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There have been no material changes to the risk factors previously described in Part I, “Item 1A.
−Removed: Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2020, other than the revised risk factors included below.
−Removed: The risks described in our Annual Report on Form 10-K are not the only risks facing the Company.
+Added: Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, other than the revised risk factor included below.
+Added: The risks described below and in our Annual Report on Form 10-K are not the only risks facing the Company.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also could materially adversely affect our business.
See “Cautionary Notice Regarding Forward-Looking Statements.”
−Removed: Strayer University or Capella University could lose its eligibility to participate in federal student financial aid programs or be provisionally certified with respect to such participation if the percentage of its revenues derived from those programs were too high, or could be restricted from enrolling students in certain states if the percentage of the University’s revenues from federal or state programs were too high.
−Removed: A proprietary institution may lose its eligibility to participate in the federal Title IV student financial aid program if it derives more than 90% of its revenues, on a cash basis, from Title IV programs for two consecutive fiscal years.
−Removed: A proprietary institution of higher education that violates the 90/10 Rule for any fiscal year will be placed on provisional status for up to two fiscal years.
−Removed: Using the formula specified in the Higher Education Act, Strayer University derived approximately 82.95% of its cash-basis revenues from these programs in 2020.
−Removed: Capella University derived approximately 71.98% of its cash-basis revenues from Title IV program funds in 2020.
−Removed: On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which amends the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.
−Removed: The legislation requires the Department to conduct a negotiated rulemaking process to modify related Department regulations.
−Removed: This rulemaking process may result in a definition of “federal education assistance” that will include tuition assistance programs offered by the U.S.
−Removed: Department of Defense and U.S.
−Removed: Department of Veterans Affairs, in addition to the Title IV programs already covered by the 90/10 Rule.
−Removed: Under the legislation, these revisions to the 90/10 Rule would apply to institutional fiscal years beginning on or after January 1, 2023.
−Removed: Further legislation has been introduced in both chambers of Congress that seek to modify the 90/10 Rule further, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue).
−Removed: We cannot predict whether Congress will pass any of these legislative proposals.
−Removed: If one of the Universities were to violate the 90/10 Rule, the loss of eligibility to participate in the federal student financial aid programs would have a material adverse effect on our business.
−Removed: Certain states have also proposed legislation that would prohibit enrollment of their residents based on a state and federal funding threshold that is more restrictive than the federal 90/10 Rule.
−Removed: If such legislation were to be enacted, and the Universities were unable to meet the threshold, loss of eligibility to enroll students in certain states would have a material adverse effect on our business.
If Strayer University and Capella University fail to comply with the extensive legal and regulatory requirements for higher education institutions, they could face significant monetary or other liabilities and penalties, including loss of access to federal student loans and grants for their students.
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and (3) state education regulatory bodies.
−Removed: In addition, other federal agencies such as the Consumer Financial Protection Bureau, Federal Trade Commission (“FTC”), and Federal Communications Commission and various state agencies and state attorneys general enforce consumer protection, calling and texting, marketing, privacy and data security, and other laws applicable to post-secondary educational institutions.
+Added: In addition, other federal agencies such as the Consumer Financial Protection Bureau (“CFPB”), Federal Trade Commission (“FTC”), and Federal Communications Commission and various state agencies and state attorneys general enforce consumer protection, calling and texting, marketing, privacy and data security, and other laws applicable to post-secondary educational institutions.
Findings of noncompliance could result in monetary damages, fines, penalties, injunctions, or restrictions or obligations that could have a material adverse effect on our business.
Some of these laws also include private rights of action.
+Added: On October 8, 2021, the Department of Education announced establishment of an Office of Enforcement within the Department’s Office of Federal Student Aid, designed to strengthen oversight over and enforcement against postsecondary schools that participate in federal student loan, grant, and work-study programs.
+Added: The Office of Enforcement restores an office first established by the Department in 2016.
+Added: The Office of Enforcement will be comprised of four existing divisions:
+Added: Administrative Actions and Appeals Services Group, Borrower Defense Group, Investigations Group, and Resolution and Referral Management Group.
+Added: The Department intends the Office of Enforcement to coordinate with other state and federal partners, including the Department of Justice, Consumer Financial Protection Bureau, Federal Trade Commission, and state attorneys general.
On October 6, 2021 the FTC announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act (the “Act”).
Under the Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive.
−Removed: Also on October 6, 2021, in an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued notice to the 70 largest for-profit schools, based on enrollment and revenues.
+Added: In an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued that same day an informational notice to the 70 largest for-profit schools based on enrollment and revenues.
The notice included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC.
−Removed: Strayer and Capella University received the FTC’s notice on October 7, 2021, although the FTC made clear that receipt of the notice itself does not reflect any assessment as to whether Capella or Strayer has engaged in deceptive or unfair conduct.
+Added: Strayer University and Capella University received the FTC’s notice on October 7, 2021, although the FTC made
+Added: clear that receipt of the notice itself does not reflect any assessment as to whether Strayer University or Capella University has engaged in deceptive or unfair conduct.
+Added: On April 4, 2022, the Company received correspondence from the Consumer Financial Protection Bureau (“CFPB”), in which the CFPB took the position that it has supervisory authority over the Company as a covered person that offers or provides private education loans pursuant to 12 U.S.C.
+Added: 5514(a)(1)(D) and further indicated the CFPB is considering whether to cite violations based on preliminary findings that the Company may have violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C.
+Added: 5301 et seq., due to alleged student loan servicing and collections practices or policies.
+Added: Specifically, the CFPB referred to Capella University and Strayer University’s historical practice of withholding official transcripts from students who were delinquent in paying amounts due, a practice which both universities discontinued prior to receipt of the correspondence.
+Added: While the Company disagrees with CFPB’s position as to its supervisory authority and disputes any alleged legal or regulatory violations, SEI is cooperating with CFPB’s inquiry and responded to CFPB as requested on April 25, 2022.
The laws, regulations, standards, and policies applicable to our business frequently change, and changes in, or new interpretations of, applicable laws, regulations, standards, or policies could have a material adverse effect on our accreditation, authorization to operate in various states, permissible activities, ability to communicate with prospective students, receipt of funds under Title IV programs, or costs of doing business.
The Department of Education periodically engages in negotiated rulemaking sessions to revise regulations that govern the federal Title IV student financial aid programs.
−Removed: As discussed above in “Current Negotiated Rulemaking” the Department of Education has convened negotiated rulemaking committees to address issues such as borrower defense to repayment, mandatory arbitration agreements, gainful employment rules, and federal government oversight into changes in ownership for institutions of higher education.
−Removed: Certain proposals related to these issues could raise the cost of compliance for Strayer University or Capella University.
+Added: As discussed in Note 16, Regulation, in the condensed consolidated financial statements appearing in Part I, Item 1 of this report under “Current Negotiated Rulemaking,” the Department of Education has convened negotiated rulemaking committees to address issues such as borrower defense to repayment, misrepresentation, mandatory arbitration agreements, gainful employment rules, and federal government oversight into changes in ownership for institutions of higher education.
+Added: Certain proposals related to these issues could raise the cost of compliance for Strayer University or Capella University or require changes in the educational programs offered by Strayer University and Capella University in order to comply with new rules.
We cannot predict whether the Department of Education will promulgate any regulations that would negatively affect Strayer University or Capella University.
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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.