’s certification to expire at the end of any month without advance notice, and without any formal procedure for review of such action.
−Removed: To our knowledge, such action is very rare and has only occurred upon a determination that an institution is in substantial violation of material Title IV requirements.
+Added: As required, GCU filed a renewal application three months in advance of the scheduled expiration date and continued to participate on a month-to-month extension of the PPA while the Department completed its review of the application (institutions are routinely given a month-to-month extension on their PPA until ED has completed its review of the application).
+Added: The Department approved and the parties executed a new Provisional Program Participation Agreement on September 29, 2023, which expires June 30, 2026.
+Added: For a school that is certified on a provisional basis, as GCU is, ED may revoke the institution’s certification without advance notice or advance opportunity for the institution to challenge that action.
+Added: For a school that is provisionally certified on a month-to-month basis, ED may allow the institution’s certification to expire at the end of any month without advance notice, and without any formal procedure for review of such action.
+Added: To our knowledge, either such action is very rare and has only occurred upon a determination that an institution is in substantial violation of material Title IV requirements.
+Added: In connection with the issuance of the November 2019 PPA, ED also informed GCU that GCU does not satisfy ED’s definition of a non-profit institution and, as a result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.
+Added: GCU has challenged that determination.
+Added: See “Coordinated actions by federal agencies.”
Administrative capability .
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As an education service company, we are not directly subject to this regulation.
−Removed: However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and comply with or accept other limitations on the ability to increase the number of programs it offers or the number of students it enrolls, any of which sanctions on our university partners could also adversely affect our business.
+Added: However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV
+Added: program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and comply with or accept other limitations on the ability to increase the number of programs it offers or the number of students it enrolls, any of which sanctions on our university partners could also adversely affect our business.
In addition, because other regulators may use the composite score for their purposes, a poor composite score could have additional effects.
For example, NC-SARA utilizes the composite score in determining whether an institution is eligible to participate in SARA.
−Removed: Per the audited financial statements of GCU as of June 30, 2022 and 2021, GCU’s composite score was 1.8 and 1.9, respectively, using the proprietary school calculation methodology.
+Added: Based on the data derived from the audited financial statements of GCU as of each of June 30, 2023 and 2022, GCU’s composite score was 1.8, using the proprietary school calculation methodology.
If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.
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Under ED regulations, the letter of credit requirement is triggered by late returns of Title IV program funds for 5% or more of the withdrawn students (and involving more than two student refunds) in the audit sample in the institution’s annual Title IV compliance audit for either of the institution’s two most recent fiscal years or in a ED program review.
−Removed: Additionally, on January 4, 2023, the ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking, including on Return to Title IV funds.
+Added: Additionally, on January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking, including on Return to Title IV funds.
No specific proposals have been put forth at this time.
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Under the 90/10 Rule, an institution becomes ineligible to participate in the Title IV programs as of the first day of the fiscal year following the second consecutive fiscal year in which it exceeds the 90% threshold, and its period of ineligibility extends for at least two consecutive fiscal years.
−Removed: If an institution exceeds the 90% threshold for two consecutive fiscal years and it and its students have received Title IV funds during the subsequent period of ineligibility, the institution will be required to return those Title IV funds to the applicable lender or the ED.
+Added: If an institution exceeds the 90% threshold for two consecutive fiscal years and it and its students have received Title IV funds during the subsequent period of ineligibility, the institution will be required to return those Title IV funds to the applicable lender or ED.
If an institution’s rate exceeds 90% for any single fiscal year, it will be placed on provisional certification for at least two fiscal years.
−Removed: Using the ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 66.2% and 69.7% of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2022 and 2021, respectively, per GCU’s audited financial statements.
+Added: Using ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 65.5% and 66.2% of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2023 and 2022, respectively, per GCU’s audited financial statements.
Accordingly, even if ED continues to treat GCU as a proprietary institution for Title IV purposes, we do not expect this rule to have any material impact on GCU.
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Among other things, the ARPA also includes a provision that amends the 90/10 rule.
−Removed: The ARPA amends the 90/10 rule by treating other “Federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 rule calculation.
+Added: The ARPA amended the 90/10 rule by treating other “Federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 rule calculation.
This means that institutions subject to the 90/10 Rule will be required to limit the combined amount of Title IV funds and applicable “Federal funds” revenue in a fiscal year to no more than 90% in a fiscal year as calculated under the rule.
Consequently, the ARPA change to the 90/10 rule is expected to increase the 90/10 rule calculations at GCU.
−Removed: The ARPA does not identify the specific Federal funding programs that will be covered by this provision, but it is expected to include funding from federal student aid programs such as the veterans’ benefits programs.
−Removed: GCU has informed us that it does not believe any change to the 90/10 rule calculation being currently discussed will have a material impact on its calculation.
−Removed: The ARPA states that the amendments to the 90/10 rule apply to institutional fiscal years beginning on or after January 1, 2023 and are subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021.
+Added: The ARPA stated that the amendments to the 90/10 rule apply to institutional fiscal years beginning on or after January 1, 2023 and were subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021.
ED started the negotiated rulemaking process in January 2022.
In March 2022, the negotiated rulemaking committee reached consensus on changes to the 90/10 Rule.
−Removed: On July 26, 2022, ED released proposed 90/10 regulations consistent with this consensus language which revised the definition of “federal education assistance” that will include tuition assistance programs offered by the U.S.
−Removed: Department of Defense and U.S.
−Removed: Department of Veterans Affairs (“VA”), in addition to the Title IV programs already covered by the 90/10 Rule.
+Added: On July 26, 2022, ED released proposed 90/10 regulations consistent with this consensus language which revised the definition of “federal education assistance” to include tuition assistance programs offered by the U.S.
+Added: Department of Defense and VA, in addition to the Title IV programs already covered by the 90/10 Rule.
On October 27, 2022, following a 30-day comment period that ended August 26, 2022, ED released final 90/10 regulations, which are consistent with the consensus language.
The new 90/10 regulations are effective for fiscal years beginning on or after January 1, 2023.
−Removed: Other legislation has been introduced in both chambers of Congress that seeks to modify the 90/10 Rule further, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue), or to eliminate the 90/10 Rule.
+Added: Other legislation has been introduced in both chambers of Congress that seeks to further modify the 90/10 Rule, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue), or to eliminate the 90/10 Rule.
We cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule.
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ED applies legal thresholds to measure an institution’s compliance.
−Removed: If ED notifies an institution that its cohort default rates exceeded 30%, for each of its three most recent federal fiscal years, the institution’s participation in the
−Removed: FDL Program and the Pell grant program would end 30 days after that notification, unless the institution appeals that determination in a timely manner on specified grounds and according to specified procedures.
+Added: If ED notifies an institution that its cohort default rates exceeded 30%, for each of its three most recent federal fiscal years, the institution’s participation in the FDL Program and the Pell grant program would end 30 days after that notification, unless the institution appeals that determination in a timely manner on specified grounds and according to specified procedures.
In addition, an institution’s participation in the FDL Program would end 30 days after notification by ED that its most recent cohort default rate, is greater than 40%, unless the institution timely appeals that determination on specified grounds and according to specified procedures.
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While GCU’s cohort default rates have historically been significantly below these levels, we cannot assure you that this will continue to be the case.
−Removed: Student Loan Relief.
−Removed: On August 24, 2022, ED announced that it would provide student loan relief to eligible borrowers to address financial hardships in connection with the COVID-19 pandemic.
−Removed: Under the relief measures, up to $10,000 in student debt will be forgiven for individual borrowers earning less than $125,000 or married couples or heads of household earning less than $250,000, and up to $20,000 will be forgiven for such borrowers who formerly received Pell Grants.
−Removed: In a memorandum prepared by ED General Counsel, ED stated that it has interpreted provisions of the Higher Education Relief Opportunities for Students Act of 2003 to authorize the Secretary to exercise broad discretion in granting student loan relief.
−Removed: Since ED’s student loan relief announcement, multiple lawsuits have been filed against ED challenging its authority to grant such relief.
−Removed: Supreme Court will hear arguments on this matter on February 28, 2023 and will likely issue an opinion in June 2023.
−Removed: We cannot predict the outcome of these lawsuits.
−Removed: ED also announced its intent to publish a proposed rule to create a new income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers.
−Removed: The new plan would include a lower payment cap, coverage of unpaid monthly interest, and loan forgiveness after 10 years of payment for borrowers with original loan balances under a certain threshold.
Incentive compensation rule .
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In addition, the incentive compensation rule raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.
−Removed: On March 17, 2011, ED issued official agency guidance, known as a “Dear Colleague Letter,” or a DCL, providing guidance on this point.
+Added: On March 17, 2011, ED
+Added: issued official agency guidance, known as a “Dear Colleague Letter,” or a DCL, providing guidance on this point.
The DCL states that “[t]he Department generally views payment based on the amount of tuition generated as an indirect payment of incentive compensation based on success in recruitment and therefore a prohibited basis upon which to measure the value of the services provided” and that “[t]his is true regardless of the manner in which the entity compensates its employees.” But the DCL also provides an important exception to the ban on tuition revenue-sharing arrangements between institutions and third parties.
−Removed: According to the DCL, ED does not consider payment based on the amount of tuition generated by an institution to violate the incentive compensation ban if the payment compensates an “unaffiliated third party” that provides a set of “bundled services” that includes recruitment services, such as those we
+Added: According to the DCL, ED does not consider payment based on the amount of tuition generated by an institution to violate the incentive compensation ban if the payment compensates an “unaffiliated third party” that provides a set of “bundled services” that includes recruitment services, such as those we provide.
Example 2-B in the DCL is described as a “possible business model” developed “with the statutory mandate in mind.” Example 2-B describes the following as a possible business model:
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The revision, removal or invalidation of the bundled services rule by Congress, ED or a court could require us to change our business model.
−Removed: In addition, we have requested guidance from ED that our specific model is proper under the incentive compensation rule and that our company is not an “affiliate” of GCU for purposes of the DCL.
−Removed: We are awaiting a response to this guidance request.
−Removed: See “Risk Factors – Risks Related to Our Business - If we are determined to have paid improper incentive compensation to our covered employees, or tuition sharing arrangements are deemed to violate the incentive compensation regulations, our business will be impaired.”
Borrower Defense to Repayment regulations .
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These regulations also established separate procedures for claims initiated for individual borrowers and claims initiated for groups of borrowers as well as separate procedures in the event that the institution is open or closed.
−Removed: The rules established varying, borrower-favorable statutes of limitations for the initiation of claims and, in some cases,
−Removed: imposed an unlimited statute of limitations.
−Removed: If the ED official or hearing official approves the borrower’s defense to repayment through the applicable administrative process established in the proposed regulations, ED may discharge the borrower’s obligation to repay some or all of the borrower’s student loans, may return to the borrower amounts already paid by the borrower toward the discharged portion of the loan, and may initiate a separate proceeding to collect the discharged and returned amounts from the institution.
+Added: The rules established varying, borrower-favorable statutes of limitations for the initiation of claims and, in some cases, imposed an unlimited statute of limitations.
+Added: If ED official or hearing official approves the borrower’s defense to repayment through the applicable administrative process established in the proposed regulations, ED may discharge the borrower’s obligation to repay some or all of the borrower’s student loans, may return to the borrower amounts already paid by the borrower toward the discharged portion of the loan, and may initiate a separate proceeding to collect the discharged and returned amounts from the institution.
Although ED attempted to prevent the effectiveness of these regulations, an October 2018 court decision mandated that the Borrower Defense to Repayment regulations that were originally published by ED in 2016 are now in effect and apply to loans first disbursed after July 1, 2017, and (because of recent regulatory developments) prior to July 1, 2020.
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This could put financial strain on our university partners and negatively affect our business.
−Removed: On August 10, 2021, the ED announced its intention to establish a negotiated rulemaking committee to develop proposed regulations for borrower defenses to repayment and other topics related to programs authorized under Title IV of the HEA.
−Removed: Negotiated rulemaking for the Affordability and Student Loans Committee began in October 2021 and concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment (“BDTR”).
−Removed: On October 31, 2022, the ED released final BDTR regulations.
−Removed: Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending BDTR claims as of July 1,
−Removed: 2023, instead of various standards based on the date of the borrower’s first loan disbursement;
−Removed: define what kinds of misconduct could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final ED actions that could give rise to a BDTR claim;
−Removed: establish a reconsideration process for borrowers whose claims are not approved for a full discharge;
−Removed: and create a process for forming groups of borrowers and adjudicating claims based on the common facts of those group claims.
−Removed: The final rule also sets the expectation that the ED will hold colleges accountable for the cost of discharges, including establishing a recoupment process separate from the approval of BDTR claims.
+Added: On August 10, 2021, ED announced its intention to establish a negotiated rulemaking committee to develop proposed regulations for borrower defenses to repayment and other topics related to programs authorized under Title IV of the HEA.
+Added: Negotiated rulemaking for the Affordability and Student Loans Committee began in October 2021 and
+Added: concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment (“BDTR”).
+Added: On October 31, 2022, ED released final BDTR regulations.
+Added: Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending BDTR claims as of July 1, 2023, instead of various standards based on the date of the borrower’s first loan disbursement;
+Added: defines what kinds of misconduct could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final ED actions that could give rise to a BDTR claim;
+Added: establishes a reconsideration process for borrowers whose claims are not approved for a full discharge;
+Added: and creates a process for forming groups of borrowers and adjudicating claims based on the common facts of those group claims.
+Added: The final rule also sets the expectation that ED will hold colleges accountable for the cost of discharges, including establishing a recoupment process separate from the approval of BDTR claims.
In addition, the final rule prohibits 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.
+Added: Litigation related to the various iterations of the BDTR regulations, and the enforcement of these regulations has made this area complicated for all parties to understand and assess.
+Added: Further, the lack of adjudications in this area has also made things less clear.
+Added: Nonetheless, if our university partners are determined to have violated this regulation there could be significant sanctions imposed, whether related to the recoupment of any loans extinguished by the Department, the imposition of letters of credit, or other sanctions under the financial responsibility or administrative capability regulations (among others).
+Added: This could put a financial strain on our university partners and negatively affect our business.
+Added: Also, if we were determined to have been the cause of the meritorious BDTR claim, our partners may have claims against us.
Note, the borrower defense to repayment regulations discussed herein were and are extensive and this does not attempt to discuss all the facets of any of the versions of these regulations.
−Removed: We cannot determine what effect of these regulations on out university partners or on GCE.
+Added: We cannot determine what effect, if any, these regulations may have on out university partners or on GCE.
Compliance reviews.
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Further, we also have an obligation to annually submit to ED a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and ED audit standards.
−Removed: Gainful employment rules.
+Added: Gainful employment rule s.
Under the HEA, proprietary schools are eligible to participate in Title IV programs in respect of educational programs that lead to “gainful employment in a recognized occupation,” with the limited exception of qualified programs leading to a bachelor’s degree in liberal arts.
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While this change was effective July 1, 2020, ED also permitted institutions to enact this change as early as July 1, 2019, so long as any such institution made manifest its intention to be subject to the rescinded regulations.
−Removed: It is our understanding that GCU had made manifest that intention and, as of July 1, 2019, is no longer subject to the gainful employment rules.
−Removed: While GCU largely complied with the previously published gainful employment rules, the previously published draft rates did indicate that four current degree programs were in the “Zone” – that is, potentially faced sanctions in the future if GCU could not reform the program to comply with the regulations – including three undergraduate education programs and the Masters in Theology.
+Added: It is our understanding that GCU had made manifest that intention and, as of July 1, 2019, was no longer subject to the gainful employment rules.
+Added: Given that GCU is currently our only university partner that is considered a proprietary school by ED, the gainful employment rules apply to it but not to our other university partners.
+Added: While GCU largely complied with the previously published gainful employment rules, those rules did indicate that four current degree programs were in the “Zone” – that is, potentially faced sanctions in the future if GCU could not reform the programs to comply with the regulations – including three undergraduate education programs and the Masters in Theology.
On December 8, 2021, ED announced its intention to establish negotiated rulemaking committees to develop proposed regulations for gainful employment and other topics related to programs authorized under Title IV of the HEA.
Negotiated rulemaking committee sessions occurred January-March 2022, and the Institutional and Programmatic Eligibility committee failed to reach consensus on the gainful employment topic.
−Removed: ED has indicated its intention to
−Removed: publish draft Gainful Employment rules in April 2023, which would be effective no earlier than July 2024.
−Removed: While we are watching this process closely, we cannot determine what the outcome will be or the effect of these regulations on out university partners or on GCE.
+Added: At the time, ED indicated its intention to publish draft gainful employment rules in April 2023, which would be effective no earlier than July 2024.
+Added: On October 10, 2023, ED published the final gainful employment regulations which have a general effective date of July 1, 2024.
+Added: The final regulations replace prior gainful employment regulations, rescinded by ED in 2019, that required GCU’s educational programs to achieve threshold rates in at least one of two debt measure categories.
+Added: The new regulations establish rules for annually evaluating GCU’s educational programs based on the calculation of debt-to-earnings rates (an annual debt-to-earnings rate and a discretionary debt-to-earnings rate) and a median earnings measure.
+Added: ED will calculate these rates and measures under complex regulatory formulas outlined in the regulations and using data such as student debt (including not only Title IV loans but also certain private loans and extensions of credit), student earnings data, and comparative median earnings data for young working adults with only a high school diploma or GED.
+Added: If GCU’s programs were to yield debt-to-earnings rates or a median earnings measure that do not comply with regulatory benchmarks for two of three consecutive years, they would lose Title IV eligibility for each of the impacted educational programs.
+Added: The regulations will also require institutions to provide warnings to current and prospective students for programs in danger of losing Title IV eligibility (which could deter prospective students from enrolling and current students from continuing their respective programs).
+Added: The regulations also include provisions for providing certifications and reporting data to ED and providing required student disclosures related to gainful employment.
+Added: The regulations include gainful employment rates and measures that will be based in part on data that is not readily accessible to us or GCU, which makes it difficult for us to predict with certainty how GCU’s educational programs will perform under the new gainful employment benchmarks and the extent to which certain programs could become ineligible for Title IV participation.
+Added: ED released performance data at the time it published the proposed regulations that calculates rates for each school’s programs while acknowledging that the methodology used to produce the calculations differs from the methodology in the proposed regulations due to limitations in data availability.
+Added: Because neither we nor GCU nor ED have access to all of the data that will ultimately be used to evaluate GCU’s programs, we cannot predict whether, or the extent to which, GCU’s programs could fail to comply with the new gainful employment benchmarks.
+Added: Moreover, we do not have control over some of the factors that could impact the rates and measures for GCU’s programs which will limit our ability to eliminate or mitigate the impact of the regulations on us and GCU’s educational programs.
+Added: Although we cannot predict how GCU’s programs will perform under the new gainful employment metrics, the performance data released suggests that in general the programs that were in the “Zone” under the previous gainful employment rules - certain undergraduate teacher education and theology programs as well as certain Masters in Counseling programs - were in jeopardy of failing under the new rules.
+Added: Given that the primary issue for the undergraduate programs that are in jeopardy of failing the new rules is not high average debt levels but rather relatively low earnings rates for first year teachers, it will be difficult for GCU to make material changes to ensure these programs do not fail.
+Added: The Masters of Counseling programs that are in jeopardy of failing are long duration programs as required by the programmatic accreditation standards and the Title IV regulations allow graduate students to borrow substantially more than is required to pay tuition.
+Added: Accordingly, the debt levels for these programs are higher than the university’s average.
+Added: Thus, the implementation of the new gainful employment regulations could require GCU to eliminate or modify these educational programs, could result in the loss Title IV Program funds for the affected programs, and could have a significant impact on the rate at which students enroll in these programs.
+Added: In addition, given ED continues to
+Added: refuse to recognize GCU’s non-profit status, students in GCU programs that fail the new metrics may lose Title IV eligibility.
Substantial misrepresentation .
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Also, if ED determines that an institution (including its contractors) has engaged in substantial misrepresentation, ED may revoke an institution’s program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny applications from the institution for approval of new programs or locations or other matters, or initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs.
−Removed: Similar rules apply under state laws or are incorporated in institutional accreditation standards and the Federal Trade Commission (“ FTC”) applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector.
−Removed: On October 6, 2021 the FTC announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act (the “Act”).
−Removed: Under the Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive.
+Added: Similar rules apply under state laws or are incorporated in institutional accreditation standards, and the FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector.
+Added: On October 6, 2021 the FTC announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act.
+Added: Under the FTC Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive.
Entities that have actual knowledge of acts or practices the FTC has found to be unlawful and that subsequently engage in such unlawful acts or practices may be held liable for civil penalties up to $50,120 per violation.
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The notice included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC.
−Removed: GCU received the FTC’s notice on October 7, 2021.
−Removed: The FTC made clear that receipt of the notice itself does not reflect any assessment as to whether GCU has engaged in deceptive or unfair conduct.
+Added: Because of ED’s decision to continue to treat GCU as a for-profit institution for Title IV purposes, GCU received the FTC’s notice on October 7, 2021.
+Added: The FTC made clear at that time that receipt of the notice itself did not reflect any assessment as to whether GCU has engaged in deceptive or unfair conduct.
If ED or another regulator determines that statements made by us or on our behalf are in violation of the regulations, we could be subject to sanctions and other liability, which could have a material adverse effect on our business.
+Added: Coordinated actions by certain federal agencies .
+Added: The Transaction was approved by GCU’s Board of Trustees based on its conclusion that it would be in the best interest of GCU’s students, faculty and staff for GCU to operate under the non-profit status that it previously held prior to 2004.
+Added: Prior to the closing of the Transaction, the IRS, HLC and the State of Arizona approved GCU’s non-profit designation.
+Added: However, on November 6, 2019, in connection with its approval of the Transaction without conditions, ED informed GCU that GCU does not satisfy ED’s definition of a non-profit entity and, as a result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.
+Added: Upon receipt of this determination, GCU and GCE entered into ongoing discussions and negotiations that were then provided by GCU to ED regarding proposed changes to the services agreement between GCU and GCE and providing ED, upon request, with an updated transfer pricing study demonstrating that the revenue sharing arrangement reflected in the services agreement reflected fair market value for the services we provide.
+Added: Despite the ongoing discussions and negotiations, ED again denied GCU’s non-profit status in January 2021.
+Added: Thereafter, in order to pursue all available avenues for recourse on this matter, GCU opted to file a lawsuit against the ED, alleging that its 2019 and 2021 decisions overstepped its authority.
+Added: That litigation currently remains ongoing.
+Added: While the Company does not believe that ED’s determination, if ultimately upheld by the federal courts, will impact GCU’s ability to meet all regulatory requirements applicable to proprietary institutions, the determination not to accept GCU’s non-profit status by ED or any other federal agency, if upheld, would continue the limits currently in effect on GCU’s ability to identify itself as a non-profit university in its advertising or other materials and could adversely impact the manner in which GCU is viewed by students, prospective students, alumni, donors and other stakeholders.
+Added: Thereafter, i n October 2021, at the same time that the FTC issued the notice to the 70 for-profit schools as mentioned above, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities in furtherance of the notice.
+Added: Since the FTC’s statement, ED, the VA and the FTC have initiated multiple actions against GCU, including audits, compliance reviews, civil investigative demands, fines and lawsuits, and the FTC has initiated civil investigative demands and a lawsuit against us, that allege, among other things, misrepresentations made in connection with marketing activities, including statements made related to GCU’s non-profit status.
+Added: These actions, which are in addition to the class action and shareholder derivative action against us and certain of our directors and officers that we are currently defending and which largely also relate back to ED’s original decision to deny recognition of GCU’s non-profit status, appear to be coordinated in the manner described in the 2021 FTC statement.
+Added: These actions, or any future actions by ED, FTC or any other federal or state government agencies or accrediting bodies with oversight over us or GCU, if ultimately resolved adversely to us or GCU, could result in monetary penalties and liabilities, further impact GCU’s non-profit status, and/or cause reputational harm .
+Added: See Part I, Item 3.
+Added: Legal Proceedings for a discussion of certain litigation matters to which we are a party.
+Added: In addition, given the importance of the non-profit designation to GCU, it is also possible that GCU might request changes to our contract with them to resolve any disputes it has with government agencies over its non-profit status.
+Added: At this time, we cannot predict what changes those could be or what effect any of those outcomes could have on our business.
Negotiated rulemaking .
2 unchanged sentences
We cannot predict the timing and content of any new regulations or guidance that ED may seek to impose or whether and to what extent ED under the new administration may issue new regulations and guidance that could adversely impact our partner institutions.
−Removed: In May 2021, ED announced its intention to establish negotiated rulemaking committees to prepare proposed regulations on an extensive range of topics including without limitation changes of ownership and change in control of institutions of higher education, certification procedures for participation in the Title IV programs, standards of administrative capability, ability to benefit standards, borrower defense to repayment, discharges for borrowers with a total and permanent disability, closed school loan discharges, discharges for false certification of student eligibility, loan repayment plans, the public service loan forgiveness program, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutional enrollment agreements, financial responsibility standards including events that indicate heightened financial risk, gainful employment, and Pell Grant eligibility for prison education programs.
−Removed: Additionally, on October 4, 2021, ED published a notice in the Federal Register announcing its intention to establish a negotiated rulemaking committee to prepare proposed regulations affecting institutional and programmatic eligibility, including the gainful employment rule and the 90/10 rule changes made by the ARPA.
−Removed: ED published many of these regulations in Fall of 2022, some of which are discussed herein.
−Removed: Additionally, ED is expected to publish proposed regulations related to gainful employment in the Federal Register for public comment in April 2023.
−Removed: If the final regulations are published by or before November 1, 2023, then the regulations typically would not take effect until July 1, 2024.
−Removed: However, we cannot predict the ultimate timing and content of any final regulations following the conclusion of the rulemaking process.
−Removed: The negotiated rulemaking process could lead to future ED regulations that could adversely impact our partner institutions.
On January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking.
8 unchanged sentences
● Improving Use of Deferments and Forbearances.
−Removed: While ED has announced their intent to move forward on these topics in April, no proposed language has yet been put forth.
−Removed: It is expected that ED will soon give dates and times for at least two or more regional field hearings seeking public comment on the proposed regulatory topics they intend to review and rewrite.
−Removed: They will also provide a calendar for when the required negotiated rulemaking sessions will be held.
−Removed: While we will be watching this closely, we cannot predict what, if any impact this rulemaking will have on our business.
+Added: ED commenced its first negotiated rulemaking on January 8, 2024 to address five of these topics:
+Added: State Authorization, Cash Management, Distance Education, Returns to Title IV, and Accreditation.
+Added: In addition to the session held on January 8–11, 2024, ED will hold negotiation sessions on February 5–8, 2024 and March 4–7, 2024.While we will be watching this closely, we cannot predict what, if any, impact this rulemaking will have on our university partners or on our business.
We cannot predict with certainty the ultimate combined impact of the regulatory changes which have occurred in recent years and that may occur as a result of the upcoming negotiated rulemaking, nor can we predict the effect of future legislative or regulatory action by federal, state or other agencies regulating our education programs or other aspects of our operations, how any resulting regulations will be interpreted or whether we and our partner institutions will be able to comply with these requirements in the future.
−Removed: Any such actions by legislative or regulatory bodies that
−Removed: affect our programs and operations could have a material adverse effect on our student population and our partner institutions, including the need to cease offering a number of programs.
+Added: Any such actions by legislative or regulatory bodies that affect our programs and operations could have a material adverse effect on our student population and our partner institutions, including the need to cease offering a number of programs.
Regulatory Standards that May Restrict Institutional Expansion or Other Changes
5 unchanged sentences
Institutions that are fully certified to participate in the Title IV programs are not required to obtain ED’s approval of additional programs that lead to a bachelor’s, professional, or graduate degree at the same degree level as programs previously approved by ED, and, similarly, is not required to obtain advance approval for new programs that prepare students for gainful employment in the same or a related recognized occupation as an educational program that has previously been designated by ED as an eligible program at that institution if it meets certain minimum-length requirements.
−Removed: GCU, because it is currently certified to participate in the Title IV programs on a month-to-month basis, is required to obtain ED approval for new programs, which requirement could impede GCU’s ability to introduce new programs and slow its growth.
+Added: GCU, because it is currently certified to participate in the Title IV programs on a provisional basis, is required to obtain ED approval for new programs, which requirement could impede GCU’s ability to introduce new programs and slow its growth.
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.