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Item 1. Business

2021-03-01 compared with 2020-03-02 · 444 added, 504 removed, 657 unchanged (59% of the section changed)

Strategic Education, Inc., a Maryland corporation formerly known as Strayer Education, Inc., is an education services company that seeks to provide the most direct path between learning and employment through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.

The Company conducts its operations primarily through its wholly-owned subsidiaries, Strayer University and Capella University, both accredited post-secondary institutions of higher education.

The Company’s operations also include certain non-degree programs, mainly focused on software and application development.

The Company generated net revenue of $997 million in 2019 .

Strategic Education, Inc., a Maryland corporation formerly known as Strayer Education, Inc., is an education services company that seeks to provide the most direct path between learning and employment through post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.

The Company conducts its operations primarily through its wholly-owned subsidiaries, Strayer University and Capella University, both accredited post-secondary institutions of higher education located in the United States, as well as Torrens University Australia ("Torrens University"), an accredited post-secondary institution of higher education located in Australia.

The Company’s operations also include certain non-degree programs, mainly focused on software and application development, and other vocational and training programs in a variety of fields.

The Company generated net revenue of $1.0 billion in 2020.

For more information regarding our revenues, profits, and financial condition, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements included in this Annual Report on Form 10-K.

Acquisition of Torrens University and related assets in Australia and New Zealand

On November 3, 2020, we completed the acquisition of Torrens University and related assets in Australia and New Zealand ("ANZ"), pursuant to the sale and purchase agreement dated July 29, 2020 (the "Purchase Agreement").

ANZ includes Torrens University, Think Education, and Media Design School, which together provide diversified student curricula to over 19,000 students across five industry verticals, including business, hospitality, health, education, creative technology and design.

The Company believes that ANZ represents an attractive portfolio of institutions with a similar focus on innovation, academic outcomes, improved affordability and career advancement as the Company.

We also believe that ANZ provides an attractive platform for future growth, driven by Australia’s status as an attractive destination for international students, as well as the potential to use ANZ as a platform for expansion across the ASEAN region.

Pursuant to the Purchase Agreement, the aggregate consideration paid was approximately $658.4 million in cash, which reflected the original agreed upon purchase price of $642.7 million, plus a $15.7 million adjustment reflecting an estimated $11.0 million of net cash at close, and an estimated $4.7 million related to higher net working capital.

These estimated adjustments are subject to a final true-up of net cash and net working capital, based on the actual closing accounts to be finalized by both parties.

The aggregate consideration paid in the transaction was funded using cash on hand and borrowings under our revolving credit facility.

Acquisition of Capella Education Company

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The merger solidifies our position as a national leader in education innovation, and provides scale that will enable greater investment in improving student academic and career outcomes while maintaining our focus on affordability.

The merger is also expected to create significant cost synergies for us.

As of December 31, 2019 , our segments and wholly-owned subsidiaries consisted of the following:

As of December 31, 2020, our reportable segments consisted of the following:

Strayer University Segment

Strayer University

Founded in 1892, Strayer University is an institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice at 64 physical campuses, predominantly located in the eastern United States, and online.

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JWMI is a Top-25 Princeton Review-ranked online MBA program.

Strayer University is accredited by the Middle States Commission on Higher Education (“Middle States” or “Middle States Commission”), one of the seven regional collegiate accrediting agencies recognized by the Department of Education.

Strayer University is accredited by the Middle States Commission on Higher Education (“Middle States” or “Middle States Commission”), an institutional collegiate accrediting agency recognized by the Department of Education.

By offering its programs both online and in physical classrooms, Strayer University provides its working adult students with flexibility and convenience.

Strayer University, with its online offerings, attracts students from around the country and throughout the world.

DevMountain is a software development school within Strayer University with locations in Lehi, Utah and Dallas, Texas.

DevMountain’s primary offerings are on-site, 12-week immersive programs in Web Development, iOS Development, Quality Assurance, and UX Design.

Beginning in March 2020, DevMountain's programs were offered exclusively online as a result of the COVID-19 pandemic.

The programs include instructor-led sessions, guest lectures, presentations and learning activities in the mornings, followed by afternoon labs and group projects.

Throughout the program and beyond course hours, students have access to DevMountain’s dedicated student success and employer relations teams as well as instructors and mentors.

DevMountain does not participate in Title IV programs.

Hackbright Academy

Hackbright Academy ("Hackbright") is a San Francisco-based software engineering school for women with a mission to close the gender gap in the high-demand software engineering space.

Hackbright’s core offering is an on-site, 12-week immersive software development program known as the “Fellowship Program.” Beginning in March 2020, Hackbright's programs were offered exclusively online as a result of the COVID-19 pandemic.

Students spend the first half of the program primarily in lecture-based learning combined with labwork, in which students collaborate in pairs to build their programming knowledge.

In the second half of the program, lectures continue, while the labwork gives way to more advanced project-based work, and the program concludes with an intense focus on career planning.

Throughout the program, Hackbright supplements the learning experience with field trips to technology companies, exposing students to various technologies and career possibilities, as well as a series of networking events.

Hackbright provides a high level of support and guidance, including assigned mentors who provide the student with support and technical advice, and an advisor who guides the student through the program.

Hackbright also engages employers through placement agreements, in which Hackbright earns a placement fee in exchange for providing access to, and facilitating the transition of alumnae into employment at companies seeking in-demand, qualified female software engineers.

Hackbright does not participate in Title IV programs.

Capella University Segment

Capella University

Capella University is an online post-secondary education company that offers a variety of bachelor's, master's, and doctoral degree programs primarily delivered to working adults.

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and education.

Capella University was founded in 1993 and is accredited by the Higher Learning Commission, one of the seven regional collegiate accrediting agencies recognized by the Department of Education.

Capella University focuses on master's and doctoral degrees, with 68% of its learners enrolled in a master’s or doctoral degree program.

Capella University was founded in 1993 and is accredited by the Higher Learning Commission (the "Higher Learning Commission" or "HLC"), an institutional collegiate accrediting agency recognized by the Department of Education.

Capella University focuses on master's and doctoral degrees, with approximately 70% of its students enrolled in a master’s or doctoral degree program.

Its academic offerings are built with competency-based curricula and designed to demonstrate competencies through real-world, authentic assessments delivered in an online format that is both convenient and flexible.

Non-Degree Programs Segment

DevMountain is a software development school offering Web Development, iOS Development, and UX Design programs in person at DevMountain’s classrooms in Lehi, Utah, Dallas, Texas, and Phoenix, Arizona, and online.

Hackbright Academy (“Hackbright”) is a software engineering school for women offering accelerated software development programs, together with placement services and coaching.

Hackbright’s programs are delivered in person through Hackbright’s classrooms in the San Francisco Bay Area.

Sophia Learning (“Sophia”) is an innovative company which leverages technology and high quality academic content to provide self-paced online courses eligible for transfer credit into over 2,000 colleges and universities.

Sophia Learning

Sophia Learning ("Sophia") is an innovative company which leverages technology and high quality academic content to provide self-paced online general education courses recommended by the American Council on Education for college credit.

Sophia does not participate in Title IV programs.

Australia/New Zealand Segment

Founded in 2013, Torrens University is the only investor-funded University in Australia.

Torrens University offers undergraduate and graduate courses primarily in five fields of study:

business, design and creative technology, health, hospitality, and education.

Courses are offered both online and on physical campuses.

Torrens University is registered with the Tertiary Education Quality and Standards Agency ("TEQSA"), the regulator for higher education providers and universities throughout Australia, as an Australian University that is authorized to self-accredit its courses.

Think Education is a vocational registered training organization and accredited higher education provider in Australia.

Think Education delivers education at several campuses in Sydney, Melbourne, Brisbane, and Adelaide as well as through online study.

Think Education and its colleges are accredited in Australia by TEQSA and the Australian Skills Quality Authority, the regulator for vocational education and training organizations that operate in Australia.

Media Design School is a globally recognized private tertiary institution for creative and technology qualifications in New Zealand.

Media Design School offers industry-endorsed courses in 3D animation and visual effects, game art, game programming, graphic and motion design, digital media artificial intelligence, and creative advertising.

Media Design School is accredited in New Zealand by the New Zealand Qualifications Authority, responsible for the quality assurance of non-university tertiary training providers.

Industry Background

The United States market for post-secondary education is large, fragmented, and competitive.

According to the National Center for Education Statistics, the total number of post-secondary learners enrolled as of the fall of 2018 was 20.0 million, reflecting a 7.3% decrease from record enrollment in the fall of 2010.

Approximately 1.2 million of these learners attended proprietary institutions.

According to the National Center for Education Statistics, the total number of post-secondary students enrolled as of the fall of 2018 was 20.0 million, reflecting a 7.3% decrease from record enrollment in the fall of 2010.

Approximately 1.2 million of these students attended proprietary institutions.

Controversy about the cost of higher education, under-employment of many college graduates, and persistent negative media coverage have caused some prospective students to question the value proposition of higher education.

According to the National Student Clearinghouse Research Center, college enrollments in all higher education sectors declined 1.3% and 2.5% in the fall of 2019 and 2020, respectively.

Enrollment at proprietary colleges declined 15.1% and 2.1% in the fall of 2018 and 2019, respectively.

Enrollment at proprietary colleges declined 2.1% in the fall of 2019 and increased 5.3% in the fall 2020.

The industry is heavily dependent on continued availability of funding for programs under Title IV of the Higher Education Act (“Title IV programs”), and concerns about potential reductions in such funding also could negatively affect demand for higher education.

Notwithstanding weaker demand dynamics over the past few years, we believe that over time, demand for post-secondary education will increase as a result of demographic, economic, and social trends.

Notwithstanding weaker demand dynamics over the past few years and the recent impact on enrollment resulting from the COVID-19 pandemic, we believe that over time, demand for post-secondary education in the United States will increase as a result of demographic, economic, and social trends.

Census Bureau has reported that approximately 62.3 million adults over the age of 25 in the United States do not have more than a high school education, and approximately 34.7 million adults over the age of 25 have some college experience but have not completed a college degree.

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• a number of initiatives underway to reduce the cost of a post-secondary education;

continued demand from working adults for programs offered by regionally accredited institutions.

• continued demand from working adults for programs offered by accredited institutions.

The Australian higher education market has been growing 3-5% annually since 2009.

In 2019, Australian higher education enrollments totaled approximately 1.6 million, compared to 1.1 million in 2009, resulting in a 42% increase in total enrollments over the last 10 years.

The Australian higher education market is expected to continue growing in the coming years, with a significant share of growth coming from international students.

The number of international students enrolled in Australian higher education institutions has grown from 0.3 million in 2009 to 0.5 million in 2019.

Due to Australia closing its borders in response to the COVID-19 pandemic, international enrollments will likely experience a period of decline.

The post-secondary education market is highly competitive, with no private or public institution holding a significant market share.

Strayer University and Capella University (the “Universities”) compete for students and learners primarily with traditional public and private degree-granting accredited colleges and universities, other proprietary degree-granting accredited schools, and alternatives to higher education.

In addition, we face competition from various non-traditional, credit-bearing and noncredit-bearing education programs, provided by both proprietary and not-for-profit providers, including massive open online courses offered worldwide without charge by traditional educational institutions and other direct-to-consumer education services.

Strayer University, Capella University, and Torrens University (the “Universities”) compete primarily with traditional public and private degree-granting accredited colleges and universities, other proprietary degree-granting accredited schools, and alternatives to higher education.

In addition, we face competition from various non-traditional, credit-bearing and noncredit-bearing education programs, provided by proprietary, public, and not-for-profit providers, including massive open online courses offered worldwide without charge by traditional educational institutions and other direct-to-consumer education services.

As the proportion of traditional colleges providing alternative learning modalities increases, we will face increasing competition for students from traditional colleges, including colleges with well-established reputations for excellence and colleges in states that offer various forms of “free college” programs.

As online learning matures as a modality for education delivery across higher education, we believe that the intensity of the competition we face will continue to increase.

We believe the key factors affecting our competitive position include the quality of our programs offered, the quality of other services provided to learners, our reputation among students and in the general marketplace, the cost and perceived value of our offerings, the employment rate and terms of employment for our graduates, the ease of access to our offerings, the quality and reputation of our faculty and other employees, the quality of our campus facilities and online platforms, the time commitment required to complete our programs and obtain a degree, the quality and size of our alumni base, and our relationship with other learning institutions.

We believe the key factors affecting our competitive position include the quality of our programs offered, the quality of other services provided to students, our reputation among students and in the general marketplace, the cost and perceived value of our offerings, the employment rate and terms of employment for our graduates, the ease of access to our offerings, the quality and reputation of our faculty and other employees, the quality of our campus facilities and online platforms, the time

commitment required to complete our programs and obtain a degree, the quality and size of our alumni base, and our relationship with other learning institutions.

Company Strengths

The Company has a track record of providing practical and convenient education programs and solutions for working adults and employers.

Through its merger with Capella Education Company on August 1, 2018 (“the Merger”), the Company retains the individual strengths of its two independently operated universities while creating a combined corporate and shared service platform that enables significant cost synergies and best practice sharing, both of which help us deliver significant benefits to students.

The Company has a track record of providing practical and convenient education programs and solutions for working adults, employers, and recent high school graduates.

Through its merger with Capella Education Company on August 1, 2018 (the "Merger”) and its acquisition of ANZ on November 3, 2020, the Company retains the individual strengths of its independently operated universities while creating a combined corporate and shared-service platform and best practice sharing, both of which help us deliver significant benefits to students.

We believe the following strengths position us to capitalize on the demand for post-secondary education:

• Focus on Innovation.

The Company values innovation and actively invests in the educational experience to improve student success and employment outcomes, while also addressing national challenges including the affordability of higher education and meeting the skill requirements of employers.

Capella University’s competency-based learning infrastructure and direct assessment capabilities, and Strayer University’s video, simulation and content capabilities are examples of this drive to transform education delivery and learning by working adults.

As a combined Company, both Universities can leverage these transformational capabilities.

The Company values innovation and actively invests in the educational experience to improve student success and employment outcomes, while also addressing challenges including the affordability of higher education and meeting the skill requirements of employers.

Capella University’s competency-based learning infrastructure and direct assessment capabilities, Strayer University’s video, simulation and content capabilities, and Torrens University's virtual career expo are examples of this drive to transform education delivery and learning by working adults.

As a combined Company, the Universities can leverage these transformational capabilities.

• Consistent operating history.

Strayer University has been in continuous operation since 1892 and Capella University since 1991, and both have demonstrated an ability to operate consistently and grow profitably.

Strayer University, Capella University, and Torrens University have been in continuous operation since 1892, 1991, and 2013, respectively, and all three institutions have demonstrated an ability to operate consistently and grow profitably.

The combined Company has continued this track record, with a broader, more diversified product offering, a balanced revenue mix, cost and revenue synergies, and greater scale.

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We offer programs in practical areas of adult education.

In order to keep pace with a changing knowledge-based economy, we constantly strive to meet the evolving needs of our students, learners and their current and prospective employers by regularly refining, updating, and adding to our portfolio of educational programs.

In order to keep pace with a changing knowledge-based economy, we constantly strive to meet the evolving needs of our students and their current and prospective employers by regularly refining, updating, and adding to our portfolio of educational programs.

The Company has a diversified program portfolio that includes Strayer University’s programs in business, including the Jack Welch Management Institute, accounting, economics and information technology, Capella University’s competency-based programs in healthcare and counseling, as well as a robust doctoral portfolio, and ANZ's post-graduate programs in business administration, information systems and public health, its renowned Blue Mountains International Hotel Management and Billy Blue Design schools, recently accredited nursing bachelor's degree and award-winning creative and digital technology qualifications.

This program diversity will help the Company better meet the educational needs of students in the modern economy.

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and career counseling.

Increasingly, we are leveraging data and analytics to create personalized experiences for our students and learners, which is reflected in our early cohort persistence improvements and continued high student satisfaction.

Increasingly, we are leveraging data and analytics to create personalized experiences for our students, which are reflected in our early cohort persistence improvements and continued high student satisfaction.

• Flexible program offerings.

We offer flexible programs that allow students to attend classes and complete coursework during the day, in the evening, and on weekends throughout the calendar year at our on-ground campuses, and at the student or learner’s convenience through our comprehensive online program offerings.

We offer flexible programs that allow students to attend classes and complete coursework during the day, in the evening, and on weekends throughout the calendar year at our on-ground campuses, and at the student's convenience through our comprehensive online program offerings.

• Attractive and convenient campus locations.

Strayer University’s campuses are located in growing metropolitan areas, mostly in the Mid-Atlantic and Southern regions where there are large populations of adults with demographic characteristics similar to those of our typical students.

The campuses are attractive and modern, offering conducive learning environments in convenient locations.

In 2019, Capella University opened its first campus center, which provides local students of its online classes with a physical location to study and to meet with enrollment counselors and academic advisors.

This physical campus center is unique in comparison to most online education programs and positions Capella University to support its online learners more effectively.

Capella University opened its first co-located campus center with Strayer University in Augusta, Georgia and plans to open more campus centers in 2020 and beyond.

Physical presences continue to be an important strength for the Company, notwithstanding the fact that the vast majority of academic activity occurs online.

Strayer University and Capella University have campuses and campus centers that are attractive and modern, offering conducive learning environments in convenient locations, and provide many online students with a physical location to study and to meet with enrollment counselors and academic advisors.

These physical campuses and campus centers are unique in comparison to most online education programs and positions Strayer University and Capella University to support their online learners more effectively.

ANZ campuses are located in central business districts of major cities across Australia and New Zealand, with accessibility and proximity to industry partners, and offer a focused and personal learning experience to their students.

• Established brand names and alumni support.

Strayer University and Capella University are established brand names in post-secondary adult education.

Our students and graduates are effective ambassadors of both brands through their work at companies across corporate America and, along with our growing alumni networks, foster greater brand awareness and additional referral opportunities for new students and learners.

Their students and graduates are effective ambassadors of both brands through their work at companies across corporate America and, along with our growing alumni networks, foster greater brand awareness and additional referral opportunities for new students.

ANZ continues to build the reputation and brand

awareness of Torrens University through the success of its students and graduates, its research programs and its relationships with key industry partners, while also leveraging the existing strengths in its established college brands, and Think Education and Media Design School businesses.

Company Strategy

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• Enhance student experience — Our students are predominately working adults who are furthering their education in order to advance their careers and professional lives.

Our students are busy with work and family responsibilities that

leave little time for other endeavors.

Our students are busy with work and family responsibilities that leave little time for other endeavors.

Thus, we make every effort to make all interactions with our students productive, and we are constantly looking for ways to serve them better.

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Additionally, Capella University’s FlexPath direct assessment model provides opportunity to drive affordability through the potential for lower tuition costs, reduced time to completion, and increased flexibility.

Strayer University and Capella University have also instituted various other tuition reductions and scholarships.

Strayer University, Capella University and Torrens University have also instituted various other tuition reductions and scholarships.

We continue to monitor and assess the impact of our affordability initiatives and explore other ways to make our offerings as affordable as possible.

We have also begun to deploy more aggressive technology innovations, including artificial intelligence and automation, which enable us to lower our operating costs and thus improve our ability to support lower tuition.

Our focus on affordability is further supported by the corporate-level efficiencies achieved through the Merger.

Our focus on affordability is further supported by the corporate-level efficiencies achieved through the Merger and ANZ acquisition.

• Establish new platforms for growth — We are constantly looking for new ways to leverage our existing resources and capabilities to grow.

The Merger provided an opportunity to leverage best-in-class processes and practices to accelerate growth, and we believe we can expand benefits to our students and students of other institutions through opportunistic business combinations.

The CEC Merger and ANZ acquisition each provided an opportunity to leverage best-in-class processes and practices to accelerate growth, and we believe we can expand benefits to our students and students of other institutions through opportunistic business combinations.

In 2018, we launched SEI Ventures, which is a seed-stage venture fund that supports pioneering education tech start-ups focused on transformational technologies that improve student success.

In addition to providing capital, the venture fund offers portfolio companies the opportunity to pilot technologies at both of our Universities and our coding boot camps, subject to compliance with applicable laws.

In addition to providing capital, the venture fund offers portfolio companies the opportunity to pilot technologies at our U.S.

based universities and our coding boot camps, subject to compliance with applicable laws.

We also continue to develop new programs and concentrations.

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Strayer University is an institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice at 64 physical campuses, predominantly located in the eastern United States, and online.

Strayer University is accredited by the Middle States Commission, one of the seven regional collegiate accrediting agencies recognized by the Department.

Strayer University is accredited by the Middle States Commission, an institutional collegiate accrediting agency recognized by the Department of Education.

By offering its programs both online and in physical classrooms, Strayer University provides its working adult students more flexibility and convenience.

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Strayer University regularly evaluates new programs and degrees to stay current with the needs of students and their employers.

As of December 31, 2019 , Strayer University offered programs in the following areas:

Graduate Programs

Undergraduate Programs

Master of Business Administration (M.B.A.) Degree

Bachelor of Science (B.S.) Degree

Jack Welch Executive Master of Business Administration (M.B.A.) Degree

Criminal Justice

Master of Education (M.Ed.) Degree

Information Technology

Master of Public Administration (M.P.A.) Degree

Bachelor of Business Administration (B.B.A.) Degree

Master of Science (M.S.) Degree

Acquisition and Contract Management

Health Services Administration

Entrepreneurship

Human Resource Management

Information Assurance

Health Services Administration

Information Systems

Hospitality and Tourism Management

Human Resource Management

Project Management

Retail Management

Social Media Marketing

Joe Gibbs Performance Management

Bachelor of Applied Science in Management (B.A.S.M.) Degree

Associate in Arts (A.A.) Degree

Acquisitions and Contract Management

Business Administration

Information Systems

Information Technology

Diploma Program

Acquisition and Contract Management

Each undergraduate degree program includes courses in oral and written communication skills, as well as mathematics and various disciplines in the humanities and social sciences.

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The normal course load for a full-time faculty member is five courses per quarter for each of three quarters, or 15 courses per academic year.

Certain high performing faculty have been promoted into 10x teaching roles where they are provided with new technology and support resources that enable them to teach much larger class cohorts than was previously possible.

Certain high-performing faculty have been promoted into what we call "10x" teaching roles where they are provided with new technology and support resources that enable them to teach much larger class cohorts than was previously possible.

None of Strayer University's employees are a party to any collective bargaining or similar agreement.

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The Board of Trustees consists of Dr.

Beason, Chairwoman, and currently eight other members.

Beason, Chairwoman, and currently nine other members.

Strayer University’s By-Laws prescribe that a majority of members be independent from Strayer University and the Company to assure independent oversight of all academic programs and services.

Of the nine members, six are independent.

The Boards of the two Universities are independent of each other and have no overlapping members.

Of the ten members, six are independent.

The Boards of Trustees of Stayer University and Capella University are independent of each other, as well as from the Board of Directors of Torrens University, and have no overlapping members.

Within the academic, strategic and financial parameters set by the Board of Trustees, Strayer University is managed on a daily basis by the Strayer University President.

The President is charged with the responsibility of overseeing the implementation of the policies established by the Board of Trustees and is supported in this function by senior administrative officers, including the Provost/Chief Academic Officer of Strayer University.

The President is charged with the responsibility of overseeing the implementation of the policies established by the Board of Trustees and is supported in this function by senior administrative

officers, including the Provost/Chief Academic Officer of Strayer University.

The majority of Strayer University’s operations are centralized within the President’s Office or Strayer University’s senior administrative staff offices.

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Direct response methods (direct, digital, and social media marketing) are used to generate inquiries from potential students.

All information relevant to prospective students is published on the website, www.strayer.edu.

Strayer University maintains booths and information tables at appropriate conferences and expos, as well as at transfer days at community colleges.

Information relevant to prospective students is published on the website, www.strayer.edu.

Strayer University maintains booths and information tables at various conferences and expos, as well as at transfer days at community colleges.

Recommendations from our alumni network also maintain and enhance Strayer University’s reputation and promote its quality education.

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Of the students enrolled in Strayer University’s programs at the beginning of the 2020 fall quarter, approximately 64% were age 31 or older, and approximately 90% were engaged in part-time study (fewer than three courses each quarter for undergraduate students and fewer than two for graduate students).

In the 2019 fall quarter, Strayer University’s undergraduate students registered for an average of approximately two courses, and graduate students registered for an average of approximately one course.

Strayer University has a very diverse student population.

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The following is a breakdown of Strayer University students by program level as of the 2020 fall term:

Percentage of

students Percentage of

total students

Graduate Certificate

Total Non-Degree

Bachelor’s 40,770 80 %

Master’s 8,608 17 %

Associate's 1,309 3 %

Total Students 50,773 100 %

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Capella University offers a variety of doctoral, master’s, and bachelor’s programs, primarily for working adults.

Capella University focuses on master's and doctoral degrees, with 68% of its learners enrolled in a master’s or doctoral degree program.

Capella University focuses on master's and doctoral degrees, with approximately 70% of its students enrolled in a master’s or doctoral degree program.

Capella University's academic offerings are built with competency-based curricula and are delivered in an online format that is convenient and flexible.

Capella University designs its offerings to help working adult learners develop specific competencies they can apply in their workplace.

At December 31, 2019 , Capella University offered over 2,000 online courses and 53 degree programs with 128 graduate and undergraduate specializations.

Capella University is accredited by the Higher Learning Commission, one of the seven regional collegiate accrediting agencies recognized by the Department of Education.

Capella University designs its offerings to help working adult students develop specific competencies they can apply in their workplace.

Capella University is accredited by the Higher Learning Commission, an institutional collegiate accrediting agency recognized by the Department of Education.

Capella University’s program offerings cover six disciplines:

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and education.

At December 31, 2019 , Capella University offered 53 degree programs with 128 graduate and undergraduate specializations within these disciplines:

Public Service Leadership

Doctor of Philosophy in Criminal Justice

Master of Science in Emergency Management

Doctor of Philosophy in Emergency Management

Master of Public Administration (MPA)

Doctor of Emergency Management (DEM)

Master of Social Work (MSW)

Doctor of Public Administration (DPA)

Master of Social Work - Advanced Standing

Doctor of Social Work (DSW)

Bachelor of Science (BS) in Criminal Justice

Master of Science in Criminal Justice

Nursing and Health Sciences

Doctor of Health Administration (DHA)

Master of Science in Nursing (MSN)

General Health Administration

Care Coordination (FlexPath option available)

Health Care Leadership

Nursing Education (FlexPath option available)

Health Care Quality & Analytics

Nursing Informatics (FlexPath option available)

Health Policy and Advocacy

Nursing Leadership and Administration (FlexPath option available)

Doctor of Public Health (DrPH)

RN-to-MSN Care Coordination (FlexPath option available)

Doctor of Nursing Practice (DNP)

RN-to-MSN Nursing Education (FlexPath option available)

Master of Health Administration (MHA)

RN-to-MSN Nursing Informatics (FlexPath option available)

General Health Administration (FlexPath option available)

RN-to-MSN Nursing Leadership and Administration (FlexPath option available)

Health Care Informatics (FlexPath option available)

Health Care Leadership (FlexPath option available)

Bachelor of Science in Health Care Administration

Health Care Operations

Health Information Management (FlexPath option available)

Master of Public Health (MPH)

Leadership (FlexPath option available)

Bachelor of Science (BS) in Public Health

Bachelor of Science in Nursing (BSN) (FlexPath option available)

Doctor of Philosophy in Psychology

Master of Science in Psychology

Behavior Analysis

Applied Behavior Analysis

Developmental Psychology

Child and Adolescent Development (FlexPath option available)

Educational Psychology

Educational Psychology (FlexPath option available)

General Psychology

General Psychology (FlexPath option available)

Industrial/Organizational Psychology

Industrial/Organizational Psychology (FlexPath option available)

Doctor of Psychology (PsyD)

Sport Psychology (FlexPath option available)

Clinical Psychology

Bachelor of Science in Psychology

Doctor of Psychology (PsyD) in School Psychology

General Psychology (FlexPath option available)

Master of Science in Clinical Psychology

Bachelor of Science in Psychology Pre-Counseling

Applied Research

Clinical Counseling

Business and Technology

Doctor of Business Administration (DBA)

Doctor of Philosophy in Information Technology

General Information Technology

Business Intelligence

Information Assurance and Cybersecurity

Global Operations and Supply Chain Management

Information Technology Education

Human Resource Management

Project Management

Information Technology Management

Master of Science in Human Resources Management

General Human Resource Management

Project Management

Master of Science in Analytics

Strategy and Innovation

Master of Science in Information Assurance and Cybersecurity

Doctor of Philosophy in Business Management

Digital Forensics

Health Care Security

General Business Management

Network Defense

Human Resource Management

Master of Science in Information Technology

Information Technology Management

Cybersecurity

Project Management

Enterprise Networks and Cloud Computing

Strategy and Innovation

General Information Technology

Master of Business Administration (MBA)

Project Management

Self-Designed (FlexPath option available)

Bachelor of Science in Business

Health Care Management (FlexPath option available)

Accounting (FlexPath option available)

Human Resource Management (FlexPath option available)

Business Administration (FlexPath option available)

Project Management (FlexPath option available)

Doctor of Information Technology (DIT)

Health Care Management (FlexPath option available)

General Information Technology

Human Resource Management (FlexPath option available)

Information Assurance and Cybersecurity

Management and Leadership (FlexPath option available)

Information Technology Education

Project Management

Project Management (FlexPath option available)

Bachelor of Science (BS) in Information Technology

General Information Technology (FlexPath option available)

Health Information Management

Information Assurance and Cybersecurity (FlexPath option available)

Project Management (FlexPath option available)

Software Development

Counseling and Human Services

Doctor of Human Services (DHS)

Master of Science in Human Services

Advanced Program Evaluation and Data Analytics

Leadership and Organizational Management

Program Evaluation and Data Analytics

Doctor of Philosophy in Human Services

Social and Community Services

Multidisciplinary Human Services

Master of Science in Marriage and Family Counseling/Therapy

Social and Community Services

General Marriage and Family Counseling/Therapy

Doctor of Philosophy in Advanced Studies in Human Behavior

Master of Science in Clinical Mental Health Counseling

General Advanced Studies in Human Behavior

Master of Science in School Counseling

Doctor of Philosophy in Counselor Education and Supervision

Master of Science in Addiction Studies

Doctor of Education (EdD)

Doctor of Philosophy in Education (PhD)

Adult Education

Curriculum and Instruction

Instructional Design for Online Learning

Educational Leadership

Leadership in Educational Administration

Performance Improvement Leadership

Leadership for Higher Education

Reading and Literacy

Nursing Education

Education Specialist (EdS)

Post-secondary and Adult Education

Curriculum and Instruction

Special Education Leadership

Leadership in Educational Administration

Master of Science in Education Innovation and Technology

Personalized and Competency-Based Instruction

Competency-Based Instruction

Reading and Literacy

General Educational Technology

Teacher Leader in Digital Transformation

Instruction in the 1:1 Environment

Teacher Leader in K-12 Studies

Personalized Learning

Master of Science in Higher Education

Professional Growth and Development

Adult Education

Master of Education (MEd) in Teaching and Learning (FlexPath option available)

Higher Education Leadership and Administration

Integrative Studies

Master of Science in Education

Curriculum and Instruction

Early Childhood Education

Early Childhood Education Studies

English Language Learning and Teaching

Instructional Design for Online Learning

Leadership in Educational Administration

Reading and Literacy

Special Education Teaching

Training and Performance Improvement

Capella University's GuidedPath credit-hour courses are offered on a quarterly academic schedule, which generally coincides with calendar quarters.

Capella University offers new learners in most programs the flexibility to begin the first course in their program of study at the beginning of any month.

These learners then enroll in subsequent courses on a regular quarterly course schedule.

Depending on the program, learners generally enroll in one to two courses per quarter.

Capella University offers new students in most programs the flexibility to begin the first course in their program of study at the beginning of any month.

These students then enroll in subsequent courses on a regular quarterly course schedule.

Depending on the program, students generally enroll in one to two courses per quarter.

Each course has a designated start date, and the majority of courses last for ten weeks.

To meet traditional Capella University best practices, GuidedPath learners typically need to access the online courseroom multiple times each week.

However, the courses are developed to be taken asynchronously, so that learners can attend each course as it fits their weekly schedule.

GuidedPath learners are required to respond to questions posed by the instructor, as well as comments made by other learners.

This format provides for an interactive experience in which each learner is both encouraged and required to be actively engaged.

To meet traditional Capella University best practices, GuidedPath students typically need to access the online courseroom multiple times each week.

However, the courses are developed to be taken asynchronously, so that students can attend each course as it fits their weekly schedule.

GuidedPath students are required to respond to questions posed by the instructor, as well as comments made by other students.

This format provides for an interactive experience in which each student is both encouraged and required to be actively engaged.

Faculty are also required to have substantive engagement in each course each week.

Additional learning activities may include reading, simulations, team projects and/or research papers.

Capella University’s online format provides a digital record of learner interactions for the course instructor to assess learners’ levels of engagement and demonstration of required competencies.

Capella University’s online format provides a digital record of student interactions for the course instructor to assess students’ levels of engagement and demonstration of required competencies.

The course design also includes assessment of course competencies.

In the FlexPath model, learners’ demonstration of competencies is directly assessed by faculty when the learner submits an assessment.

FlexPath learners set their own deadlines, demonstrate competencies via authentic assessment, and move through courses at their own speed, giving them an opportunity to accelerate or slow down to meet their learning needs and schedule demands.

The primary exception to Capella University’s online format is for doctoral learners and for certain master’s degree candidates pursuing professional licenses.

These learners participate in periodic residencies, year-in-residencies, and supervised practica and internships as a complement to their courses.

Residencies typically last from three to 42 days and are required, on average, once per year for learners in applicable programs.

The supervised practica and internships vary in length based on the program in which the learner is enrolled.

Capella University also offers certificate programs, which consist of a series of courses focused on a particular area of study, for learners who seek to enhance their skills and knowledge.

In the FlexPath model, students’ demonstration of competencies is directly assessed by faculty when the student submits an assessment.

FlexPath students set their own deadlines, demonstrate competencies via authentic assessment, and move through courses at their own speed, giving them an opportunity to accelerate or slow down to meet their learning needs and schedule demands.

The primary exception to Capella University’s online format is for doctoral students and for certain master’s degree candidates pursuing professional licenses.

These students participate in periodic residencies, year-in-residencies, and supervised practica and internships as a complement to their courses.

Residencies typically last from three to 42 days and are required, on

average, once per year for students in applicable programs.

The supervised practica and internships vary in length based on the program in which the student is enrolled.

Capella University also offers certificate programs, which consist of a series of courses focused on a particular area of study, for students who seek to enhance their skills and knowledge.

Online certificate courses can be taken to prepare for a graduate degree program or on a stand-alone basis.

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Faculty chairs supervise the faculty in their respective specializations.

Core faculty and part-time faculty teach courses, serve on curriculum or other relevant committees, work on curriculum development in their areas of expertise, and serve as comprehensive exam and dissertation mentors to doctoral learners.

None of Capella University’s employees are a party to any collective bargaining or similar agreement with Capella University.

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In addition, professional development and training is provided for all faculty members on an ongoing basis.

To evaluate the performance of faculty members, courseroom activity is regularly monitored and assessments are made with respect to both learner satisfaction with the courseroom experience and learner performance against course outcomes.

To evaluate the performance of faculty members, courseroom activity is regularly monitored and assessments are made with respect to both student satisfaction with the courseroom experience and student performance against course outcomes.

Organization of Capella University

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Capella University’s By-Laws prescribe that a majority of members be independent from Capella University and the Company to provide independent oversight of all academic programs and services.

Of the twelve members, nine are independent.

Of the twelve members, eight are independent.

The Boards of Trustees of Stayer University and Capella University are independent of each other, as well as from the Board of Directors of Torrens University, and have no overlapping members.

Within the academic, strategic and financial parameters set by the Board of Trustees, Capella University is managed on a daily basis by the Capella University President.

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The majority of Capella University’s operations are centralized within the President’s Office or Capella University’s senior administrative staff offices.

Capella University engages in a range of relationship-based marketing activities to build the Capella brand, differentiate it from other educational providers, increase awareness and consideration with prospective learners, generate inquiries for enrollment, and stimulate referrals from current learners and graduates.

Capella University engages in a range of relationship-based marketing activities to build the Capella brand, differentiate it from other educational providers, increase awareness and consideration with prospective students, generate inquiries for enrollment, and stimulate referrals from current students and graduates.

These marketing activities may include Internet, television, print, radio, email, social media, and direct mail advertising campaigns.

Other marketing activities include supportive outreach to current learners, participation in seminars and trade shows, and development of key marketing relationships with corporate, healthcare, armed forces, government, and educational organizations.

Online advertising (display, social, mobile, search, and through aggregators) currently generates the largest volume of inquiries from prospective learners.

Other marketing activities include supportive outreach to current students, participation in seminars and trade shows, and development of key marketing relationships with corporate, healthcare, armed forces, government, and educational organizations.

Online advertising (display, social, mobile, search, and through aggregators) currently generates the largest volume of inquiries from prospective students.

Student Profile

As of December 31, 2019 , Capella University enrollment was 39,220 learners.

Of the Capella University learners, approximately 81% were female, and approximately 50% were people of color.

Capella University’s learner population is geographically distributed primarily throughout the United States.

The following summarizes Capella University learners as of December 31, 2019 :

Percentage of

total learners

As of December 31, 2020, Capella University enrollment was 41,073 students.

Of these students, approximately 71% were engaged in part-time study, approximately 82% were female, and approximately 43% of students self-reporting their ethnicity were minorities.

Capella University’s student population is geographically distributed primarily throughout the United States.

The following summarizes Capella University students as of December 31, 2020:

Program Number of

students Percentage of

total students

Master's 19,130 47 %

Bachelor's 12,928 31 %

Doctoral 8,210 20 %

Other 805 2 %

Total 41,073 100 %

Student Admissions

Capella University’s admission process is designed to offer access to prospective learners who seek the benefits of a post-secondary education while providing feedback to learners regarding their ability to complete their chosen program successfully.

Prior to the first course in their program of study, learners are generally required to complete an orientation to online education and a skills assessment, the results of which help develop an understanding of the specific needs and readiness of each individual learner.

Learners must successfully complete the first course in their program of study to continue their education.

Learners enrolling in bachelor’s programs must have a high school diploma or a GED and demonstrate competence in writing and logical reasoning during the first course of their program of study.

Capella University’s admission process is designed to offer access to prospective students who seek the benefits of a post-secondary education while providing feedback to students regarding their ability to complete their chosen program successfully.

Prior to the first course in their program of study, students are generally required to complete an orientation to online education and a skills assessment, the results of which help develop an understanding of the specific needs and readiness of each individual student.

Students must successfully complete the first course in their program of study to continue their education.

Students enrolling in bachelor’s programs must have a high school diploma or a GED and demonstrate competence in writing and logical reasoning during the first course of their program of study.

Additionally, applicants to undergraduate programs who do not have transferable credits from an accredited higher education institution are required to pass assessments in writing and reading prior to acceptance into the program.

Learners enrolling in graduate programs must have the requisite undergraduate academic degree from an accredited institution and a specified minimum grade point average.

Students enrolling in graduate programs must have the requisite undergraduate academic degree from an accredited institution and a specified minimum grade point average.

In addition to standard admission requirements, Capella University requires applicants to some programs to provide additional application material and information and/or interview with and be approved by faculty.

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Capella University's overall tuition rates vary by discipline, length of program, and degree level.

Learners in the GuidedPath credit hour programs are charged tuition on a per course or per term basis.

Students in the GuidedPath credit hour programs are charged tuition on a per course or per term basis.

Per course prices vary by discipline, number of credit hours, and degree level.

Per course prices for bachelor's level GuidedPath credit hour programs ranged from approximately $1,100 to $2,500 for the 2019-2020 academic year (the academic year that began in July 2019), and from approximately $1,000 to $2,400 for the 2018-2019 academic year (the academic year that began in July 2018).

Per course prices for bachelor's level GuidedPath credit hour programs were $2,500 for the 2020-2021 academic year (the academic year that began in July 2020), and from approximately $1,100 to $2,500 for the 2019-2020 academic year (the academic year that began in July 2019).

Per course prices for master's level GuidedPath credit hour programs ranged from approximately $1,700 to $3,300 for both the 2020-2021 academic year and the 2019-2020 academic year.

Per course prices for doctoral level GuidedPath credit hour programs ranged from approximately $2,400 to $3,800 for the 2020-2021 academic year and from $2,500 to $4,300 for the 2019-2020 academic year.

Learners in select doctoral programs are charged tuition at a fixed quarterly amount, regardless of the number of courses for which the learner registers.

Students in select doctoral programs are charged tuition at a fixed quarterly amount, regardless of the number of courses for which the student registers.

Quarterly tuition rates ranged from approximately $3,200 to $4,900 per quarter for the 2020-2021 academic year and from $4,400 to $4,900 per quarter for the 2019-2020 academic year.

Tuition for FlexPath master's and bachelor's programs is priced at a flat, fixed amount for each 12-week subscription period.

Tuition for FlexPath doctoral, master's and bachelor's programs is priced at a flat, fixed amount for each 12-week subscription period.

There is no maximum course load during each subscription period;

however, a maximum of two FlexPath courses can be taken at any one time.

Tuition for bachelor's level FlexPath programs ranged from $2,500 to $3,200 per 12-week subscription period in the 2019-2020 academic year, and from $2,400 to $3,000 per 12-week subscription period in the 2018-2019 academic year.

Tuition for master's level FlexPath programs ranged from $2,400 to $2,800 per 12-week subscription period for the 2019-2020 academic year and from $2,300 to $2,700 per 12-week subscription period for the 2018-2019 academic year.

“Other” in the preceding enrollment table primarily includes learners enrolled in certificate programs.

Learners in credit hour certificate programs are charged tuition on a per course basis, which varies by discipline and the number of credit hours.

Tuition for bachelor's level FlexPath programs ranged from $2,500 to $3,200 per 12-week subscription period in both the 2020-2021 academic year and the 2019-2020 academic year.

Tuition for master's level FlexPath programs ranged from $2,400 to $2,800 per 12-week subscription period for both the 2020-2021 academic year and the 2019-2020 academic year.

Tuition for Capella's Doctor of Nursing Practice in the FlexPath format is $3,200 per 12-week subscription period for the 2020-2021 academic year.

“Other” in the preceding enrollment table primarily includes students enrolled in certificate programs.

Students in credit hour certificate programs are charged tuition on a per course basis, which varies by discipline and the number of credit hours.

Per course prices for certificate programs ranged from approximately $1,700 to $3,200 for the 2020-2021 academic year and from $1,100 to $4,500 for the 2019-2020 academic year.

Tuition for FlexPath certificate programs was $2,750 per 12-week subscription period for the 2019-2020 academic year and ranged from $2,100 to $2,700 per 12-week subscription period for the 2018-2019 academic year.

Tuition for FlexPath certificate programs was $2,750 per 12-week subscription period for both the 2020-2021 academic year and the 2019-2020 academic year.

Year-over-year tuition increases are specific to the program or specialization and depend on market conditions, program differentiation or changes in operating costs that have an impact on price adjustments of individual programs or specializations.

These program costs will vary by learner based upon the program and specialization selected, the number of courses taken per quarter and the number of transfer credits earned.

These program costs will vary by student based upon the program and specialization selected, the number of courses taken per quarter and the number of transfer credits earned.

Capella University offers scholarships and tuition discounts, under a variety of different programs, to members of the armed forces and in connection with various corporate, healthcare, federal and educational marketing relationships, for example:

armed forces relationships and discount program available to all members of the U.S.

armed forces, including active duty members, veterans, National Guard members, reservists, civilian employees of the Department of Defense and immediate family members of active duty personnel.

armed forces, including active duty members, veterans, National Guard members, reservists, civilian employees of the U.S.

Department of Defense and immediate family members of active duty personnel.

• Corporate, healthcare and federal relationships with more than 500 large and mid-size organizations.

• Educational relationships that encourage graduates of nearly 300 community colleges to enroll in Capella University undergraduate programs and faculty and administrators to enroll in Capella University graduate programs.

As of December 31, 2019 , approximately 31% of Capella University learners received a discount in connection with these programs.

Throughout the past several years, Capella University expanded and refined its offering of learner success scholarships under a variety of different programs to promote affordability and encourage learners to remain enrolled.

Learners must meet admission requirements and enroll and apply within certain timeframes to receive the scholarships, which are generally awarded over a period of four to eight consecutive quarters.

As of December 31, 2019 , approximately 15% of Capella University learners were awarded a scholarship.

As of December 31, 2020, approximately 30% of Capella University students received a discount in connection with these programs.

Throughout the past several years, Capella University expanded and refined its offering of student success scholarships under a variety of different programs to promote affordability and encourage students to remain enrolled.

Students must meet admission requirements and enroll and apply within certain timeframes to receive the scholarships, which are generally awarded over a period of four to eight consecutive quarters.

As of December 31, 2020, approximately 21% of Capella University students were awarded a scholarship.

Career Development Services

Career counseling, job search advising, and career management support is provided by staff to all Capella University learners and alumni.

Capella University career counselors interact with learners and alumni via email, telephone, and online seminars to assist with career-related activities such as resume development;

Career counseling, job search advising, and career management support is provided by staff to all Capella University students and alumni.

Capella University career counselors interact with students and alumni via email, telephone, and online seminars to assist with career-related activities such as resume development;

curriculum vitae and cover letter development;

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and career advancement efforts.

The Career Center’s online iGuide resources help learners gather occupational information and trends, access job postings and view sample job search documents.

Counselors also assist with prospective learners’ selection of the Capella University program and specialization that best suits their professional aspirations.

Non-Degree Programs

The Company’s Non-Degree Programs are provided by DevMountain, Hackbright, and Sophia.

These programs provide workers and their employers with access to courses and trainings focused on software development, general education and other high demand job-ready skills over a shorter time period as compared to the degree programs.

In the fall of 2019, DevMountain was merged into Strayer University and thus now falls under its regulatory purview.

DevMountain is a software development school with locations in Lehi, Utah;

Dallas, Texas;

and Phoenix, Arizona.

DevMountain’s primary offerings are on-site, 12-week immersive programs in Web Development, iOS Development, and UX Design.

The programs include instructor-led sessions, guest lectures, presentations and learning activities in the mornings, followed by afternoon labs and group projects.

Throughout the program and beyond course hours, learners have access to DevMountain’s dedicated student success and employer relations teams as well as instructors and mentors.

DevMountain does not participate in Title IV programs.

Hackbright is a San Francisco-based software engineering school for women with a mission to close the gender gap in the high-demand software engineering space.

Hackbright’s core offering is an on-site, 12-week immersive software development program known as the “Fellowship Program.” Learners spend the first half of the program primarily in lecture-based learning combined with labwork, in which learners collaborate in pairs to build their programming knowledge.

In the second half of the program, lectures continue, while the labwork gives way to more advanced project-based work, and the program concludes with an intense focus on career planning.

Throughout the program, Hackbright supplements the learning experience with field trips to technology companies, exposing learners to various technologies and career possibilities, as well as a series of networking events.

Hackbright provides a high level of support and guidance, including assigned mentors who provide the learner with support and technical advice, and an advisor who guides the learner through the program.

Hackbright does not participate in Title IV programs.

Sophia is an innovative company which leverages technology and high quality academic content to provide self-paced online courses eligible for transfer credit into over 2,000 colleges and universities.

Sophia does not participate in Title IV programs.

As of December 31, 2019 , Strategic Education, Inc.

had a total of 3,076 full-time employees, including 411 full-time faculty members and 2,665 non-faculty staff.

Full-time faculty members teach on average 4-5 courses per quarter.

The balance of classes are taught by adjunct faculty who normally teach 1-2 courses per academic quarter.

Although we had approximately

2,440 adjunct faculty throughout the year, not all of them teach every quarter.

In the 2019 fall quarter, approximately 25% of our courses were taught by full-time faculty.

Because we are not research universities, all faculty members are expected to spend their time teaching and advising students.

In addition to our faculty, our non-faculty staff, including 153 part-time employees, serve in the areas of information systems, financial aid, recruitment and admissions, student administration, marketing, human resources, corporate accounting, and other administrative functions.

The Career Center’s online iGuide resources help students gather occupational information and trends, access job postings and view sample job search documents.

Counselors also assist with prospective students’ selection of the Capella University program and specialization that best suits their professional aspirations.

Australia/New Zealand

Torrens University, Think Education, and Media Design School (collectively the "ANZ Institutions") offer undergraduate and graduate degree courses as well as vocational programs primarily focused in five key disciplines:

business, design and creative technology, health, hospitality, and education.

The variety of educational programs offered include both accredited and non-accredited courses that are offered online, in person at physical campuses, or a combination of online and in person.

The ANZ Institutions have strong industry partnerships and design the majority of their courses in collaboration with these industry partners.

Further, a significant portion of the teaching staff also work in the industry related to the subject/discipline in which they teach and are therefore industry-connected subject matter experts.

The faculty at ANZ Institutions include both full-time and part-time faculty members.

In Australia and New Zealand, the primary qualification faculty members must have to teach at an institution of higher education is a degree that is at least one level higher than the relevant discipline they are teaching, in order to demonstrate their advanced skills, knowledge and understanding of the subject matter.

Torrens University is required to have a robust and active research agenda in order to maintain its registration as a University.

As such, all faculty are expected to be involved in scholarship and/or research programs.

Torrens University has an outstanding group of senior research leaders in the disciplines of artificial intelligence and health, and are forming new research groups in business, design, education, and disability.

All new faculty are required to complete an academic on-boarding program, which includes an introduction to the institution they are joining.

The on-boarding program is followed by a rolling schedule of training sessions and symposiums during the year addressing key topics relating to teaching and learning, thus enabling staff continuously to develop their skills and remain up-to-date with new developments.

In addition, an Academic Professional Development program is available to all

academic staff, which provides opportunities from core competency development to advanced teaching methodologies.

These programs are delivered as formal trainings, national symposiums, online facilitated seminars, informal community-based professional learning events and access to a learning and teaching resource repository and network.

In addition, all staff at the ANZ Institutions are able to take any course at the ANZ Institutions free of charge.

Organization of the ANZ Institutions

Each ANZ Institution has a local Governing Board and an Academic Board.

The Governing Board meets at least quarterly and provides oversight of the management of the institutions, which includes providing input into strategic direction, risk management, academic governance, reporting and disclosure, performance, corporate governance and delegations.

The Academic Board, on delegated authority from the Governing Board, has principal responsibility for quality assurance of all academic activities of the institutions, including the maintenance of high standards in teaching and scholarship.

The Executive Leadership team oversees the operational leadership and strategic direction of the institutions with clear delegations and direction from each of the institution’s Governing Boards.

Marketing and sales initiatives vary depending on the type of prospective students being targeted.

Marketing to international students is primarily delivered through international agents and events that are largely relationship-based while marketing to domestic students is primarily delivered digitally.

These marketing activities include digital paid campaigns, social media engagement as well as events such as open days for students to come learn about the institutions, seminars or webinars that are offered both in person and virtual, as well as through high school career fairs or agents’ career fairs for international students.

Student Profile

Students attending the ANZ Institutions primarily consist of recent high school graduates as well as working adults.

The student population includes domestic students, representing citizens or permanent residents of Australia and New Zealand, and international students.

Approximately half of students are international students that are attending classes in person (typically on a student visa), at a foreign partner campus, or online.

Student Admissions

Torrens University and Think Education (Australia)

Students enrolling in higher education undergraduate courses must satisfy minimum admission criteria and any course prerequisites.

The admission requirements vary based on an applicant's current level of education and work experience.

Students enrolling in higher education graduate courses must demonstrate their ability to undertake postgraduate studies in the proposed field.

The admission criteria are course-specific and may include formal qualifications at the Australian Qualifications Framework ("AQF") Level 7 or above, a combination of formal qualifications and relevant professional experience, or extensive high-level relevant professional experience.

All applications for postgraduate courses are assessed on an individual basis.

In addition, when applying for postgraduate study, applicants may be considered under the guidelines of Special Entry and Educational Access Schemes designed to broaden access to the University, address perceived disadvantage or encourage studies in particular disciplines.

This group includes, but is not limited to, applicants with physical disabilities, applicants from geographically isolated areas, applicants with economically disadvantaged backgrounds and Aboriginal or Torres Strait Islander applicants.

Students enrolling in a vocational education and training program must meet minimum requirements for admission including any course specific requirements and English language requirements.

In addition, domestic applicants who wish to access vocational education and training ("VET") student loans will be assessed to establish if they have the aptitude to complete the qualification.

Evidence to demonstrate this aptitude includes a completed Australian secondary education or equivalent, or a qualification at the level or below an applicant’s desired course according to the AQF.

Media Design School (New Zealand)

Students enrolling in undergraduate courses at Media Design School must have formal academic qualifications from a secondary or tertiary-level school.

The specific entry requirements are program-specific and may include interviews, portfolios, work and life experience, informal and non-formal learning, or a combination of these methods.

Students enrolling in graduate level courses must demonstrate their capacity to undertake postgraduate studies in their proposed field.

The admission requirements are program-specific and may include formal qualifications, extensive relevant professional experience, or a combination of formal qualifications and relevant professional experience.

In addition, applicants must provide evidence of

meeting the English language proficiency level required by each program and as required by the New Zealand Qualifications Authority.

Tuition and Fees

The ANZ Institutions charge tuition by subject and the tuition rates vary by subject.

Tuition rates are reviewed at least annually.

In addition, the ANZ Institutions offer a range of scholarships and discounts to students that are both merit-based and based on specific circumstances.

Students are typically required to pay tuition in advance of starting a course.

Domestic students in Australia will choose to pay either out of pocket or by taking a loan through use of the government’s Higher Education Loan Program or Vocational Student Loan Program.

Domestic students in New Zealand may also utilize government loans to fund tuition, and in addition may be eligible for a period of ‘fees free’ study funded by the government.

International students are not eligible for government funding and pay out of pocket.

Career Development Services

Career development services are offered through the Careers Connect platform, which is a digital platform available to students on-demand.

Through the platform students can access resume and cover letter review services;

search and apply for jobs;

search and apply for volunteering, work-integrated learning, industry placements and virtual internships;

complete virtual mock interviews;

access online resources and webinars relating to job search, career planning, and graduate employment;

and view and register for careers and industry-related events.

The ANZ Institutions also partner with Forage to bring students free virtual work experience to help them build their employability skills.

These short experiences, developed by global industry leaders, help students gain practical work skills and receive a certificate upon completion.

In addition, each student is assigned a Success Coach upon starting their course of study to help prepare and connect the student to their chosen industry.

The Success Coach's focus is to improve the employability of each student by using their industry knowledge to maximize the impact of the student's application and presentation of their personal brand.

Human Capital Resources

As of December 31, 2020, Strategic Education employed 3,679 full-time employees worldwide, of whom 912 were based outside of the U.S.

In the U.S., the Company employed 2,767 full-time employees, including 385 full-time faculty members, and 2,382 non-faculty staff.

Outside the U.S., the Company employed 246 full-time faculty members, and 666 non-faculty staff.

SEI is committed to operating transparently and with the highest standards of integrity.

Our guiding principles and leadership behaviors emphasize student-centric priorities and drive us as we continue to build a vibrant, diverse and inclusive culture.

Recurring organization health surveys offer employees a way to share feedback with SEI senior leaders on priorities, leadership culture, and the workplace, and are used to shape company goals.

The executive leadership team hosts frequent company-wide town hall meetings and mentoring sessions that inform employees about the Company’s initiatives and results and provide insight on skills and attributes that drive success.

The Company also supports numerous platforms for employee engagement, such as community and employee network groups which provide opportunities for employees to experience inclusive community at SEI through development opportunities, informal mentoring and volunteering.

SEI honors and celebrates diversity, equity and inclusion as core institutional principles.

The Company is fully engaged in cultivating a diverse and inclusive workforce and environment that reflects all stakeholders.

This activity is aligned with SEI’s commitment to advancing diversity in key roles.

In 2019, SEI created the CEO’s Council on Diversity, Equity, and Inclusion, which is charged with promoting these initiatives across the organization.

Online resources are also available to help SEI employees foster an inclusive environment and demonstrate empathy and cultural competence.

The Company is dedicated to attracting, developing and retaining top talent.

SEI offers compensation and benefits packages that are market-competitive and performance-based.

The compensation programs and policies reflect the Company’s commitment to reward performance that aligns with its values and priorities.

SEI fosters the growth and career development of its employees by creating solutions that support employees to deliver high performance, grow their careers, and contribute to SEI’s mission to enable economic mobility of its students through education.

Online learning resources are available that cover a broad range of skills, including leadership, professional development, innovation, communication and technology.

The Company has also prioritized identifying high-performing employees to accelerate their development and foster a strong, diverse succession pipeline.

Information About Our Executive Officers

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In the ordinary course of business, we develop many kinds of intellectual property that are or will be the subject of copyright, trademark, service mark, patent, trade secret, or other protections.

Such intellectual property includes, but is not limited to, our courseware materials for classes taught online or other distance-learning means and business know-how and internal processes and procedures developed to respond to the requirements of our operations and various education regulatory agencies.

Such intellectual property includes, but is not limited to, our courseware materials for classes taught online or by other distance-learning means and business know-how and internal processes and procedures developed to respond to the requirements of our operations and various education regulatory agencies.

In many instances, our course content is produced for us by faculty and other content experts under work-for-hire agreements pursuant to which we own the course content in return for a fixed development fee.

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and select foreign jurisdictions for registration of the marks, including the marks “STRAYER” and “CAPELLA” for educational services, and certain other distinctive logos, along with various other trademarks, service marks and domain names related to our offerings.

In addition, we have the rights to trade names, logos and other intellectual property specific to our international institutions including "Torrens University Australia," "Think Education Group," and "Media Design School", in the countries in which those institutions operate.

Regulatory Environment

As regionally accredited institutions of higher education operating in multiple jurisdictions, Strayer University and Capella University are subject to accreditation rules and varying state licensing and regulatory requirements.

As institutionally accredited institutions of higher education operating in multiple jurisdictions, Strayer University and Capella University are subject to accreditation rules and varying state licensing and regulatory requirements.

In addition, the Higher Education Act and the regulations promulgated thereunder require all higher education institutions that participate in the various Title IV programs, including Strayer University and Capella University, to comply with detailed substantive and reporting requirements and to undergo periodic regulatory scrutiny.

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Among other things, Congress may reauthorize the Higher Education Act and adopt, repeal or amend other legislation affecting higher education institutions.

Congress or the Administration may also delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions, or the Administration may promulgate new regulations via a negotiated rulemaking process, or otherwise.

Congress or the Administration may also delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions, or the Administration or states may promulgate new regulations via a negotiated rulemaking process, or otherwise.

In addition, the Administration may interpret, apply, and enforce Title IV and other regulations in a manner different from past guidance and practice.

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To be eligible to participate in Title IV programs, Strayer University and Capella University must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education.

An institution must, among other things, be authorized to offer its educational programs by each state in which it is physically located and maintain institutional accreditation by a recognized accrediting agency, as discussed below.

An institution must, among other things, be authorized to offer its educational programs by each state in which it maintains physical presence, as defined by the state, and maintain institutional accreditation by a recognized accrediting agency, as discussed below.

The institution also must be certified by the Department of Education to participate in Title IV programs and follow Department of Education rules regarding the awarding and processing of funds issued under Title IV programs.

For purposes of Title IV programs, Strayer University and all of its campuses are considered a single institution of higher education, such that

Department of Education requirements applicable to an institution of higher education are generally applied to all of Strayer University’s campuses in the aggregate rather than on an individual basis.

For purposes of Title IV programs, Strayer University and all of its campuses are considered a single institution of higher education, such that Department of Education requirements applicable to an institution of higher education are generally applied to all of Strayer University’s campuses in the aggregate rather than on an individual basis.

Capella University is also considered to be a single institution of higher education.

On October 11, 2017, the Department and Strayer University executed a new Program Participation Agreement, approving Strayer University’s continued participation in Title IV programs with full certification through June 30, 2021.

On October 11, 2017, the Department and Strayer University executed a new Program

Participation Agreement, approving Strayer University’s continued participation in Title IV programs with full certification through June 30, 2021.

Strayer University's application for re-certification must be submitted by March 30, 2021, and Strayer intends to file the application prior to the deadline.

As a result of the August 1, 2018 merger, Capella University experienced a change of ownership, with the Company as its new owner.

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Accredited institutions or programs are subject to periodic review by accrediting bodies to determine whether such institutions or programs continue to maintain the performance, integrity, and quality required for accreditation.

If an institution’s or program’s performance does not meet its accrediting agency’s (or other regulator’s) expectations or applicable standards, then its operations may be conditioned or severely constrained, or the institution’s accreditation may be withdrawn, depending on the severity of the noncompliance.

If an institution’s or program’s performance does not meet its accrediting agency’s (or possibly other regulators') expectations or applicable standards, then its operations may be conditioned or severely constrained, or the institution’s accreditation may be withdrawn, depending on the severity of the noncompliance.

Accreditation is an important attribute of Strayer University and Capella University.

Colleges and universities depend on accreditation to evaluate transferability of credit and applications to graduate schools.

Employers rely on the accreditation status of institutions when evaluating a candidate’s credentials or considering tuition reimbursement programs.

Employers sometimes rely on the accreditation status of institutions when evaluating a candidate’s credentials or considering tuition reimbursement programs.

Students rely on accreditation status for assurance that an institution maintains quality educational standards.

In order for institutions to be eligible to participate in federal student financial assistance programs, they must be accredited by an institutional accreditor recognized by the Secretary of Education.

On November 1, 2019, after a negotiated rulemaking and public comment process, the Department of Education amended its regulations governing the recognition of accrediting agencies, effective July 1, 2020.

The final regulations revise in some respects the Department’s process for recognition and review of accrediting agencies, the criteria used by the Department to recognize accrediting agencies, and Department’s requirements for accrediting agencies in terms of their oversight of accredited institutions and programs.

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The Higher Education Act charges the National Advisory Committee on Institutional Quality and Integrity (“NACIQI”) with recommending to the Secretary of Education which accrediting or state approval agencies should be recognized as reliable authorities for judging the quality of post-secondary institutions and programs.

NACIQI reviewed Middle States at its February 2018 meeting and recommended that the Secretary of Education extend its recognition for five years.

NACIQI reviewed the Middle States Commission at its February 2018 meeting and recommended that the Secretary of Education extend its recognition for five years.

NACIQI also reviewed the Higher Learning Commission at its February 2018 meeting and recommended that the Secretary of Education extend its recognition for five years.

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Strayer University

Strayer University has been institutionally accredited since 1981 by Middle States, a regional accrediting agency recognized by the Secretary of Education.

Strayer University has been institutionally accredited since 1981 by Middle States, an institutional accrediting agency recognized by the Secretary of Education.

Middle States accredits degree-granting public and private colleges and universities in its region (including Delaware, Washington, D.C., Maryland, New Jersey, New York, Pennsylvania, Puerto Rico, and the U.S.

Virgin Islands), including distance education programs offered by those institutions.

Middle States is the same accrediting agency that accredits such universities as Georgetown University, Columbia University, the University of Maryland, and other degree-granting public and private colleges and universities in its region.

As a result of the State Authorization and Accreditation final rules, Middle States may also conduct accrediting activities in any other geographic region within or outside of the United States without regard to its specified region.

Strayer University went through a period of reaffirmation of accreditation that began in 2015 and lasted through June 2017, when Middle States reaffirmed Strayer University’s accreditation.

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All of Strayer University’s substantive changes require prior Middle States approval.

Such changes include, but are not limited to, certain new educational programs, certain contractual arrangements with other institutions providing a portion of an educational program, establishment or closure of additional locations and branch campuses, and changes in ownership or control.

Such changes include, but are not limited to, educational programs at different levels or different subject areas, certain contractual arrangements with other institutions providing a portion of an educational program, establishment or closure of additional locations and branch campuses, and changes in ownership or control.

In 2000, the agencies that accredit higher education institutions in various regions of the United States adopted a Policy Statement on Evaluation of Institutions Operating Interregionally.

Under that policy, both the home regional accreditor and the host regional accreditor cooperate to evaluate an institution that delivers education at a physical site in the host accreditor’s region.

Although the home region is solely responsible for final accreditation actions, as Strayer University opens and operates campuses in regions outside Middle States’ region, the host regional accreditors may elect to participate in the accreditation process of such expansion operations.

Under that policy, both the home regional accreditor and the host regional accreditor cooperated to evaluate an institution that delivers education at a physical site in the host accreditor’s region.

Given the recent changes in federal law repealing the strict geographic scope of institutional accreditors, this policy statement is, for the most part, moot.

However, different institutional accreditors have treated the policy statement differently.

Capella’s institutional accreditor, HLC, has continued to demonstrate deference to the policy statement while Strayer’s institutional accreditor, Middle States, has withdrawn the corresponding internal policy.

In addition to institutional accreditation, Strayer University has obtained specialized or programmatic accreditation, or professional recognition, from the following organizations for specific programs:

the Accreditation Council for Business Schools and Programs (“ACBSP”), the Society for Human Resource Management (“SHRM”), the National Security Agency’s Committee on National Security Systems, and the Teacher Education Accreditation Council (“TEAC”), which consolidated with the National Council for Accreditation of Teacher Education to form the Council for the Accreditation of Educator Preparation (“CAEP”).

The baccalaureate degree program in nursing at Strayer University is accredited by the Commission on Collegiate Nursing Education (“CCNE”).

the Accreditation Council for Business Schools and Programs (“ACBSP”), the Society for Human Resource Management (“SHRM”), and the National Security Agency’s Committee on National Security Systems.

Capella University

Capella University has been institutionally accredited since 1997 by the Higher Learning Commission, a regional accrediting agency recognized by the Secretary of Education.

Capella University has been institutionally accredited since 1997 by the Higher Learning Commission, an institutional accrediting agency recognized by the Secretary of Education that accredits degree-granting public and private colleges and universities in its region (Arizona, Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, West Virginia, Wisconsin, and Wyoming).

The Higher Learning Commission is the same accrediting agency that accredits such universities as Northwestern University, the University of Chicago, the University of Minnesota and other degree-granting public and private colleges and universities in its region.

As a result of the State Authorization and Accreditation final rules, the Higher Learning Commission may also conduct accrediting activities in any other geographic region within or outside of the United States without regard to its specified region.

In January 2015, Capella University’s accreditation with the Higher Learning Commission was reaffirmed.

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The Higher Learning Commission is continuously developing new standards and approval processes under which it evaluates programs and institutions.

Consistent with that approach, the Higher Learning Commission in August 2016 adopted policy changes which include giving the Commission more discretion to designate institutions to be in "financial distress” or under "government investigation.” Receipt of these designations could affect future accreditation status and eligibility for Title IV aid under the Department of Education’s new “financial responsibility” triggers.

While the Company believes its strong reputation and compliance record will continue to place Capella University in favorable standing under the new policy, there is sufficient breadth and discretion within the policy such that government investigation, litigation, or financial or other circumstances could result in an impact to our business from the application of the policies.

In addition, the Higher Learning Commission enacted policy changes, effective September 1, 2019, that mandated certain recruitment, admissions and related institutional practices, as well as guidelines for shared services relationships that took effect immediately.

While the Company believes its strong reputation and compliance record will continue to place Capella University in favorable standing, there is sufficient breadth and discretion within the policy that government investigation, litigation, or financial or other circumstances could result in an impact to our business from the application of the policies.

In addition to institutional accreditation, Capella University has obtained specialized or programmatic accreditation, or professional recognition, for specific programs including from the following organizations:

Computing Accreditation Commission of the Accreditation Board for Engineering and Technology (“ABET”);

Accreditation Council for Business Schools and Programs (“ACBSP”);

Council for Accreditation of Counseling and Related Programs (“CACREP”);

Council for the Accreditation of Educator Preparation (“CAEP”);

Commission on Accreditation for Marriage and Family Therapy Education (“COAMFTE”);

Council on Social Work Education (“CSWE”);

Project Management Institute - Global Accreditation Center for Project Management (“PMI-GAC”);

the Society for Human Resource Management (“SHRM”).

The BSN, MSN, and DNP degree programs at Capella University are accredited by the Commission on Collegiate Nursing Education (“CCNE”).

The Association for Behavior Analysis International;

Computing Accreditation Commission of the Accreditation Board for Engineering and Technology;

Council for Accreditation of Counseling and Related Programs;

Council for the Accreditation of Educator Preparation;

Commission on Accreditation for Marriage and Family Therapy Education;

Council on Social Work Education;

the National Security Agency and the U.S.

Department of Homeland Security;

Project Management Institute - Global Accreditation Center for Project Management;

The BSN, MSN, and DNP degree programs at Capella University are accredited by the Commission on Collegiate Nursing Education.

Shared-Services Agreements

As part of the Merger, Strategic Education, Inc.

entered into shared services agreements with both Universities to provide certain services, including but not limited to finance, legal, human resources, information technology, financial aid, and marketing.

Strategic Education, Inc.

has entered into shared-services agreements with both U.S.

Universities to provide certain services, including but not limited to finance, legal, human resources, information technology, financial aid, and marketing.

The services are governed by Master Services Agreements, which provide, among other things, for oversight of the services by the governing board of each University.

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Strayer University is subject to extensive regulation in each jurisdiction in which campuses are located, including in 2020:

Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Washington, D.C.

Capella University is registered as a private institution with the Minnesota Office of Higher Education (“MOHE”) pursuant to Minnesota Statute sections 136A.61-131A.71, as required for most post-secondary private institutions that grant degrees at the associate level or above in Minnesota, and as required by the Higher Education Act to participate in Title IV programs.

In 2019, Capella University was also authorized to operate in Georgia.

Strayer University and Capella University will be subject to similar extensive regulation in those additional states in which we may expand our operations in the future.

State laws and regulations affect our operations and may limit our ability to introduce educational programs or establish new campuses.

Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Washington, D.C.

Capella University is registered as a private institution with the Minnesota Office of Higher Education pursuant to Minnesota Statute sections 136A.61-131A.71, as required for most post-secondary private institutions that grant degrees at the associate level or above in Minnesota, and as required by the Higher Education Act to participate in Title IV programs.

In 2020, Capella University was also authorized to operate in Colorado, Florida, Georgia and Tennessee.

Strayer University and Capella University will be subject to similar extensive regulation in those additional states in which we may physically expand our operations in the future.

State laws and regulations affect our operations and may limit our ability to introduce new and existing educational programs or establish new campuses.

On October 29, 2010, the Department of Education adopted new regulations, effective July 1, 2011, that set new requirements on states for their authorization of schools for purposes of Title IV eligibility.

We believe that every state above in which the Universities are authorized has processes in place that comply with these requirements.

We believe that every state above in which Strayer University and Capella University are authorized has processes in place that comply with these requirements.

Hackbright Academy is licensed to operate in the State of California by the Bureau for Private Post-secondary Education (“BPPE”).

DevMountain programs are approved in Utah, Texas and Arizona.

In the fall of 2019, DevMountain was merged into Strayer University and thus now falls under its regulatory purview.

DevMountain programs are approved in Utah and Texas.

In the fall of 2019, DevMountain merged into Strayer University.

Licensure of Online Programs

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Institutions may obtain such authorization directly from the state or (except in California) through a state authorization reciprocity agreement.

A state authorization reciprocity agreement is defined as an agreement between two or more states that authorizes an institution located and legally authorized in a state covered by the agreement to provide post-secondary education through distance education or correspondence courses to students in other states covered by the agreement and does not prohibit a participating state from enforcing its own laws with respect to higher education.

A state authorization reciprocity agreement is defined as an

agreement between two or more states that authorizes an institution located and legally authorized in a state covered by the agreement to provide post-secondary education through distance education or correspondence courses to students in other states covered by the agreement and does not prohibit a participating state from enforcing its own laws with respect to higher education.

The regulations also require institutions to document the state process for resolving complaints from students enrolled in programs offered through distance education or correspondence courses for each state in which such students reside.

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If an institution’s distance education program is found not to be in compliance, the institution may lose its ability to award Title IV funds for that distance education program.

On November 1, 2019, the Department released final regulations on accreditation and state authorization of distance education, which are scheduled to become effective July 1, 2020.

On November 1, 2019, the Department released final regulations on accreditation and state authorization of distance education, which became effective July 1, 2020.

The rules maintain the requirement from the 2016 rule that institutions offering post-secondary education through distance education or correspondence courses to students located in a state in which the institution is not located must meet state requirements in that state or participate in a state authorization reciprocity agreement.

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Whereas the disclosure requirements in the 2016 rule apply only to distance education programs, the disclosure requirements in the 2019 rule apply to both campus-based and online programs.

The Department has announced that institutions may in their discretion implement early the regulations relating to state authorization and institutional information disclosures but neither University chose to do so.

Beginning July 1, 2017, California required out-of-state private post-secondary educational institutions that offer distance education to California residents to register with the Bureau for Private Postsecondary Education.

On August 24, 2020, the Department released final regulations on distance education and innovation.

The rules granted institutions more flexibility to offer distance education and competency-based education direct assessment programs.

Additionally, the rules created new definitions for certain terms including “academic engagement” and “regular and substantive interaction” to provide more clarity regarding Title IV requirements for distance education programs.

The final rule will become effective July 1, 2021, with the option for early implementation.

Both Capella University and Strayer University opted to early implement the final rules in December 2020.

Beginning July 1, 2017, California required out-of-state private post-secondary educational institutions that offer distance education to California residents to register with the BPPE.

Strayer University and Capella University have filed BPPE registration applications and received confirmation of the registration.

State Authorization Reciprocity Agreement

Varying state regulations, fees, and paperwork embedded in the many different state approaches to regulation of post-secondary institutions have limited the ability to grow across state lines to offer students high quality choices for education and have hindered national workforce initiatives.

Varying state regulations, fees, and paperwork embedded in the many different state approaches to regulation of post-secondary institutions have historically limited the ability to grow across state lines to offer students high-quality choices for education and have hindered national workforce initiatives.

As a solution to the ever-growing complexity of the regulatory oversight of institutions of higher learning on a state-by-state basis, the State Authorization Reciprocity Agreement (“SARA”) has emerged to aid in the advancement of distance education.

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The Universities’ home states, in turn, will continually monitor the institutions’ compliance with SARA standards.

With this initiative, the Universities will be able to expand distance education offerings with increased consistency and ease.

With this initiative, the Universities are able to expand distance education offerings with increased consistency and ease.

The only state that does not now participate in SARA is California.

The reciprocity agreement does not affect university operations that constitute a physical presence in a particular state, and the Universities will continue to follow individual state regulations for on-ground campuses and activities.

To the extent that such approval is required by state law, the Universities also must obtain approval from each state that is not a SARA member (currently only California) if the Universities seek to enroll students from those states in the Universities’ distance education programs.

At this time, SARA does not deal with professional licensing board approval for programs leading to state licensing in fields such as nursing, teacher education, psychology, and the like, and the Universities must seek such approvals on a state-by-state basis, as needed.

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States have specific requirements that an individual must satisfy in order to be licensed as a professional in a specified field.

Capella University graduates often seek to obtain professional licensure in their chosen fields following graduation

because it will enhance employment opportunities or they are legally required to do so for employment purposes.

Capella University graduates often seek to obtain professional licensure in their chosen fields following graduation because it will enhance employment opportunities or they are legally required to do so for employment purposes.

Their success in obtaining licensure depends on several factors, including each individual’s personal and professional qualifications as well as other factors related to the degree or program completed, such as:

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Capella University has a team dedicated to professional licensure that works directly with learners.

The licensure team develops and maintains extensive resources to inform learners of unique state licensing requirements prior to enrollment and throughout their program.

The licensure team develops and maintains extensive resources to inform learners of unique state licensing requirements prior to enrollment and throughout their program, including delivering direct disclosures to students in licensure-track programs as required by the U.S.

Department of Education.

The University’s catalog and websites also describe the requirements for obtaining professional licensure, paired with specific disclaimers that reiterate learner responsibility for licensure outcomes.

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Compliance with state or professional licensure or certification requirements is the learner’s sole responsibility.

Other Approvals

Strayer University and Capella University are approved by appropriate authorities for the education of active duty military personnel and qualifying family members, veterans and members of the selected reserve and their spouses and dependents, as well as for the rehabilitation of veterans.

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Department of State, has implemented a mandatory electronic reporting system for schools that enroll foreign students and exchange visitors.

Strayer University is also authorized to participate in state financial aid programs in Pennsylvania, Florida, and Vermont.

Capella University is authorized to participate in the Minnesota GI Bill program.

Strayer University is also authorized to participate in state financial aid programs in Pennsylvania, Florida, Alabama, and Vermont.

Capella University is authorized to participate in the Minnesota GI Bill and the Minnesota Indian Scholarship programs.

Financing Student Education

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Department of Defense (“DOD”), and various private organizations.

Eligible students at Strayer University may also participate in educational assistance programs administered by the Commonwealth of Pennsylvania, the State of Florida, and the State of Vermont.

Some Capella University students may qualify to participate in the Minnesota GI Bill program.

Eligible students at Strayer University may also participate in educational assistance programs

administered by the Commonwealth of Pennsylvania, the State of Florida, the State of Alabama, and the State of Vermont.

Some Capella University students may qualify to participate in the Minnesota GI Bill program or the Minnesota Indian Scholarship program.

Under the Post-9/11 Veterans Educational Assistance Act of 2008 (as amended), sometimes referred to as the “New GI Bill,” eligible veterans may receive, among other benefits, tuition benefits up to the net cost to the student (after accounting for state and federal aid, scholarships, institutional aid, fee waivers, and similar assistance), subject to a cap of $25,162 for non-public domestic institutions for 2020-2021.

In addition, eligible students pursuing an educational program solely through distance learning are eligible to receive a housing stipend of $895 per month, half the amount available to students attending certain classroom-based programs or programs that combine classroom learning and distance learning.

In addition, eligible students pursuing an educational program solely through distance learning are eligible to receive a housing stipend of approximately $916 per month, half the amount available to students attending certain classroom-based programs or programs that combine classroom learning and distance learning.

On August 16, 2017, the President signed into law the Harry W.

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Additionally, the bill will restore VA education benefits to students who were enrolled in schools that closed after January 2015 if their credits did not transfer.

Strayer University and Capella University participate in DOD military tuition assistance programs under a Memoranda of Understanding (“MOU”).

On January 5, 2021, President Trump signed into law the Veterans Health Care and Benefits Improvement Act of 2020, which expands student veterans’ protections.

Among other things, the legislation requires a risk-based review of schools if an institution is operating under Heightened Cash Monitoring 2, under provisional approval status by the Department of Education, subject to any punitive action by a federal or state entity, facing the loss or risk of loss of accreditation, or has converted from for-profit to non-profit status.

The legislation also restores veterans benefits to students whose school closed, as long as the student transferred fewer than 12 credits;

protects students from debt collection by the Department of Veterans Affairs for overpaid tuition benefits;

and establishes a number of institutional requirements, including:

providing clear disclosures about cost, loan debt, graduation and job placement rates, and acceptance of transfer credit;

ensuring institutions are accommodating short absences due to service;

prohibiting same-day recruitment and registration;

and prohibiting more than three unsolicited recruiting contacts.

The legislation will require guidance from the Department of Veterans Affairs, and is effective August 21, 2021.

Strayer University and Capella University participate in DOD military tuition assistance programs under Memoranda of Understanding (“MOU”).

Strayer University’s current MOU was executed on September 5, 2019.

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Service members of the United States Armed Forces are eligible to receive tuition assistance from their branch of service through the DOD military tuition assistance programs.

Under the Memorandum of Understanding, the Universities agree to comply with DOD rules and procedures regarding the receipt of tuition assistance on behalf of active duty military personnel (and qualifying family members) in attendance at the University.

Under the Memorandum of Understanding, Strayer University and Capella University agree to comply with DOD rules and procedures regarding the receipt of tuition assistance on behalf of active duty military personnel (and qualifying family members) in attendance at the University.

Title IV Programs

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In certain circumstances, the Department of Education may certify an institution’s continuing eligibility to participate in Title IV programs on a provisional basis for up to three complete award years (July 1 – June 30) from the date of provisional certification.

During the period of provisional certification, the institution must comply with any additional conditions included in its program participation agreement, which typically require approval by the Department of Education for establishment of an additional location, increase in the level of academic offering, and addition of any educational program (including degree,

non-degree, or short-term training programs) before awarding or disbursing Title IV aid to students enrolled at such a location or in such a program.

If the Department of Education determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may revoke or further condition the institution’s certification to participate in Title IV programs with fewer due process protections for the institution than if it were fully certified.

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An institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible without alternative measures and further federal oversight.

For both of the Universities, the Department evaluates financial responsibility at the parent level, based on review of SEI’s financial statements.

For Strayer University and Capella University, the Department evaluates financial responsibility at the parent level, based on review of SEI’s financial statements.

We have applied the financial responsibility standards to our financial statements as of and for the year ended December 31, 2020, and based on our calculated composite score and other relevant factors, we believe we meet the Department of Education’s financial responsibility standards.

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The Department of Education will also determine that an institution is not financially responsible if certain triggering events, such as a lawsuit against the institution, an accrediting agency’s requirement that the institution submit a teach-out plan, or potential loss of Title IV eligibility for gainful employment programs, result in the institution’s recalculated composite score to be less than 1.0.

The Department of Education may also invoke certain

“discretionary” triggering events, such as citation by a state agency or accrediting agency for failure to satisfy the agency’s standards, to determine that an institution is not financially responsible.

The Department of Education may also invoke certain “discretionary” triggering events, such as citation by a state agency or accrediting agency for failure to satisfy the agency’s standards, to determine that an institution is not financially responsible.

An institution determined not to be financially responsible because of one or more triggering events may be required to issue an irrevocable letter of credit for not less than 10% of the Title IV funds received by the school for the most recently completed fiscal year and/or will be issued a Provisional Program Participation Agreement.

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The 2019 rule further updates the definitions of terms used to calculate an institution’s composite score and otherwise amends the composite score methodology to reflect changes in Financial Accounting Standards Board (“FASB”) accounting standards pertaining to new leases.

The financial responsibility changes are effective July 1, 2020.

The financial responsibility changes became effective July 1, 2020.

Student Loan Defaults

The Department of Education calculates a rate of student defaults (known as a cohort default rate) for each institution with 30 or more borrowers entering repayment in a given federal fiscal year.

The Department of Education includes in the cohort all student borrowers at the institution who entered repayment on any Direct or FFEL Program loan during that year.

The Department of Education includes in the cohort all student borrowers at the institution who entered repayment on any Direct or Federal Family Education Loan Program loan during that fiscal year.

The cohort default rate is the percentage of those borrowers who become subject to their repayment obligation in the relevant federal fiscal year and default by the end of the second federal fiscal year following that fiscal year, resulting in a three-year cohort default rate.

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Institutions with a cohort default rate equal to or greater than 15% for any of the three most recent fiscal years for which data are available are subject to a 30-day delayed disbursement period for first-year, first-time undergraduate borrowers.

Although Strayer University has not had a cohort default rate at or above 15% in any of the three most recent fiscal years, Strayer University voluntarily disburses Direct Loans in this manner.

Strayer University and Capella University’s official three-year cohort default rates for 2015, 2016, and 2017, as well as the average official three-year cohort default rates for proprietary institutions nationally, were as follows:

Strayer University

Capella University

National Average

As part of the Universities’ compliance programs related to the cohort default rate, Strayer University and Capella University provide entrance and exit counseling to their students and engage the services of third parties to counsel students once they are in repayment status regarding their repayment obligations.

Strayer University Capella University National Average

2017 11.3 % 6.5 % 14.7 %

2016 10.4 % 6.8 % 15.2 %

2015 10.6 % 6.5 % 15.6 %

As part of the compliance programs related to the cohort default rate, Strayer University and Capella University provide entrance and exit counseling to their students and engage the services of third parties to counsel students once they are in repayment status regarding their repayment obligations.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which included a provision that established a federal student loan administrative forbearance period, pause in interest accrual, and suspension of collections activity through September 30, 2020.

Former Department of Education Secretary Betsy DeVos extended these student loan flexibilities through January 31, 2021.

President Biden subsequently extended the period through September 30, 2021.

While it is too early to know the entirety of the impact that COVID and COVID-related repayment flexibility will have on the cohort default rate, the Company expects that the next one or more cohort years will be affected.

The 90/10 Rule

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The key components of non-Title IV revenue for Strayer University and Capella University are individual student payments, employer tuition reimbursement payments, veterans’ education benefits, military tuition assistance, vocational rehabilitation funds, private loans, state grants, and scholarships.

Certain members of Congress have proposed to revise the 90/10 Rule to count DOD tuition assistance and veterans’ education benefits along with Title IV revenue toward the 90% limit and to reduce the limit to 85% of total revenue.

In the context of Higher Education Act reauthorization, other members of Congress recently have proposed legislation that would eliminate the 90/10 Rule.

Certain members of Congress have proposed to revise the 90/10 Rule to count DOD tuition assistance and veterans’ education benefits along with Title IV revenue toward the 90% limit

and to reduce the limit to 85% of total revenue.

In the context of Higher Education Act reauthorization, defense bills and appropriations bills, other members of Congress recently have proposed legislation that would eliminate the 90/10 Rule.

We cannot predict whether or how the recent changes in Administration and Congress will affect the 90/10 Rule.

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The rule applies to all institutional employees and service providers who are engaged in or responsible for any student recruitment or admission activity or making decisions regarding the award of financial aid.

The Department of Education has interpreted the regulation not to apply to certain high-level employees, including senior managers and executive level employees who are involved only in the development of policy and do not engage in individual student contact.

The Department of Education has interpreted the regulation not to apply to employees who are involved only in the development of policy and do not engage in individual student contact.

Merit-based adjustments to covered employees' compensation may be made if they are not based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid.

Failure to comply with the incentive payment rule could result in loss of certification to participate in federal student financial aid programs, limitations on participation in the federal student financial aid programs, or financial penalties.

In June 2015, the Department of Education announced in a memorandum that it would revise its approach to measuring damages for noncompliance with the incentive payment prohibition.

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The Department has not yet released any subsequent debt-to-earnings measures.

On July 1, 2019, the Department of Education released final gainful employment regulations, which contain a full repeal of the 2015 Regulations, including all debt measures, reporting, disclosure, and certification requirements.

Per the Department of Education's Master Calendar, these rules go into effect July 1, 2020.

However, the Secretary used her authority under the HEA to allow institutions to implement the new rules early as of July 1, 2019.

Those institutions that implement early are not required to report gainful employment data for the 2018-2019 award year, are not required to comply with gainful employment disclosure and template publication requirements, and are not required to comply with the regulation’s certification requirements with respect to programmatic accreditation and program satisfaction of prerequisites for professional licensure/state certification.

Both Capella University and Strayer University have elected to implement the July 2019 regulations early and have documented their decision to do so as required by the Department of Education.

We cannot predict if recent changes to the administration and Congress will result in the revival of gainful employment regulations or if a similar version may be reenacted.

Return of Federal Funds

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Strayer University and Capella University are required to measure the last day of attendance based on official attendance records, and “attendance” for online classes must include participation in an academically-related activity.

The Universities’ systems allow for measurement on this basis.

Strayer University's and Capella University's systems allow for measurement on this basis.

The institution must return to the appropriate Title IV programs, in a specified order, the lesser of the unearned Title IV program funds or the institutional charges incurred by the student for the period multiplied by the percentage of unearned Title IV program funds.

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The rule specifies the types of statements that can subject the institution to liability for misrepresentation, as well as the nature and form of misleading statements.

As part of the Department’s 2016 promulgation of the Borrower Defenses to Repayment regulation, the Department changed the definition of misrepresentation for Title IV regulations to include any statement that “has the likelihood or tendency to mislead under the circumstances.” The newly expanded definition also includes “any statement that omits information in such a way as to make the statement false, erroneous, or misleading.” This regulation was published on November 1, 2016 and, after a series of delays, went into effect as of October 16, 2018.

On August 30, 2019, the Department released final Borrower Defense to Repayment regulations that included a new definition of “misrepresentation,” which is effective July 1, 2020.

As part of the Department’s 2016 promulgation of the Borrower Defenses to Repayment regulation, the Department changed the definition of misrepresentation for Title IV regulations to include any statement that “has the likelihood or tendency to mislead under the circumstances.” The expanded definition included “any statement that omits information in such a way as to make the statement false, erroneous, or misleading.” This regulation was published on November 1, 2016 and, after a series of delays, went into effect as of October 16, 2018.

On August 30, 2019, the Department released final Borrower Defense to Repayment regulations that included a new definition of “misrepresentation,” which became effective July 1, 2020.

The final rule defines a “misrepresentation” as:

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In addition, the regulation permits the Department to grant relief to an individual or group of individuals, including individuals who have not applied to the Department seeking relief.

If a defense is successfully raised, the Department has discretion to initiate action to collect from an institution the amount of losses incurred based on the borrower defense.

If a defense is successfully raised, the Department has discretion to initiate action to collect from an institution the amount of losses incurred based on the borrower

The 2016 BDTR Rule also amends the rules concerning discharge of federal student loans when a school or campus closes and prohibits pre-dispute arbitration agreements and class action waivers for borrower defense-type claims.

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However, in October 2018, a judge denied a request to delay implementation of portions of the regulations, and as a result the 2016 BDTR Rule went into effect as of October 16, 2018.

On September 23, 2019, the Department published final Borrower Defense to Repayment regulations (the “2019 BDTR Rule”), which will govern borrower defense to repayment claims in connection with loans first disbursed on or after July 1, 2020.

The 2016 BDTR Rule continues to apply in the interim.

On September 23, 2019, the Department published final Borrower Defense to Repayment regulations (the “2019 BDTR Rule”), which governs borrower defense to repayment claims in connection with loans first disbursed on or after July 1, 2020.

Under the 2019 BDTR Rule, an individual borrower can assert a defense to repayment and be eligible for relief if she or he establishes, by a preponderance of the evidence, that (1) the institution at which the borrower enrolled made a misrepresentation of material fact upon which the borrower reasonably relied in deciding to obtain a Direct Loan or a loan repaid by a Direct Consolidation Loan;

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The 2019 BDTR Rule permits the usage of pre-dispute arbitration agreements as a condition of enrollment, so long as the institution provides plain-language disclosures to students and the disclosure is placed on the institution’s website.

The regulations also allow for a borrower to choose whether to apply for a closed school

loan discharge or accept a teach-out opportunity.

The regulations also allow for a borrower to choose whether to apply for a closed school loan discharge or accept a teach-out opportunity.

In addition, the closed school discharge window is expanded from 120 days to 180 days prior to the school’s closure, though the final rule does not allow for an automatic closed school loan discharge.

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If the Secretary discharges a loan in whole or in part, the Department of Education may require the school to repay the amount of the discharged loan.

The provisions of the regulation are effective July 1, 2020.

We cannot predict whether or how the recent changes in Administration and Congress will affect the borrower defense to repayment rules.

Third-Party Servicers

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for processing stipends due to students.

For loan default prevention, the Universities contract with i3 Group, LLC and ECMC Solutions.

For loan default prevention, Strayer University and Capella University contract with i3 Group, LLC and ECMC Solutions.

Strayer University and Capella University also contract with the National Student Clearinghouse to report enrollment status updates to the National Student Loan Data System.

Strayer University and Capella University believe that their third-party servicer contracts comply with the regulations, and they have reported such contracts to the Department of Education.

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Restrictions on Adding Locations and Educational Programs

State requirements and accrediting agency standards can limit or slow the ability of the Universities to establish legally authorized additional locations and programs.

State requirements and accrediting agency standards can limit, slow, or halt the ability of Strayer University and Capella University to establish legally authorized additional locations and programs.

Most states require approval before institutions can add new programs, campuses, or teaching locations.

Middle States requires its accredited institutions to notify it in advance of implementing new programs or locations, which may require additional approval.

Middle States requires its accredited institutions to notify it in advance of implementing new programs or additional locations as defined by Middles States, which may require additional approval.

At its discretion, Middle States may also conduct site visits to additional locations to evaluate whether accredited institutions that experience rapid growth in the number of additional locations, among other reasons, maintain educational quality.

All new Strayer University campus locations require Middle States approval before students are enrolled, and the Higher Education Act requires Middle States to monitor institutions with significant enrollment growth.

All new Strayer University locations require Middle States approval before students are enrolled, and the Higher Education Act requires Middle States to monitor institutions with significant enrollment growth.

The Higher Learning Commission, the Minnesota Office of Higher Education, and other state educational regulatory agencies that license or authorize Capella University and its degree programs require institutions to notify them in advance of implementing new programs and, upon notification, may undertake a review of the institution’s licensure, authorization or accreditation.

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Any Strayer University or Capella University expansion plans assume its continued ability to establish new campuses as additional locations under such applicable regulations and thereby avoid incurring the two-year delay in participation in Title IV programs.

Department of Education regulations require institutions to report to the Department of Education a new additional location at which at least 50% of an eligible program will be offered, if the institution wants to disburse Title IV program funds to students enrolled at that location.

Under its Program Participation Agreement with the Department of Education, Strayer University must notify the Department of Education of the addition of any such location within ten days of opening, but need

not seek prior approval.

Department of Education regulations require institutions to report to the Department of Education a new additional location at which at least 50% of an eligible program may be offered, if the institution wants to disburse Title IV program funds to students enrolled at that location.

Under Capella University’s provisional certification, the Department of Education must approve any new campus locations, level of academic offerings, and non-degree and degree programs before Capella University may award or disburse Title IV aid to students enrolled at any such location or in any such program.

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The Department of Education approved Capella University to operate direct assessment courses, and Capella University has been doing so under its FlexPath programs.

Forthcoming regulations from the Department of Education will address competency based education programs and may allow for further access to federal funding for these types of initiatives.

COVID-19 Related Legislation and Administrative Actions

On March 27, 2020, Congress passed the CARES Act in response to the COVID-19 pandemic.

The CARES Act includes provisions that provide relief to students and to the institutions of higher education that they attend.

This legislation granted the Department of Education regulatory flexibility in waiving some requirements established under the Higher Education Act related to the administration of federal student aid programs.

For example, the CARES Act modified the process that institutions must follow for the return of unearned Title IV funds in connection with student withdrawals and provided institutions with additional flexibility for the measurement of satisfactory academic progress for students.

The CARES Act suspended payments and interest accrual for Federal Family Education Loans and Direct Loans until September 30, 2020.

Subsequent executive action by the previous and current administrations have extended these suspensions until September 30, 2021.

The Department issued several guidance documents outlining and interpreting these changes.

Additionally, the CARES Act established a $12.6 billion Higher Education Emergency Relief Fund (“HEERF”).

While the Department allocated HEERF funding for Strayer, the university did not accept its allocation.

On December 27, 2020, Congress passed the omnibus Consolidated Appropriations Act, 2021 (“CAA”), which included several education-related provisions.

Relevant provisions of the CAA increased the maximum Pell Grant for the 2021-2022 award year, restored quarters/semesters of Pell eligibility to students who have successfully asserted a borrower defense to repayment;

repealed the limitation on lifetime subsidized loan eligibility (known as “Subsidized Usage Limit Applies,” or SULA), and simplified the Free Application for Federal Student Aid.

The CAA also appropriated an additional $22.7 billion for the HEERF to be distributed to higher education institutions.

While the Department allocated HEERF funding for Strayer and Capella, to date neither university accepted its allocation.

Other Regulations Governing Title IV Programs

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We believe that the Universities are in compliance with these requirements.

On November 29, 2018, the Department of Education published proposed rules related to implementation of Title IX, which prohibits discrimination on the basis of sex in education programs that receive funding from the federal government.

The proposed rules would define what constitutes sexual harassment for purposes of Title IX in the administrative enforcement context, would describe what actions trigger an institution’s obligation to respond to incidents of alleged sexual harassment, and would specify how an institution must respond to allegations of sexual harassment.

The Department of Education accepted public comments through January 30, 2019.

We cannot predict what final regulations will be adopted as a result of this rulemaking process.

On May 6, 2020, the Department of Education published final rules related to implementation of Title IX, which prohibits discrimination on the basis of sex in education programs that receive funding from the federal government.

The final rules define what constitutes sexual harassment for purposes of Title IX in the administrative enforcement context, describe what actions trigger an institution’s obligation to respond to incidents of alleged sexual harassment, and specify how an institution must respond to allegations of sexual harassment.

Among other things, the new rules include a requirement for live hearings on Title IX sexual harassment claims, which includes direct and cross-examination of parties, university-provided advisors (in the event a student or party does not provide an advisor), rulings on questions of relevance by decision-makers, and the creation and maintenance of a record of the live hearing proceedings.

The final rules became effective August 14, 2020.

We cannot predict whether or how the recent changes in Administration and Congress will affect the Title IX rules.

Students with Disabilities

Federal agencies, including the Department of Education and the Department of Justice, have considered or are considering how electronic and information technology should be made accessible to persons with disabilities.

For example, Section 504 of the Rehabilitation Act of 1973 (“Section 504”) prohibits discrimination against a person with a disability by any

organization that receives federal financial assistance.

For example, Section 504 of

the Rehabilitation Act of 1973 (“Section 504”) prohibits discrimination against a person with a disability by any organization that receives federal financial assistance.

The Americans with Disabilities Act (“ADA”), prohibits discrimination based on disability in several areas, including public accommodations.

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The Higher Education Act and Department of Education regulations also require an institution to submit annually to the Secretary of Education a compliance audit of its administration of Title IV programs conducted by an independent certified public accountant in accordance with Generally Accepted Government Auditing Standards and applicable audit guides of the Department of Education’s Office of Inspector General (“ED OIG”).

For fiscal years beginning after June 30, 2016, the Universities must submit such audits that have been conducted in accordance with a guide for audits of proprietary schools that was issued by the ED OIG in September 2016.

For fiscal years beginning after June 30, 2016, Strayer University and Capella University must submit such audits that have been conducted in accordance with a guide for audits of proprietary schools that was issued by the ED OIG in September 2016.

In addition, to enable the Secretary of Education to make a determination of financial responsibility, an institution must submit annually to the Secretary of Education audited financial statements prepared in accordance with Department of Education regulations.

For both Universities, financial responsibility is determined at the SEI parent level.

For Strayer University and Capella University, financial responsibility is determined at the SEI parent level.

In June 2019, the Department conducted an announced, on-site program review at Capella University, focused on Capella University’s FlexPath program.

The review covered the 2017-2018 and 2018-2019 federal financial aid years.

The program review has not concluded.

In general, after the Department conducts its site visit and reviews data supplied by the institution, it sends the institution a program review report.

The institution has the opportunity to respond to any findings in the report.

The Department of Education then issues a Final Program Review Determination, which identifies any liabilities.

The institution may appeal any monetary liabilities specified in the Final Program Review Determination.

The Department issued its preliminary program report on November 13, 2020, and Capella University responded to the report.

On February 9, 2021, Capella University received the Department’s Final Program Review Determination, which closed the Program Review without further action required on the part of Capella University.

Potential Effect of Regulatory Violations

If either Strayer University or Capella University fails to comply with the regulatory standards governing Title IV programs, the Department of Education could impose one or more sanctions, including transferring the University from the advance payment method to the reimbursement or cash monitoring system of payment, seeking to require repayment of certain Title IV funds, requiring the University to post a letter of credit in favor of the Department of Education as a condition for continued Title IV certification, taking emergency action against the University, or referring the matter for criminal prosecution or initiating proceedings to impose a fine or to limit, condition, suspend, or terminate the University’s participation in Title IV programs.

Although there are no such sanctions currently in force against Strayer University or Capella University, if such sanctions or proceedings were imposed and resulted in a substantial curtailment, or termination, of that University’s participation in Title IV programs or resulted in substantial fines or monetary liabilities, the University and the Company could be materially and adversely affected.

Although there are no such sanctions currently in force against Strayer University or Capella University, if such sanctions or proceedings were imposed and resulted in a substantial curtailment, or termination, of that University’s participation in Title IV programs or resulted in substantial fines or monetary liabilities, that University and the Company could be materially and adversely affected.

If Strayer University or Capella University lost its eligibility to participate in Title IV programs, or if Congress reduced the amount of available federal student financial aid, the University would seek to arrange or provide alternative sources of revenue or financial aid for students.

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Upon such a change of control, an institution's eligibility to participate in Title IV programs is generally suspended until it has applied for recertification by the Department of Education as an eligible institution under its new ownership, which requires that the institution also re-establish its state authorization and accreditation.

The Department of Education may temporarily and provisionally certify an institution seeking approval of a change of ownership under certain circumstances while the Department of Education reviews the institution’s application.

The Department of Education may also temporarily and provisionally certify an institution seeking approval of a change of ownership under certain circumstances while the Department of Education reviews the institution’s application.

The time required for the Department of Education to act on such an application may vary substantially.

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An institution is ineligible to receive Title IV program funds during the period from the change of ownership and control until recertification.

The Higher Education Act provides that the Department of Education may temporarily, provisionally certify an institution seeking approval of a change of ownership and control based on preliminary review by the Department of Education of a materially complete application received by the Department of Education within ten business days after the transaction.

The Higher Education Act provides that the Department of Education may also temporarily, provisionally certify an institution seeking approval of a change of ownership and control based on preliminary review by the Department of Education of a materially complete application received by the Department of Education within ten business days after the transaction.

The Department of Education may continue such temporary, provisional certification on a month-to-month basis until it has rendered a final decision on the institution’s application.

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Strayer University currently is authorized by the U.S.

Department of Homeland Security to admit foreign students for study in the United States subject to applicable requirements.

Department of Homeland Security to admit foreign students for study in the United States subject to applicable requirements (because Capella is on-line only, and foreign students must take a portion of their classes on-ground, Capella University does participate).

In certain circumstances, the U.S.

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Department of Veterans Affairs educational benefits.

In 2019, Strayer University had such approval in Alabama, Arkansas, Delaware, Florida, Georgia, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, Wisconsin, and Washington, D.C.

In 2020, Strayer University had such approval in Alabama, Arkansas, Delaware, Florida, Georgia, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Washington, D.C.

In 2020, Capella University had such approval in Minnesota, and because all of its programs are online only, this approval allows it to extend VA education benefits to students in all states and abroad.

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Congress has held hearings regarding the reauthorization of the HEA and continued to consider new legislation regarding the passage thereof.

It is currently unclear when Congress will reauthorize the Higher Education Act.

It is currently unclear when Congress will reauthorize the Higher Education Act, and the onset of the COVID-19 pandemic has further delayed these efforts.

The most recent reauthorized Higher Education Act continued all of the Title IV programs in which we participate, but made many revisions to the requirements governing the Title IV programs, including provisions relating to the relationships between institutions and lenders that make student loans, student loan default rates, and the formula for revenue that institutions are permitted to derive from the Title IV programs.

Notwithstanding the lack of a full HEA reauthorization, Congress has annually appropriated funds for the existing Title IV programs under the HEA.

In addition, further rulemaking by the Department of Education may impose additional requirements on institutions that participate in Title IV programs.

Committee leadership of both the U.S.

House of Representatives and Senate began reauthorization hearings in the latter half of 2013, and the current Congress has continued to discuss reauthorization of the HEA.

Existing programs and participation requirements are subject to change in this process.

Existing programs and participation requirements are subject to change based on HEA reauthorization.

Additionally, funding for the student financial assistance programs may be affected during appropriations and budget actions.

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Congress has appropriated funds for the Department of Education through September 30, 2021.

From December 22, 2018 to January 25, 2019, Congress and the President reached an impasse over funding for certain other government agencies for federal fiscal year 2019.

The so-called “partial government shutdown” affected the Department of Education and Title IV programs to the extent that the Department of Education or students rely on information from affected federal agencies, such as the Internal Revenue Service.

The Department of Education issued guidance to endeavor to reduce adverse consequences for students.

A future government shutdown, particularly one that includes the Department of Education or appropriations for Title IV programs, could have a material adverse effect on our operations and financial condition.

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Such reductions, in turn, could lead to lower enrollments at Strayer University or Capella University or require us to increase our reliance upon alternative sources of student financial aid.

Given the significant percentage of our revenues that are derived indirectly from Title IV programs, the loss of, or a significant reduction in, Title IV

program funds available to our students could have a material adverse effect on Strayer University, Capella University, and the Company.

Beginning July 1, 2017, in accordance with the Consolidated Appropriations Act, 2017, institutions that participate in the Title IV programs may award Pell Grant funds for up to 150% of a student’s standard scheduled Pell Grant in one award year.

This provision, which commonly is referred to as “year-round Pell,” is intended to allow students to graduate more quickly and with less debt.

To be eligible for the additional Pell Grant funds, a student must be otherwise eligible to receive Pell Grant funds and must be enrolled at least half-time in the payment period for which the student receives additional Pell Grant funds in excess of 100% of the student’s standard scheduled award.

Given the significant percentage of our revenues that are derived indirectly from Title IV programs, the loss of, or a significant reduction in, Title IV program funds available to our students could have a material adverse effect on Strayer University, Capella University, and the Company.

Consumer Financial Protection Bureau

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Department of Education

Title IV regulations applicable to the Universities have been subject to frequent revisions, many of which have increased the level of scrutiny to which higher education institutions are subjected and have raised applicable standards.

In addition to those regulations discussed above, on October 30, 2015, the Department of Education published final regulations creating a new income-contingent repayment plan and implementing changes to streamline and enhance existing processes for borrowers.

The regulations were effective July 1, 2016.

Current Federal Rulemaking

On July 31, 2018, the Department announced its intention to establish a negotiated rulemaking committee to prepare proposed regulations for the Title IV programs.

The Department convened three subcommittees:

one addressing proposed regulations related to distance learning and educational innovation, one addressing TEACH Grant conversions, and one to make recommendations to the committee regarding revisions to the regulations regarding the eligibility of faith-based entities to participate in the Title IV programs.

The distance learning and educational innovation subcommittee addressed, among other topics, simplification of state authorization requirements, the “written arrangements” rule, the definition of “regular and substantive interaction,” the definition of the term “credit hour,” direct assessment programs and competency-based education, and barriers to innovation in post-secondary education.

The negotiated rulemaking committees reached consensus on all topics being negotiated.

As a result, the Department, except in extraordinary circumstances, is bound to publish the consensus language as the notice of proposed rulemaking and accept public comment on that proposal.

The Department expressed its intention to publish proposed rules from these sessions in three parts.

As described in the Accreditation and State Education Licensure sections of this Annual Report on Form 10-K, on November 1, 2019, the Department published the final rule for the set of changes related to accreditation and state authorization, which will generally take effect on July 1, 2020.

On December 11, 2019, the Department published for public comment a proposed rule for the set of changes related to TEACH grants and faith-based entities.

The Department has yet to publish a rule that addresses the final set of changes related to distance education, regular and substantive interaction, credit hour requirements, written arrangements, and direct assessment and competency-based education programs.

Under the HEA, if the Department publishes final rules on the pending topics by November 1, 2020, they would become effective July 1, 2021.

On November 29, 2018, the Department of Education published proposed rules related to implementation of Title IX, which would define what constitutes sexual harassment for purposes of Title IX in the administrative enforcement context, would describe what actions trigger an institution’s obligation to respond to incidents of alleged sexual harassment, and would specify how an institution must respond to allegations of sexual harassment.

The Department of Education accepted public comments through January 30, 2019.

We cannot predict what final regulations will be adopted as a result of these rulemaking processes.

Title IV regulations applicable to Strayer University and Capella University have been subject to frequent revisions, many of which have increased the level of scrutiny to which higher education institutions are subjected and have raised applicable standards.

College Affordability and Transparency Lists

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The Department of Education updates the data available on the College Scorecard on a periodic basis.

In May 2019, the Department of Education added new metrics to the College Scorecard, including information on non-degree institutions and data concerning student outcomes at the program level.

In 2019, the Department of Education added new metrics to the College Scorecard, including information on non-degree institutions and data concerning student outcomes, including salary, at the program level.

Privacy and Data Security

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The California Attorney General oversees civil enforcement of the CCPA, which allows for civil penalties of up to $2,500 for each violation and up to $7,500 for each intentional violation.

In addition, the CCPA imposes on companies an obligation to maintain reasonable security procedures and empowers individuals to bring private actions to recover damages if their personal information is subject to a security breach as a result of a company’s failure to maintain reasonable security practices.

In addition, the CCPA imposes on companies an obligation to maintain reasonable security procedures and empowers individuals to bring

private actions to recover damages if their personal information is subject to a security breach as a result of a company’s failure to maintain reasonable security practices.

Collection of personal information outside the United States may subject companies to global privacy and data security laws.

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Noncompliance with the GDPR can result in administrative, civil, or criminal liability.

Executive Order on Military and Veterans Benefits Programs

In April 2012, President Obama issued an Executive Order directing the Departments of Defense and Veterans Affairs, along with other Executive Branch agencies, to implement actions to establish “Principles of Excellence” to apply to educational institutions receiving funding from federal military and veterans educational benefits programs, including benefits programs provided by the Post-9/11 GI Bill and the military tuition assistance program.

The Principles of Excellence relate broadly to information regarding tuition and fees, academic quality, marketing, and state authorization requirements.

The Principles of Excellence require federal agencies to create a centralized complaint system for students receiving federal military and veterans educational benefits to register complaints that relevant agencies can track and address.

On January 30, 2014, the Department of Defense, Department of Veterans Affairs, Department of Education, and Federal Trade Commission, in collaboration with the Consumer Financial Protection Bureau and the U.S.

Department of Justice, announced a new 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, Department of Defense tuition assistance programs, and other military-related education benefit programs.

Australian and New Zealand Regulation

We operate two post-secondary educational institutions in Australia, Torrens University Australia Limited (“Torrens”) and Think:

Colleges Pty Ltd (“Think”).

In Australia, a distinction is made between higher education and vocational education organizations.

Higher education providers consist of public and private universities, Australian branches of overseas universities and other higher education providers.

Higher education qualifications consist of undergraduate awards (bachelor’s degrees, associate degrees and diplomas) and postgraduate awards (graduate certificates and diplomas, master’s degrees and doctoral degrees).

The regulation of higher education providers is undertaken at a national level by the Tertiary Education Quality and Standards Agency (“TEQSA”).

All organizations that offer higher education qualifications in or from Australia must be registered with TEQSA.

Higher education providers must also have their courses of study accredited by TEQSA unless they have been granted and hold self-accrediting status.

Torrens currently holds self-accrediting status, but Think does not.

Registration as a higher education provider is for a fixed period of up to seven years.

TEQSA regularly reviews the conduct and operation of accredited higher education providers.

The vocational education and training (“VET”) sector consists of technical and further education institutes, agricultural colleges, adult and community education providers, community organizations, industry skill centers and private providers.

VET qualifications include certificates, diplomas and advanced diplomas.

The regulation of VET providers is undertaken at a national level by the Australian Skills Quality Authority (“ASQA”).

An organization providing VET courses in Australia must be registered by ASQA as a Registered Training Organisation (“RTO”).

Courses offered by RTOs need to be accredited by ASQA.

Registration as an RTO is for a fixed period of up to seven years.

ASQA regularly reviews the conduct and operations of RTOs.

Torrens is one of 43 universities in Australia.

It is a private, for-profit entity and is registered with TEQSA in the Australian University category.

As a self-accrediting university, it is not required to have its individual courses of study accredited by TEQSA.

Torrens is also registered with ASQA as an RTO and is thus entitled to offer vocational and training courses.

Think is one of approximately 4,000 RTOs in Australia and in that capacity is regulated by ASQA.

It is also registered as a higher education provider with TEQSA.

Its higher education courses require, and have received, accreditation by TEQSA.

Australia also maintains a Commonwealth Register of Institutions and Courses for Overseas Students (“CRICOS”) for Australian education providers that recruit, enroll and teach overseas students.

Registration on CRICOS allows providers to offer courses to overseas students studying on Australian student visas.

Both Torrens and Think are so registered.

The Commonwealth government has established income-contingent loan schemes that assist eligible fee-paying students to pay all or part of their tuition fees (separate but similar schemes exist for higher education and vocational courses).

Under the schemes, the relevant fees are paid directly to the institutions by the Commonwealth government on behalf of the student.

A corresponding obligation then exists from the participating student to the Commonwealth government, which is addressed by adding a levy to that student’s income tax until the loan amount has been repaid.

Neither Torrens nor Think have any responsibility in connection with the repayment of these loans by students and, generally, this assistance is not available to international students.

Both Torrens and Think are registered for the purposes of these plans (a precondition to their students being eligible to receive such loans).

We operate a post-secondary educational institution in New Zealand, Media Design School Limited (“MDS”).

MDS is a Private Training Establishment, a private organization offering education or training.

It is a globally renowned and specialist provider of design and creative technology education with qualifications ranging from diplomas to postgraduate degrees.

MDS also has access to New Zealand Government student finance where study loans are offered to students who are New Zealand citizens or ordinarily resident in New Zealand, subject to certain conditions.

Privacy and Data Security

Privacy laws and regulations in other countries where the Company has significant international presence, including Australia’s Federal Privacy Act and Australian Privacy Principles and New Zealand’s Privacy Act, may also impact the manner in which the Company’s foreign subsidiaries are able to transfer and process personal information.

Additional Information

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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