What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-28 · 431 added, 276 removed, 1079 unchanged (40% of the section changed)

39 unchanged sentences

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Strayer University Graduation Fund Liability – Undergraduate Degree Programs

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The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future.

Management’s estimate of the benefits that will be redeemed in the future, or the estimated redemption rate, is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs.

The principal considerations for our determination that performing procedures relating to the Strayer University Graduation Fund liability for undergraduate degree programs is a critical audit matter are (i) the significant judgment by management in estimating the liability and (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s estimate of the liability and the estimated redemption rate assumption.

Management’s estimate of the benefits that will be redeemed in the future is based on the Company’s historical experience of student persistence toward completion of a course of study within this program and similar programs.

As disclosed by management, estimated redemption rates of eligible students vary based on their term of enrollment.

The principal considerations for our determination that performing procedures relating to the Strayer University Graduation Fund liability for undergraduate degree programs is a critical audit matter are (i) the significant judgment by management in estimating the liability and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s estimate of the liability and the estimated redemption rate assumption.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

1 unchanged sentence

These procedures also included, among others, testing management’s process for estimating the Graduation Fund liability for undergraduate degree programs, including (i) evaluating the appropriateness of the methodology;

(ii) testing the completeness, accuracy and relevance of the underlying data used in management’s estimate;

(ii) testing the completeness and accuracy of the underlying data used in management’s estimate;

and (iii) evaluating the reasonableness of the estimated redemption rate assumption for the undergraduate degree programs.

Evaluating management’s estimated redemption rate assumption involved evaluating whether the assumption was reasonable considering (i) historical estimated redemption rates and (ii) whether the assumption was consistent with evidence obtained in other areas of the audit.

Goodwill Impairment Assessment – Australia and New Zealand (“ANZ”) Reporting Unit

As described in Notes 2 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,251 million as of December 31, 2022, of which $519 million relates to the ANZ reporting unit.

Management assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.

In 2022, management elected to bypass a qualitative impairment assessment for goodwill assigned to the ANZ reporting unit and proceeded directly to a quantitative impairment assessment using the first day of the fourth quarter of 2022 as the assessment date.

Management used an income-based approach to determine the fair value of the ANZ reporting unit.

The income approach consisted of a discounted cash flow model, which involved the use of critical assumptions and estimates related to the amounts and timing of expected future cash flows such as new international student enrollment growth, the discount rate, and the terminal growth rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment for the ANZ reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the ANZ reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to new international student enrollment growth, the discount rate, and the terminal growth rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s ANZ reporting unit.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the ANZ reporting unit;

(ii) evaluating the appropriateness of the income approach;

(iii) testing the completeness and accuracy of

underlying data used in the income approach;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to new international student enrollment growth, the discount rate and the terminal growth rate.

Evaluating management’s assumptions related to the student enrollment growth involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s income approach;

and (ii) the reasonableness of the discount rate and the terminal growth rate assumptions.

/s/ PricewaterhouseCoopers LLP

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Accounts payable and accrued expenses $ 95,518 $ 90,588

Income taxes payable — 6,989

Contract liabilities 73,232 88,488

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Additional paid-in capital 1,529,969 1,510,924

Accumulated other comprehensive income 48,880 9,203

Accumulated other comprehensive income (loss) 9,203 ( 35,068 )

Retained earnings 174,572 159,690

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Income from operations 109,384 73,912 70,760

Other income 13,192 4,573 2,687

Other income (expense) 4,573 2,687 ( 1,191 )

Income before income taxes 113,957 76,599 69,569

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Common Stock Additional Paid-in Capital Retained Earnings Accumulated

Other Comprehensive Income Total

Other Comprehensive Income (Loss) Total

Shares Par Value

Balance at December 31, 2019 21,964,809 $ 220 $ 1,309,438 $ 152,819 $ 233 $ 1,462,710

Impact of adoption of new accounting standard — — — ( 3,311 ) — ( 3,311 )

Issuance of common stock in public offering 2,185,000 22 220,226 — — 220,248

Stock-based compensation — — 14,593 17 — 14,610

1 unchanged sentence

Issuance of restricted stock, net 250,377 2 ( 25,847 ) — — ( 25,845 )

Repurchase of common stock ( 1,769 ) — ( 105 ) ( 142 ) — ( 247 )

Common stock dividends ($ 2.40 per share)

— — — ( 56,005 ) — ( 56,005 )

Foreign currency translation adjustment — — — — 48,068 48,068

Unrealized gains on marketable securities, net of tax — — — — 579 579

1 unchanged sentence

Balance at December 31, 2020 24,418,939 $ 244 $ 1,519,549 $ 179,646 $ 48,880 $ 1,748,319

Impact of adoption of new accounting standard — — — ( 3,311 ) — ( 3,311 )

Issuance of common stock in public offering 2,185,000 22 220,226 — — 220,248

Stock-based compensation — — 18,094 55 — 18,149

5 unchanged sentences

Foreign currency translation adjustment — — — — ( 39,392 ) ( 39,392 )

Unrealized gains on marketable securities, net of tax — — — — 579 579

Unrealized losses on marketable securities, net of tax — — — — ( 285 ) ( 285 )

Net income — — — 55,087 — 55,087

63 unchanged sentences

As discussed in Note 2 and Note 3, the Company completed its acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”) on November 3, 2020.

As discussed in Note 20, beginning in the first quarter of 2021 the Company changed the way management reports financial information relied on by the Chief Operating Decision Maker (“CODM”) to evaluate performance and allocate the resources of the Company.

The Company's revised organizational structure includes the following three operating and reportable segments:

Higher Education, which is primarily comprised of the Company's previous Strayer University and Capella University segments and is focused on providing flexible and affordable certificate and degree programs to working adults;

(2) Education Technology Services, a new segment that is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs;

and (3) Australia/New Zealand, which provides certificate and degree programs in Australia and New Zealand.

During the first three quarters of 2021, the Education Technology Services segment was called the Alternative Learning segment.

The Australia/New Zealand segment was not changed as a result of the Company's reorganization.

Prior period segment disclosures have been restated to conform to the current period presentation.

The accompanying consolidated financial statements and footnotes include the results of the Company’s three reportable segments:

Higher Education (“USHE”), which is primarily comprised of Strayer University and Capella University and is focused on providing flexible and affordable certificate and degree programs to working adults;

(2) Education Technology Services, which is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs;

and (3) Australia/New Zealand, which through Torrens University and associated assets, provides certificate and degree programs in Australia and New Zealand.

The Company’s reportable segments are discussed further in Note 21.

Significant Accounting Policies

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All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Certain immaterial prior year amounts have been reclassified to conform with the current year’s presentation.

On November 3, 2020, the Company completed its acquisition of ANZ, whereby the Company was deemed the acquirer in the business combination for accounting purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

1 unchanged sentence

Below is a description of the nature of the costs included in the Company’s operating expense categories.

Instructional and support costs (“I&SC”) generally contain items of expense directly attributable to activities that support students.

Instructional and support costs generally contain items of expense directly attributable to activities that support students.

This expense category includes salaries and benefits of faculty and academic administrators, as well as admissions and administrative personnel who support and serve student interests.

1 unchanged sentence

Bad debt expense incurred on delinquent student account balances is also included in instructional and support costs.

General and administration (“G&A”) expenses include salaries and benefits of management and employees engaged in finance, human resources, legal, regulatory compliance, marketing and other corporate functions.

General and administration expenses include salaries and benefits of management and employees engaged in finance, human resources, legal, regulatory compliance, marketing and other corporate functions.

Also included are the costs of advertising and production of marketing materials.

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The functional currency of each of the foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business.

Financial statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the financial statements.

Financial statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the

financial statements.

Assets and liabilities are translated into USD using the period-end spot foreign exchange rates.

1 unchanged sentence

Equity accounts are translated at historical exchange rates.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive income within shareholders’ equity.

The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

For any transaction that is in a currency different from the entity’s functional currency, the Company records a net gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) in the consolidated statements of income.

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These balances are recorded as restricted cash and included in other current assets in the consolidated balance sheets.

As part of commencing operations in Pennsylvania in 2003, the Company is required to maintain a “minimum protective endowment” of at least $ 0.5 million in an interest-bearing account as long as the Company operates its campuses in the state.

As part of commencing operations in Pennsylvania, the Company is required to maintain a “minimum protective endowment” of at least $ 0.5 million in an interest-bearing account as long as the Company operates its campuses in the state.

The Company holds these funds in an interest-bearing account, which is included in other assets.

8 unchanged sentences

All of the Company’s marketable securities are designated as available-for-sale and consist of tax-exempt municipal securities and corporate debt securities.

Available-for-sale marketable securities are carried at fair value as determined by quoted market prices or other inputs either directly or indirectly observable in the marketplace for identical or similar assets, with unrealized gains and losses, net of tax, recognized as a component of accumulated other comprehensive income within shareholders’ equity.

Management reviews the fair value of the portfolio at least quarterly, and evaluates individual securities with fair value below amortized cost at the balance sheet date for impairment.

In order to determine whether there is an impairment, management evaluates whether the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis.

In order to determine whether there is an impairment, management evaluates whether

the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis.

If management intends to sell an impaired debt security, or it is more likely than not the Company will be required to sell the security prior to recovering its amortized cost basis, an impairment is deemed to have occurred.

The amount of an impairment related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings.

The amount of an impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of accumulated other comprehensive income within shareholders’ equity.

The cost of securities sold is based on the specific identification method.

18 unchanged sentences

Tuition receivable, net $ 51,277 $ 62,953

Approximately $ 3.6 million and $ 2.5 million of tuition receivable are included in other assets as of December 31, 2020 and 2021, respectively, because these amounts are expected to be collected after 12 months.

Approximately $ 2.5 million and $ 2.7 million of tuition receivable, net, are included in other assets as of December 31, 2021 and 2022, respectively, because these amounts are expected to be collected after 12 months.

The following table illustrates changes in the Company’s allowance for credit losses for each of the three years ended December 31, 2022 (in thousands):

8 unchanged sentences

Property and equipment are stated at cost, less accumulated depreciation and amortization.

In accordance with the Property, Plant, and Equipment Topic, ASC 360, the carrying values of the Company’s assets are re-evaluated when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In accordance with the Property, Plant, and Equipment Topic, ASC 360, the carrying values of the Company’s assets are re-evaluated when events or changes in

circumstances indicate that the carrying amount of an asset may not be recoverable.

If it is determined that an impairment loss has occurred based on expected undiscounted future cash flows, then a loss is recognized using a fair value-based model.

During the year ended December 31, 2021, the Company recognized $ 2.7 million of impairment charges related to property and equipment, which is included in Restructuring costs on the consolidated statements of income.

During the years ended December 31, 2021 and 2022, the Company recognized $ 2.7 million and $ 2.5 million, respectively, of impairment charges related to property and equipment, which is included in Restructuring costs on the consolidated statements of income.

Depreciation and amortization of property and equipment is calculated using the straight-line method over the estimated useful lives ranging from three years to 40 years.

2 unchanged sentences

Repairs and maintenance costs are expensed as incurred.

During the year ended December 31, 2021, the Company evaluated its leased and owned campus portfolio, which resulted in the decision to downsize or exit several of its underutilized campus locations, including two of its owned U.S.

Higher Education campuses.

In 2021, the Company sold the long-lived assets, consisting of land, buildings, and building improvements, related to the two owned campuses and recognized a $ 2.7 million gain on sale, which is included in Restructuring costs on the consolidated statements of income.

As discussed in Note 5, the Company’s 2020 restructuring plan included an evaluation of the Company’s owned and leased real estate portfolio, which resulted in the consolidation and sale of underutilized facilities.

The Company sold two of its owned U.S.

Higher Education campuses in 2021 and one of its owned U.S.

Higher Education campuses in 2022.

The Company sold the long-lived assets, consisting of land, buildings, and building improvements, related to these owned campuses and recognized a $ 2.7 million and $ 2.9 million gain on sale during the years ended December 31, 2021 and 2022, respectively, which are included in Restructuring costs on the consolidated statements of income.

Construction in progress includes costs of computer software developed for internal use, which is accounted for in accordance with the Internal-Use Software Topic, ASC 350-40.

1 unchanged sentence

During the development stage, direct consulting costs, payroll, and payroll-related costs for employees that are directly associated with the project are capitalized and amortized over the estimated useful life of the software once placed into operation.

Purchases of property and equipment and changes in accounts payable for each of the three years in the period ended December 31, 2021 in the consolidated statements of cash flows have been adjusted to exclude noncash purchases of property and equipment transactions during that period.

Purchases of property and equipment and changes in accounts payable for each of the three years in the period ended December 31, 2022 in the consolidated statements of cash flows have been adjusted to exclude non-cash purchases of property and equipment transactions during that period.

Deferred Costs

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See Note 8 for additional information.

The Fair Value Measurement Topic, ASC 820-10 (“ASC 820-10”), establishes a framework for measuring fair value, establishes a fair value hierarchy based upon the observability of inputs used to measure fair value, and expands disclosures

about fair value measurements.

Assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

Assets and liabilities are classified in their entirety within the fair value hierarchy based on the

lowest level input that is significant to the fair value measurement.

Under ASC 820-10, fair value of an investment is the price that would be received to sell an asset or to transfer a liability to an entity in an orderly transaction between market participants at the measurement date.

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The Company expenses advertising costs in the quarter incurred.

Advertising costs were $ 149.8 million, $ 161.5 million and $ 165.1 million for the years ended December 31, 2019, 2020, and 2021, respectively, and are included within General and administration expense in our consolidated statements of income.

Advertising costs were $ 161.5 million, $ 165.1 million and $ 181.3 million for the years ended December 31, 2020, 2021, and 2022, respectively, and are included within General and administration expense on the consolidated statements of income.

Stock-Based Compensation

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(1) the proceeds received from the exercise of stock options, and (2) the amount of compensation cost associated with the stock awards for future service not yet recognized by the Company.

Stock options are not included in the computation of diluted earnings per share when the stock option exercise price of an individual grant exceeds the average market price for the period.

Stock options, restricted stock, and restricted stock units are excluded from the computation of diluted earnings per share when their effect would be anti-dilutive.

Set forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for each of the three years ended December 31, 2022 (in thousands):

5 unchanged sentences

Anti-dilutive shares excluded from the diluted earnings per share calculation 63 324 114

Comprehensive Income

Comprehensive income includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of unrealized gains and losses on available-for-sale marketable securities, net of tax, and foreign currency translation adjustments.

As of December 31, 2019, 2020, and 2021, the balance of accumulated other comprehensive income was $ 233,000 , net of tax of $ 90,000 , $ 48.9 million, net of tax of $ 0.3 million, and $ 9.2 million, net of tax of $ 0.2 million, respectively.

During the year ended December 31, 2020, approximately $ 25,000 , net of tax of $ 10,000 , of unrealized gains on available-for-sale marketable securities was reclassified out of accumulated other comprehensive income to Other income on the consolidated statements of income.

There were no reclassifications out of accumulated other comprehensive income to net income for the years ended December 31, 2019 and 2021.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of unrealized gains and losses on available-for-sale marketable securities, net of tax, and foreign currency translation adjustments.

As of December 31, 2020 and 2021, the balance of accumulated other comprehensive income was $ 48.9 million, net of tax of $ 0.3 million and $ 9.2 million, net of tax of $ 0.2 million, respectively, and as of December 31, 2022 the balance of accumulated comprehensive loss was $ 35.1 million, net of tax of $ 0.1 million.

During the year ended December 31, 2020, approximately $ 25,000 , net of tax of $ 10,000 , of unrealized gains on available-for-sale marketable securities was reclassified out of accumulated other comprehensive income (loss) to Other income on the consolidated statements of income.

There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the years ended December 31, 2021 and 2022.

The Company provides for deferred income taxes based on temporary differences between financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse.

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A tax position is derecognized if it no longer meets the more likely than not threshold of being sustained.

The tax years since 2018 remain open for federal tax examination and the tax years since 2017 remain open to examination by state and local taxing jurisdictions in which the Company is subject.

The tax years since 2019 remain open for federal tax examination, the tax years since 2018 remain open to examination by certain states, and the tax years since 2017 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation.

Other Investments

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The Company accounts for the investments in limited partnerships under the equity method.

The Company's pro-rata share in the net income of the limited partnerships is included in Other income in our consolidated statements of income.

The Company accounts for the investments made through its venture fund, SEI Ventures, at cost less impairment as these investments do not have readily determinable fair value.

The Company’s pro-rata share in the net income (loss) of the limited partnerships is included in Other income on the consolidated statements of income.

The Company also holds investments accounted for at cost less impairment as these investments do not have readily determinable fair value.

Use of Estimates

1 unchanged sentence

The most significant management estimates include allowances for credit losses, useful lives of property and equipment and intangible assets, incremental borrowing rates, potential sublease income and vacancy periods, accrued expenses, forfeiture rates and the likelihood of achieving performance criteria for stock-based awards, value of free courses earned by students that will be redeemed in the future, valuation of goodwill and intangible assets, and the provision for income taxes.

During the years ended December 31, 2020 and 2021, management estimates also include potential impacts the COVID-19 pandemic will have on student enrollment, tuition pricing, and collections of tuition receivables in future periods.

The duration and severity of the COVID-19 pandemic and its impact on the Company’s consolidated financial statements is subject to uncertainty.

Actual results could differ from those estimates.

Recently Issued Accounting Standards Not Yet Adopted

ASUs recently issued by the FASB but not yet effective are not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Updates recently issued by the FASB but not yet effective are not expected to have a material effect on the Company’s consolidated financial statements.

Business Combinations

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The acquired operations include Torrens University Australia, Think Education, and Media Design School, which together provide diversified student curricula to approximately 19,000 students across five industry verticals, including business, hospitality, health, education, creative technology and design.

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 $ 11.0 million of net cash at close, and $ 4.7 million related to higher net working capital.

The Company applied the acquisition method of accounting to ANZ, whereby the excess of the acquisition date fair value of consideration transferred over the fair value of identifiable net assets was allocated to goodwill.

Goodwill reflects workforce

and synergies expected from cost savings, operations, and revenue enhancements of the combined company that are expected to result from the acquisition.

Goodwill reflects workforce and synergies expected from cost savings, operations, and revenue enhancements of the combined company that are expected to result from the acquisition.

The goodwill recorded as part of the acquisition was allocated to the Australia/New Zealand reportable segment in the amount of $ 546.3 million, and is not deductible for tax purposes.

The Company incurred $ 8.1 million of acquisition-related costs related to this acquisition.

These costs were primarily attributable to legal, financial, and accounting support services incurred by the Company in connection with the acquisition, and are included in Merger and integration costs in the accompanying consolidated statements of income.

During the year ended December 31, 2021, the Company finalized the fair value of assets acquired and liabilities assumed.

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• The allocation of purchase price and related adjustments, including the adjustments to amortization expense related to the fair value of intangible assets acquired;

• The exclusion of acquisition-related costs incurred during the years ended December 31, 2019 and 2020;

• The exclusion of acquisition-related costs incurred during the year ended December 31, 2020;

• Associated tax-related impacts of adjustments;

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The following table presents the Company’s pro forma combined revenues and net income (in thousands).

Pro forma results for the year ended December 31, 2021 are not presented below because the results of ANZ are included in the Company's December 31, 2021 consolidated statement of income.

Pro forma results for the years ended December 31, 2021 and 2022 are not presented below because the results of ANZ are included in the Company’s December 31, 2021 and 2022 consolidated statements of income.

Pro Forma Combined

Year Ended December 31, 2019 Year Ended December 31, 2020

Year Ended December 31, 2020

Revenue $ 1,244,440

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Tuition, net of discounts, grants and scholarships 22,431 245,791 224,400

950 4,333 6,347

Total Australia/New Zealand Segment 23,381 250,124 230,747

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Some students may be eligible for scholarship awards, the estimated value of which will be realized in the future and is deducted from revenue when earned, based on historical student attendance and completion behavior.

Contract liabilities are recorded as a current or long-term liability in the consolidated balance sheets based on when the performance obligations are expected to be satisfied and the related benefits are expected to be realized.

Contract liabilities are recorded as a current or long-term liability in the consolidated balance sheets based on when the benefits are expected to be realized.

Substantially all of the contract liability balance classified as short term at the beginning of the year was recognized into revenue during the year ended December 31, 2022.

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To be eligible, students must meet all of Strayer University’s admission requirements, and must be enrolled in a bachelor’s or master’s degree program.

The Company’s employees and their dependents are not eligible for the program.

Students who have more than one consecutive term of non-attendance lose any Graduation Fund credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by Strayer University in the future.

In response to the COVID-19 pandemic, Strayer University temporarily allowed students to miss three consecutive terms without losing their Graduation Fund credits.

Revenue from students participating in the Graduation Fund is recorded in accordance with ASC 606.

The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the

underlying revenue transactions that result in progress by the student toward earning the benefit.

The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit.

The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs.

Each quarter, the Company assesses its assumptions underlying these estimates, and to date, any adjustments to the estimates have not been material.

Each quarter, the Company assesses its assumptions underlying

these estimates, and to date, any adjustments to the estimates have not been material.

The amount estimated to be redeemed in the next 12 months is $ 17.9 million and is included as a current contract liability in the consolidated balance sheets.

The remainder is expected to be redeemed within two to four years .

The table below presents activity in the Graduation Fund for the years ended December 31, 2020 and 2021 (in thousands):

The table below presents activity in the contract liability related to the Graduation Fund for the years ended December 31, 2021 and 2022 (in thousands):

December 31, 2021 December 31, 2022

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Certain commissions earned by third party international agents are considered incremental and recoverable costs of obtaining a contract with customers of ANZ.

These costs are deferred and then amortized over the period of benefit which ranges from one to two years .

These costs are deferred and then amortized over the period of benefit which ranges from one year to two years .

Restructuring and Related Charges

In 2018 and 2019, the Company incurred personnel-related restructuring charges due to cost reduction efforts and management changes.

These changes related to the integration of Capella Education Company in order to establish an efficient ongoing cost structure for the Company.

The severance and other employee separation costs incurred in connection with the integration of CEC are included in Merger and integration costs on the consolidated statements of income.

In the third quarter of 2020, the Company began implementing a restructuring plan in an effort to reduce the ongoing operating costs of the Company to align with changes in enrollment following the COVID-19 pandemic.

Under this plan, the Company incurred severance and other employee separation costs related to voluntary and involuntary employee terminations.

In addition, the 2020 restructuring plan included an evaluation of the Company's owned and leased real estate portfolio, which resulted in the consolidation and sale of underutilized facilities.

During the years ended December 31, 2020 and 2021, the Company recorded right-of-use lease asset charges of approximately $ 0.4 million and $ 18.9 million, respectively, related to facilities consolidated as a result of the restructuring plan.

The Company also recorded fixed asset impairment charges of approximately $ 2.7 million during the year ended December 31, 2021.

During the year ended December 31, 2021, the Company recorded a $ 2.7 million gain from the sale of property and equipment of owned campuses that were closed in connection with the 2020 restructuring plan.

All severance and other employee separation charges, right-of-use lease asset and fixed asset impairment charges, and gains on the sale of property and equipment related to the 2020 restructuring plan are included in Restructuring costs on the consolidated statements of income.

The following details the changes in the Company’s severance and other employee separation costs restructuring liabilities for the years ended December 31, 2020, 2021, and 2022 (in thousands):

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Payments ( 6,448 ) ( 10,680 ) ( 17,128 )

Adjustments — — —

Balance at December 31, 2020 1,835 1,287 3,122

1 unchanged sentence

Payments ( 1,835 ) ( 4,293 ) ( 6,128 )

Adjustments — — —

Balance at December 31, 2021 (2)

2 unchanged sentences

Payments — ( 2,853 ) ( 2,853 )

Adjustments — — —

Balance at December 31, 2022 $ — $ — $ —

___________________________________________________________

(1) Restructuring plan implemented following the Company’s merger with CEC.

(2) Restructuring liabilities are included in accounts payable and accrued expenses.

The 2020 restructuring plan also included an evaluation of the Company’s owned and leased real estate portfolio, which resulted in the consolidation and sale of underutilized facilities.

During the years ended December 31, 2020, 2021, and 2022, the Company recorded right-of-use lease asset charges of approximately $ 0.4 million, $ 18.9 million, and $ 1.2 million, respectively, related to facilities consolidated as a result of the restructuring plan.

The Company recorded benefits related to the early termination and related extinguishment of lease liabilities of approximately $ 0.2 million and $ 1.2 million during the years ended December 31, 2021 and 2022, respectively.

During the years ended December 31, 2021 and 2022, the Company recorded gains from the sale of property and equipment of owned campuses that were closed in connection with the 2020 restructuring plan of approximately $ 2.7 million and $ 2.9 million, respectively.

The Company also recorded fixed asset impairment charges of approximately $ 2.7 million and $ 2.5 million during the years ended December 31, 2021 and 2022, respectively.

All severance and other employee separation charges, right-of-use lease asset and fixed asset impairment charges, benefits from early lease terminations, and gains on the sale of property and equipment are included in Restructuring costs on the consolidated statements of income.

Marketable Securities

17 unchanged sentences

Due within one year $ 6,501 $ 9,156

Due after one year through five years 30,270 23,377

Due after one year through three years 23,377 13,123

Total $ 29,878 $ 22,279

4 unchanged sentences

Total $ 36,192 $ 9,300 $ 6,420

The Company recorded approximately $ 35,000 in gross realized gains and $ 0.8 million in gross realized losses in net income during the years ended December 31, 2020 and December 31, 2021, respectively.

The Company recorded approximately $ 35,000 in gross realized gains and $ 0.8 million in gross realized losses in net income during the years ended December 31, 2020 and 2021, respectively.

The Company did no t record any gross realized gains or losses in net income during the year ended and December 31, 2022.

55 unchanged sentences

Total assets at fair value on a recurring basis $ 22,496 $ 217 $ 22,279 $ —

Deferred payments $ 658 $ — $ — $ 658

Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2021 (in thousands):

13 unchanged sentences

The Company measures the above items on a recurring basis at fair value as follows:

• Money market funds — Classified in Level 1 is excess cash the Company holds in both taxable and tax-exempt money market funds, which are included in cash and cash equivalents in the accompanying consolidated balance sheets.

The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income in stockholders’ equity.

• Money market funds — Classified in Level 1 is excess cash the Company holds in money market funds, which are included in cash and cash equivalents in the accompanying consolidated balance sheets.

The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

The Company’s cash and cash equivalents held at December 31, 2021 and 2022, approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.

2 unchanged sentences

• Deferred payments — The Company acquired certain assets and entered into deferred payment arrangements with the sellers in transactions that occurred in 2011.

The deferred payments are classified within Level 3 as there is no liquid market for similarly priced instruments and are valued using discounted cash flow models that encompass significant unobservable inputs.

The assumptions used to prepare the discounted cash flows include estimates for interest rates, enrollment growth, retention rates, and pricing strategies.

These assumptions are subject to change as the underlying data sources evolve and the programs mature.

The short-term portion of deferred payments was $ 0.7 million as of December 31, 2021 and is included in accounts payable and accrued expense.

The deferred payments were classified within Level 3 as there was no liquid market for similarly priced instruments and were valued using discounted cash flow models that encompassed significant unobservable inputs.

The assumptions used to prepare the discounted cash flows included estimates for interest rates, enrollment growth, retention rates, and pricing strategies.

The final payment related to the deferred payment arrangements was made in the first quarter of 2022.

The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the years ended December 31, 2021 or 2022.

10 unchanged sentences

Balance as of December 31, 2020 $ 732,075 $ 586,451 $ — $ 1,318,526

Additions (1)

Reporting unit reallocation (1)

( 100,000 ) — 100,000 —

Additions — — — —

Impairments — — — —

2 unchanged sentences

Balance as of December 31, 2021 632,075 553,789 100,000 1,285,864

Reporting unit reallocation (2)

( 100,000 ) — 100,000 —

Additions — 947 — 947

4 unchanged sentences

___________________________________________________

(1) Represents additions related to the acquisition of ANZ in 2020, as discussed in Note 3.

(1) Represents the reallocation of goodwill as a result of the Company reorganizing its segments in 2021.

(3) Represents a measurement period adjustment recorded in 2021, as discussed in Note 3.

(2) Represents a measurement period adjustment recorded in 2021 related to the Company’s acquisition of ANZ, as discussed in Note 3.

The Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.

In 2021, the Company performed a qualitative impairment assessment of goodwill assigned to its reporting units using the first day of the fourth quarter of 2021 as the assessment date.

In 2022, the Company performed a qualitative impairment assessment of goodwill assigned to all reporting units, except for the goodwill assigned to the ANZ reporting unit, using the first day of the fourth quarter of 2022 as the assessment date.

The Company evaluated the likelihood of impairment by considering qualitative factors relevant to the reporting units, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value.

Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for its reporting units as of the assessment date.

There were no impairment charges related to goodwill recorded during the years ended December 31, 2019, 2020, and 2021.

Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for these reporting units as of the assessment date.

In 2022, the Company performed a quantitative impairment assessment for goodwill assigned to the ANZ reporting unit using the first day of the fourth quarter of 2022 as the assessment date.

The Company used an income-based approach to determine the fair value of the ANZ reporting unit.

The income approach consisted of a discounted cash flow model that included projections of future cash flows for the ANZ reporting unit, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.

The determination of fair value consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ reporting unit include, but are not limited to, the amounts and timing of expected future cash flows, new international student enrollment growth, the discount rate, and the terminal growth rate.

The assumptions used in determining the expected future cash flows consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives.

The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in a particular company.

The terminal growth rate reflects the sustainable operating income a reporting unit could generate in a perpetual state as a function of revenue growth, inflation, and future margin expectations.

The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of its ANZ reporting unit exceeded its carrying value.

Accordingly, no goodwill impairment charges were recorded during the years ended December 31, 2020, 2021, and 2022.

Intangible Assets

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The Company’s finite-lived intangible assets are comprised of student relationships, which are being amortized on a straight-line basis over a three-year useful life.

Straight-line amortization expense for finite-lived intangible assets reflects the pattern in which the assets' economic benefits are consumed over their estimated useful lives.

Straight-line amortization expense for finite-lived intangible assets reflects the pattern in which the economic benefits of the assets are consumed over their estimated useful lives.

Amortization expense related to finite-lived intangible assets was $ 57.3 million, $ 44.3 million, and $ 11.1 million for the years ended December 31, 2020, 2021 and 2022, respectively.

The following table presents future amortization expense for finite-lived intangible assets as of December 31, 2021 (in thousands):

2022 $ 11,619

2027 and thereafter —

Total $ 21,302

In 2023, the Company will recognize the remaining $ 9.1 million of amortization expense related to its finite-lived intangible assets.

Indefinite-lived intangible assets not subject to amortization consist of trade names.

1 unchanged sentence

In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles.

The Company assesses indefinite-lived intangible assets at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.

In 2021, the Company performed a qualitative impairment assessment related to its indefinite-lived intangible assets using the first day of the fourth quarter of 2021 as the assessment date.

In 2022, the Company performed a qualitative impairment assessment related to its indefinite-lived intangible assets, except for the ANZ trade names, using the first day of the fourth quarter of 2022 as the assessment date.

The Company evaluated the likelihood of impairment by considering qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that have a significant bearing on fair value.

Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for the indefinite-lived intangible assets as of the assessment date.

There were no impairment charges related to indefinite-lived intangible assets recorded during the years ended December 31, 2019, 2020, and 2021.

Based on the results of its qualitative impairment analysis, the Company determined that no impairment indicators existed for these indefinite-lived intangible assets as of the assessment date.

In 2022, the Company performed a quantitative impairment assessment for indefinite-lived intangible assets related to the ANZ trade names using the first day of the fourth quarter of 2022 as the assessment date.

The Company used an income-based approach to determine the fair value of the ANZ trade names.

The income approach consisted of a discounted cash flow model, using the relief from royalty method, which included a projection of future revenues for ANZ, identifying a royalty rate, calculating a terminal value, and discounting such cash flows by a risk adjusted rate of return.

The determination of fair value of the ANZ trade name primarily consists of using unobservable inputs under the fair value measurement standards.

The Company believes that the most critical assumptions and estimates used in determining the estimated fair value of the ANZ trade names include, but are not limited to, the amounts and timing of future revenue growth rates, the royalty rate, the discount rate, and the terminal growth rate.

The assumptions used in determining the expected future revenue growth rates consider various factors such as historical operating trends, particularly in student enrollment and pricing, anticipated economic and regulatory conditions, reasonable expectations for planned business expansion opportunities, and long-term operating strategies and initiatives.

The royalty rate is based on the Company’s assumption of what a reasonable market participant would pay to license the ANZ trade names, expressed as a percentage of revenues.

The discount rate is based on the Company’s assumption of a prudent investor’s required rate of return for assuming the risk of investing in a particular company.

The terminal growth rate reflects the sustainable revenue growth the business could generate in a perpetual state as a function of inflationary expectations.

The Company believes that these assumptions are consistent with a reasonable market participant view while employing the concept of highest and best use of the asset.

Based on the results of its quantitative impairment assessment, the Company concluded that the fair value of the ANZ trade names exceeded its carrying value.

Accordingly, there were no impairment charges related to indefinite-lived intangible assets recorded during the years ended December 31, 2020, 2021, and 2022.

Other Current Assets

Other current assets consist of the following as of December 31, 2021 and 2022 (in thousands):

December 31, 2021 December 31, 2022

Prepaid expenses 17,862 19,073

Restricted cash 9,794 13,287

Cloud computing costs 5,019 7,859

Other 8,102 3,066

Other current assets $ 40,777 $ 43,285

Other assets consist of the following as of December 31, 2021 and 2022 (in thousands):

4 unchanged sentences

Other investments 3,576 3,396

Tuition receivable, non-current 3,585 2,466

Tuition receivable, net, non-current 2,466 2,673

Other 4,864 4,005

2 unchanged sentences

Long-term prepaid expenses primarily relate to payments that have been made for future services to be provided after one year.

In the fourth quarter of 2020, pursuant to the terms of the perpetual license agreement associated with JWMI, the Company made a final one-time cash payment of approximately $ 25.3 million for the right to continue to use the Jack Welch name and likeness.

In 2020, pursuant to the terms of the perpetual license agreement associated with JWMI, the Company made a final one-time cash payment of approximately $ 25.3 million for the right to continue to use the Jack Welch name and likeness.

As of December 31, 2021 and 2022, $ 19.2 million and $ 17.7 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.

12 unchanged sentences

Other Investments

The Company's venture fund, SEI Ventures, makes investments in education tech start-ups focused on transformational technologies that improve student success.

The Company holds investments in education tech start-ups focused on transformational technologies that improve student success.

These investments are accounted for at cost less impairment as they do not have readily determinable fair value.

Tuition Receivable

Non-current tuition receivable represents tuition that the Company expects to collect, but not within the next 12 months.

Non-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months.

Other is comprised primarily of deferred financing costs associated with the Company’s credit facility, deferred contract costs related to commissions paid by ANZ to third party international agents, and refundable security deposits associated with the Company’s leased campus and office space.

7 unchanged sentences

Long-Term Debt

On November 3, 2020, the Company entered into an amended credit facility ("Amended Credit Facility"), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $ 350 million.

On November 3, 2020, the Company entered into an amended credit facility (“Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $ 350

The Amended Credit Facility provides the Company with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in the future in an aggregate amount of up to the sum of (x) the greater of (A) $ 300 million and (B) 100 % of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75 :1.00.

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Approximately $ 3.6 million and $ 3.4 million was denominated in Australian dollars as of December 31, 2021 and 2022, respectively.

During the year ended December 31, 2022, the Company repaid $ 40.0 million of the outstanding balance under the Revolving Credit Facility.

During the years ended December 31, 2020, 2021 and 2022, the Company paid $ 1.0 million, $ 2.7 million and $ 4.2 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.

4 unchanged sentences

Asset retirement obligations 9,122 6,283

Deferred payments related to acquisitions 715 —

Other 3,263 3,183

5 unchanged sentences

Certain of the Company’s lease agreements require the leased premises to be returned in a predetermined condition.

Deferred Payments Related to Acquisitions

In connection with previous acquisitions, the Company acquired certain assets and entered into deferred payment arrangements with the sellers.

Equity Awards

In connection with the merger with Capella Education Company on August 1, 2018, the Capella Education Company 2014 Equity Incentive Plan (the “2014 Capella Plan”) and the Capella Education Company 2005 Stock Incentive Plan (collectively, the “Capella Plans”) were assumed by the Company.

Under the Capella Plans, shares of the Company’s common stock were permitted to be issued upon the exercise or settlement of equity awards that were granted prior to the merger date or pursuant to awards granted after the closing of the merger to legacy Capella Education Company employees under the 2014 Capella Plan.

On November 6, 2018, the Company’s shareholders approved the Strategic Education, Inc.

5 unchanged sentences

The maximum term of the awards granted under the 2018 Plan is ten years .

The number of shares of common stock authorized for issuance under the 2018 Plan is 700,000 , plus the number of shares available for grant under the 2015 Plan at the time of stockholder approval of the 2018 Plan, plus the number of shares which may in the future become available under the 2015 Plan due to forfeitures of outstanding awards.

The original number of shares of common stock authorized for issuance under the 2018 Plan was 700,000 , plus the number of shares available for grant under the 2015 Plan at the time of stockholder approval of the 2018 Plan, plus the number of shares which may in the future become available under the 2015 Plan due to forfeitures of outstanding awards.

On April 27, 2022, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the total number of shares of common stock available for issuance under the 2018 Plan by the number of shares that were available for issuance under the 2014 Capella Plan as of the effective date of the First Amendment, plus the number of shares that may become available upon the future expiration, forfeiture or cancellation of outstanding awards under the Capella Plans.

Subsequent to the shareholders approval of the First Amendment, all equity-based awards are granted under the 2018 Plan.

As of December 31, 2022, 925,063 shares were available for issuance under the 2018 Plan.

Under the Capella Plans, shares of the Company's common stock may be issued upon the exercise or settlement of equity awards that were granted prior to the merger date or pursuant to awards granted after the closing of the merger to legacy Capella Education Company employees under the 2014 Capella Plan.

As of December 31, 2021, 1,020,818 shares were available for issuance to legacy Capella Education Company employees under the 2014 Capella Plan.

As of December 31, 2021, the Company has issued and outstanding awards under the 2018 Plan as well as the 2015 Plan, the Capella Education Company 2005 Stock Incentive Plan, and the Capella Education Company 2014 Equity Incentive Plan.

As of December 31, 2022, the Company has issued and outstanding awards under the 2018 Plan, the Capella Education Company 2005 Stock Incentive Plan, and the Capella Education Company 2014 Equity Incentive Plan.

Dividends paid on unvested restricted stock are reimbursed to the Company, and dividend equivalents accumulated on unvested restricted stock units are forfeited, if the recipient forfeits his or her shares as a result of termination of employment prior to vesting in the award, other than as a result of the recipient’s death, disability, or certain qualifying terminations in connection with a change in control of the Company, or unless waived by the Company.

36 unchanged sentences

The amount of intrinsic value will change based on the fair market value of the Company’s common stock.

The Company paid $ 1.8 million, and received $ 1.2 million and $ 0.1 million of net cash proceeds related to stock options exercised during the years ended December 31, 2019, 2020, and 2021, respectively.

The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2019, 2020, and 2021 was $ 17.4 million, $ 2.0 million and $ 24 thousand, respectively.

The Company received $ 1.2 million, $ 0.1 million, and $ 14 thousand of net cash proceeds related to stock options exercised during the years ended December 31, 2020, 2021, and 2022, respectively.

The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2020, 2021, and 2022 was $ 2.0 million, $ 24 thousand, and $ 15 thousand, respectively.

Valuation and Expense Information under Stock Compensation Topic ASC 718

1 unchanged sentence

This cost is expected to be recognized over the next 2.3 years on a weighted-average basis.

Approximately 443,000 shares of restricted stock awards are subject to performance conditions.

Approximately 644,000 shares of restricted stock awards and restricted stock units are subject to performance conditions.

The accrual for stock-based compensation for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods.

5 unchanged sentences

General and administration 9,499 13,535 14,766

Merger and integration costs 367 — —

Restructuring costs — ( 703 ) —

2 unchanged sentences

Stock-based compensation expense, net of tax $ 10,839 $ 13,340 $ 16,304

During the years ended December 31, 2019, 2020, and 2021, the Company recognized windfall tax benefits related to share-based payment arrangements of approximately $ 4.0 million, $ 2.8 million, and $ 18,000 , respectively, which were adjustments to the provision for income taxes.

During the year ended December 31, 2020, the Company recognized a windfall tax impact of approximately $ 2.8 million and during the years ended December 31, 2021, and 2022, the Company recognized shortfall tax impacts of approximately $ 18 thousand, and $ 1.5 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes.

Other Employee Benefit Plans

1 unchanged sentence

401(k) Plan, which covers all eligible employees of the Company.

Effective January 1, 2022, participants may voluntarily contribute up to $ 20,500 of their base compensation annually.

The Company makes discretionary contributions to participants of the Strategic Education, Inc.

1 unchanged sentence

The Company’s contributions to these plans totaled $ 7.6 million, $ 7.4 million and $ 7.7 million for the years ended December 31, 2020, 2021, and 2022, respectively.

Pursuant to local laws, ANZ is required to make contributions on behalf of its employees for post-retirement benefits.

Pursuant to local laws, ANZ is required to make contributions on behalf of its employees for post-retirement superannuation benefits.

In addition, ANZ has recorded a liability for long service leave, an entitlement for which employees meeting certain requirements are eligible for extended paid leave.

The Company incurred $ 1.5 million and $ 8.4 million in expense related to these arrangements for the benefit of ANZ employees for the years ended December 31, 2020 and 2021, respectively.

The Company incurred $ 1.5 million, $ 8.4 million, and $ 8.7 million in expense related to these arrangements for the benefit of ANZ employees for the years ended December 31, 2020, 2021, and 2022, respectively.

In May 1998, the Company adopted the Strayer Education, Inc.

10 unchanged sentences

In November 2003, the Company’s Board of Directors authorized the Company to repurchase up to an aggregate of $ 15 million in value of common stock in open market purchases from time to time at the discretion of the Company’s management depending on market conditions and other corporate considerations.

The Company’s Board of Directors amended the program

on various dates, increasing the repurchase amount authorized and extending the expiration date.

The Company’s Board of Directors amended the program on various dates, increasing the repurchase amount authorized and extending the expiration date.

At December 31, 2022, $ 246.8 million of the Company’s share repurchase authorization was remaining for repurchases through December 31, 2023.

7 unchanged sentences

2021 76,969 $ 76.72

2022 612,104 $ 65.54

Commitments and Contingencies

The Company’s U.S.

Higher Education institutions participate in various federal student financial assistance programs which are subject to audit by agencies, including the Department of Education, the Veterans Administration, and the Department of Defense.

Department of Defense.

Management believes that the potential effects of audit adjustments, if any, for the periods currently under audit will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial position, results of operations, or cash flows.

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Net deferred tax liability $ ( 44,595 ) $ ( 34,605 )

The valuation allowance for deferred tax assets as of December 31, 2021 was $ 0.6 million and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return.

As of December 31, 2022, Loss carryforward consists of net operating losses related to the states where the Company does not file a consolidated return.

The company has state net operating loss carryforwards of $ 20.2 million which will expire from

2027 through 2043 and $ 14.3 million which have an indefinite carryover period.

The change in the valuation allowance for deferred tax assets as of December 31, 2021 and 2022 was $ 0.6 million and $ 1.2 million, respectively, and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return.

The Company concluded that it was more likely than not that the deferred tax asset for the net operating loss carryforwards would not be realized due to negative evidence outweighing the positive evidence regarding the realization of the deferred tax assets.

The Company will continue to evaluate its ability to realize its net deferred tax assets on a quarterly basis.

The Company had no valuation allowance for deferred tax assets as of December 31, 2020.

As of December 31, 2021, Loss carryforward consists of net operating losses related to the states where the Company does not file a consolidated return.

As of December 31, 2021 and 2022, the Company’s liabilities for unrecognized tax benefits are included in other long-term liabilities in the consolidated balance sheets.

Interest and penalties, including those related to uncertain tax positions, are included in the provision for income taxes in the consolidated statements of income.

The Company recognized $ 64,000 and $ 33,000 of expense related to interest and penalties in 2020 and 2021, respectively.

The total amount of interest and penalties included in the consolidated balance sheets was $ 45,000 and $ 30,000 as of December 31, 2020 and 2021, respectively.

The Company recognized approximately $ 33,000 and $ 55,000 of expense related to interest and penalties in 2021 and 2022, respectively.

The total amount of interest and penalties included in the consolidated balance sheets was approximately $ 30,000 and $ 59,000 as of December 31, 2021 and 2022, respectively.

The following table summarizes changes in unrecognized tax benefits, excluding interest and penalties, for the respective periods (in thousands):

11 unchanged sentences

Impact of foreign operations ( 1.2 ) 2.2 3.0

Termination of deferred compensation arrangements 9.2 — —

Transaction costs — 0.6 —

Nondeductible compensation 2.2 1.9 2.4

Change in valuation allowance — 0.8 1.7

Excess tax benefit on share-based compensation ( 2.0 ) — 1.7

Transaction costs 0.6 — —

Other ( 1.9 ) ( 1.2 ) ( 0.1 )

Effective tax rate 24.3 % 28.1 % 32.9 %

In February 2019, to align compensation and benefit plans after completion of the merger with CEC, the Compensation Committee of the Company’s Board of Directors took action to terminate all deferred compensation arrangements, including for employees already participating in such arrangements.

These changes affect the tax deductibility of certain arrangements, which resulted in a discrete item recorded during the three months ended March 31, 2019, reducing the Company’s deferred tax assets by $ 11.5 million, and increasing the Company’s 2019 effective tax rate and future cash tax payments.

Cash payments for income taxes were $ 45.4 million, $ 27.3 million, and $ 26.8 million in 2020, 2021, and 2022, respectively.

2 unchanged sentences

Strategic Education’s portfolio of companies is dedicated to closing the skills gap by placing adults on the most direct path between learning and employment.

In the first quarter of 2021, the Company changed the way management reports financial information relied on by the Chief Operating Decision Maker (“CODM”) to evaluate performance and allocate the resources of the Company.

The Company’s revised organizational structure includes three operating and reportable segments:

Higher Education (“USHE”), which is primarily comprised of the Company's previous Strayer University and Capella University segments, Education Technology Services, and Australia/New Zealand.

During the first three quarters of 2021, the Education Technology Services segment was called the Alternative Learning segment.

Financial reporting under the new organizational structure began in the first quarter of 2021.

Prior period segment disclosures have been recast to conform to the current period presentation.

The Company’s organizational structure includes three operating and reportable segments:

Higher Education, Education Technology Services, and Australia/New Zealand.

The USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Strayer University and Capella University, including the Jack Welch Management Institute MBA, which is a unit of Strayer University.

2 unchanged sentences

The employer relationships developed by the Education Technology Services division are an important source of student enrollment for Strayer University and Capella University, and the majority of the revenue attributed to the Education Technology Services division is driven by the volume of enrollment derived from these employer relationships.

Education Technology Services also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which enables lower cost education benefits programs through the use of low-cost online general education courses recommended by the American Council on Education for credit at other colleges and universities.

Education Technology Services also supports employer partners through Workforce Edge, a platform which provides employers a full-service education benefits administration solution, and Sophia Learning, which enables education benefits programs through the use of low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities.

The Australia/New Zealand segment is comprised of Torrens University, Think Education and Media Design School in Australia and New Zealand, which collectively offer certificate and degree programs in business, design, education, hospitality, healthcare, and technology through campuses in Australia, New Zealand, and online.

2 unchanged sentences

The Company’s Chief Operating Decision Maker does not evaluate operating segments using asset information.

A summary of financial information by reportable segment (in thousands) for the years ended December 31, 2019, 2020, and 2021 is presented in the following table:

A summary of financial information by reportable segment for the years ended December 31, 2020, 2021, and 2022 is presented in the following table (in thousands):

2020 2021 2022

18 unchanged sentences

Amortization of intangible assets 64,225 51,495 14,350

Merger and integration costs 401 — —

Restructuring costs 349 2,036 2,480

4 unchanged sentences

Education Technology Services 112 567 1,147

Merger and integration costs 367 — —

Restructuring costs — ( 703 ) —

10 unchanged sentences

The outcome of such matters is uncertain, and the Company may incur costs in the future to defend, settle, or otherwise resolve them.

The Company accrues for estimated costs related to existing lawsuits, claims and proceedings when it is probable that it

will incur these costs in the future and the costs are reasonably estimable.

The Company accrues for estimated costs related to existing lawsuits, claims and proceedings when it is probable that it will incur these costs in the future and the costs are reasonably estimable.

The Company currently believes that the ultimate outcome of such matters will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or cash flows.

However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect future results of operations in a particular period.

On April 20, 2021, Capella University received a letter from the Department of Education referencing the Wright matter (described below), and indicating that the Department will require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 1,000 borrower defense applications that have been submitted regarding Capella.

According to the Department, some of the applications allege similar claims as in the Wright matter concerning alleged misrepresentations of the length of time to complete doctoral programs.

Capella has since received approximately 500 applications for borrower defense to repayment and is cooperating with the Department’s fact-finding process.

At this time, the Company is unable to predict the outcome of the Department's fact-finding process or the resolution of the borrower defense applications.

Wright, et al.

1 unchanged sentence

(now captioned Ornelas, et al.

Capella, et al.) was filed several years ago in the United States District Court for the District of Minnesota.

Capella, et al.) was filed several years ago in the United States District Court for the District of Minnesota, Case No.

After the court granted Capella’s motion to dismiss in relation to all but one plaintiff, the plaintiff filed a motion for leave to file a second amended complaint on October 5, 2020, seeking to add six named plaintiffs as well as additional sub-classes and causes of action to the lawsuit.

On September 22, 2021, the court affirmed a magistrate’s order granting plaintiffs’ motion to amend, and plaintiffs subsequently filed their second amended complaint.

In January 2022, the parties reached an agreement in principle regarding the terms of a confidential settlement, and Capella anticipates the settlement agreement will become effective in Q1 2022, at which time the parties will file a joint Stipulation of Dismissal of the case.

On September 22, 2021, the court affirmed a magistrate’s order granting plaintiff’s motion to amend, and plaintiffs subsequently filed their second amended complaint.

The parties entered into a confidential settlement which became effective on April 20, 2022, and on April 25, 2022 the parties filed a joint stipulation of dismissal with prejudice.

On May 17, 2022, the court entered an order of dismissal with prejudice.

On April 20, 2021, Capella University received a letter from the Department of Education referencing Wright, et al.

Capella Education Co., et al.

and indicating that the Department would require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 1,000 borrower defense applications that have been submitted regarding Capella University.

According to the Department, some of the applications allege similar claims as in the Wright matter concerning alleged misrepresentations of the length of time to complete doctoral programs.

Capella University subsequently received approximately 500 applications for borrower defense to repayment.

Capella University contested each claim for defense to repayment in individualized responses with supporting evidence, the last of which was sent to the Department in August 2021.

Since that time, Capella University has not received any communication from the Department related to the set of borrower defense claims received in 2021, nor has Capella University received indication that any of these claims has been evaluated on the facts presented and adjudicated on the merits.

On June 22, 2022, in litigation in which Capella University is not a party, Sweet, et al.

Miguel Cardona and the United States Department of Education , United States District Court for the Northern District of California, Case No.

3:19-cv-03674-WHA, the Department joined a proposed class settlement agreement that would result in a blanket grant of automatic, presumptive relief for all borrower defense to repayment applications filed by students at any of approximately 150 different listed institutions, including Capella University, through June 22, 2022.

The class settlement agreement would also provide certain expedited review of borrower defense claims related to schools excluded from the automatic relief list, as well as for borrowers who applied during the period after execution of the settlement and before final approval.

The Sweet settlement received preliminary court approval on August 4, 2022.

A joint motion for final approval was filed on September 22, 2022, which multiple intervening higher education institutions and companies opposed.

Following a fairness hearing, the court granted final approval of the settlement on November 16, 2022.

Intervenors have appealed the court’s order and moved to stay the court’s final judgment approving the settlement pending resolution of the appeal.

In a July 25, 2022 filing in the same litigation, the Department stated that providing automatic relief to such borrowers “does not constitute the granting or adjudication of a borrower defense pursuant to the Borrower Defense Regulations, and therefore provides no basis to the Department for initiating a borrower defense recoupment proceeding against any institution identified” on the list.

It is unclear whether the Department would attempt to seek recovery from Capella University for the amounts of discharged loans.

The Department has indicated that any recoupment against institutions “could be imposed only after the Department initiated a separate, future proceeding, in accordance with regulations that require the Department to prove a sufficient basis for liability and provide schools with notice and an opportunity to be heard.” If the Department were to seek

recovery for the amounts of discharged loans, Capella University would dispute and defend against such efforts.

At this time, the Company is unable to predict the ultimate outcome of Capella-related borrower defense applications.

United States Regulation

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Among other things, the $2.2 trillion bill established some flexibilities related to the processing of federal student financial aid, established a higher education emergency fund, and created relief for some federal student loan borrowers.

Through the CARES Act, institutions of higher education were provided relief from conducting a return to Title IV (R2T4) calculation in cases where the student withdrew because of the COVID-19 pandemic, including removing the requirement that the institution return unearned funds to the Department of Education and providing loan cancellation for the portion of the Direct Loan associated with a payment period that the student did not complete due to the COVID-19 pandemic.

The CARES Act also allows institutions to exclude from satisfactory academic progress calculations any attempted credits that the student did not complete due to the COVID-19 pandemic, without requiring an appeal from the student.

Additionally, under the legislation, institutions are permitted to transfer up to 100% of Federal Work-Study (“FWS”) funds into their Federal Supplemental Educational Opportunity Grant (“FSEOG”) allocation and are granted a waiver of the 2019/2020 and 2020/2021 non-federal share institutional match.

Institutions may continue to make FWS payments to student employees who are unable to meet their employment obligations due to the COVID-19 pandemic.

The Department issued sub-regulatory guidance to institutions regarding implementation of the provisions included in the CARES Act.

The CARES Act also suspended payments and interest accrual on federal student loans until September 30, 2020, in addition to suspending involuntary collections such as wage garnishment, tax refund reductions, and reductions of federal benefits like Social Security benefits during the same timeframe.

On March 30, 2021, the Secretary of Education also extended student loan relief to all Federal Family Education Loans (“FFEL”) not previously covered.

Through a series of administrative actions, student loan relief has been extended, including on August 24, 2022, when the Department announced, “a final extension of the pause on student loan repayment, interest, and collections through December 31, 2022.” The restart of student loan repayments has subsequently been postponed further.

Finally, the CARES Act allocated $14 billion to higher education through the creation of the Education Stabilization Fund.

Fifty percent of the emergency funds received by institutions must go directly to students in the form of emergency financial aid grants to cover expenses related to the disruption of campus operations due to the COVID-19 pandemic.

Students who were previously enrolled in exclusively online courses prior to March 13, 2020 are not eligible for these grants.

Institutions may use remaining emergency funds not given to students for costs associated with significant changes to the delivery of instruction due to the COVID-19 pandemic, as long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities, including marketing and advertising;

or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.

Institutions received funds under the Education Stabilization Fund based on a formula that factors in their relative percentage of full-time, Federal Pell Grant-eligible students who were not exclusively enrolled in online education prior to the emergency period.

On April 9, 2020, the Department published guidance and funding levels for the Education Stabilization Fund, indicating that Strayer University was eligible to receive $ 5,792,122 .

Given that Strayer University is predominantly online, and very few students take only on-ground classes, Strayer University declined to accept the funds allocated to it because most students would not have expenses related to the disruption of campus operations.

Instead, Strayer University provided a $ 500 tuition grant for all students who had enrolled in on-ground classes for the Spring term, prior to the classes being converted to online.

Because Capella University’s students are exclusively online, Capella University was ineligible for Education Stabilization funding.

American Rescue Plan Act of 2021

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Similar to previous stimulus packages, this legislation provided additional funding for the Higher Education Emergency Relief Fund.

A small portion of the $39.6 billion allocated for institutions of higher education has been made available for student emergency aid for students at for-profit institutions.

A small portion of the $39.6 billion allocated for institutions of higher education was made available for student emergency aid for students at for-profit institutions.

Capella University disbursed $ 184,323 to students of the highest need in June 2021, and Strayer University disbursed $ 2,554,682 to students of the highest need in July 2021.

The legislation also amends the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.

The legislation also amended the “90/10 Rule” to include “all federal education assistance” in the “90” side of the ratio calculation.

Business – Regulation – U.S.

Regulatory Environment – The 90/10 Rule” for a description of the 90/10 Rule.

The legislation requires the Department to conduct a negotiated rulemaking process to modify related Department regulations, which the Department has announced its intent to convene beginning no earlier than January 2022.

This rulemaking process may result in a definition of “federal education assistance” that will include tuition assistance programs offered by the U.S.

Department of Defense and U.S.

Department of Veterans Affairs, in addition to the Title IV programs already covered by the 90/10 Rule.

Under the legislation, these revisions to the 90/10 Rule would apply to institutional fiscal years beginning on or after January 1, 2023.

Further legislation has been introduced in both chambers of Congress that seeks to modify the 90/10 Rule further, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue).

We cannot predict whether Congress will pass any of these legislative proposals.

The legislation required the Department to conduct a negotiated rulemaking process to modify related Department regulations, which the Department began in January 2022.

In March 2022, the Institutional and Programmatic Eligibility negotiated rulemaking committee reached consensus on changes to the 90/10 Rule.

On October 27, 2022, the Department of Education released final 90/10 regulations, which are consistent with the consensus language.

The final regulations provided for an expanded definition of “federal education assistance” that will be periodically defined by the Secretary.

On December 21, 2022, the Department released a list of federal agencies and federal education assistance programs that must be included as federal revenue in the 90/10 calculation.

Such agencies include the U.S.

Department of Defense (military tuition assistance) and the Department of Veterans Affairs (veterans education benefits), in addition to the Title IV programs already covered by the 90/10 Rule.

The new 90/10 regulations are effective for fiscal years beginning on or after January 1, 2023.

Other legislation has been introduced in both chambers of Congress that seeks to modify the 90/10 Rule further, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue), or to eliminate the 90/10 Rule.

We cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule.

Consolidated Appropriations Act, 2021

On December 27, 2020, former President Trump signed into law the Consolidated Appropriations Act of 2021.

Among other things, this package funded the government through September 2021, provided additional COVID-related relief, and made a number of U.S.

On December 27, 2020, the President signed into law the Consolidated Appropriations Act of 2021.

Among other things, this package funded the federal government through September 2021, provided additional COVID-related relief, and made a number of U.S.

higher education changes.

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The legislation also extends until January 1, 2026 expanded employer-provided educational assistance permitting employers to pay up to $5,250 toward an employee’s federal student loans as a tax-free benefit.

The legislation also includes a number of higher education-related provisions, including:

eliminating the “expected family contribution” from the Free Application for Federal Student Aid (“FAFSA”) and replacing it with a “Student Aid Index;”

expanding eligibility for Pell Grants;

In addition, the legislation includes a number of higher education-related provisions, including:

adopting the FAFSA Simplification Act, which includes eliminating the “expected family contribution” from the Free Application for Federal Student Aid (“FAFSA”) and replacing it with a “Student Aid Index;” expanding eligibility for Pell Grants;

restoring Pell Grant eligibility for incarcerated students attending non-profit institutions;

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and significantly simplifying the FAFSA form.

The Department is expected to provide, but has not yet provided, institutions with guidance on the higher education provisions included in the Consolidated Appropriations Act of 2021, which take effect on July 1, 2023.

Additionally, the bill provides $22.7 billion for higher education institutions and students impacted by COVID-19, including $680.9 million (3 percent of the total) for student emergency aid for students at for-profit institutions.

The Department published a FAFSA Simplification Information webpage on October 14, 2022 and is expected to provide institutions with guidance on the higher education provisions included in the Consolidated Appropriations Act of 2021, which take effect on July 1, 2023.

The bill also provided $22.7 billion for higher education institutions and students impacted by COVID-19, including $680.9 million (3 percent of the total) for student emergency aid for students at for-profit institutions.

In January 2021, the Department released a table of institutional allocation of funds which indicated that Capella University was eligible for $ 328,602 and Strayer University was eligible for $ 5,831,606 , all of which was disbursed to students with the highest need in the form of direct grants in spring 2021.

Veterans Health Care and Benefits Improvement Act of 2020

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

On January 5, 2021, the President signed into law the Veterans Health Care and Benefits Improvement Act of 2020, which expanded 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 or provisional approval status by the Department of Education, is subject to any punitive action by a federal or state entity, faces 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 from the closed school or program;

protects students from debt collection by the Department of Veterans Affairs (“VA”) for overpaid tuition benefits;

protects students from debt collection by the VA for overpaid tuition benefits;

and establishes a number of institutional requirements, including:

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prohibiting same-day recruitment and registration;

and prohibiting more than three unsolicited recruiting contacts during any 1-month period.

The legislation will require guidance from the VA, and most provisions became effective August 1, 2021.

and prohibiting more than three unsolicited recruiting contacts during any one-month period.

Most provisions became effective August 1, 2021.

Institutions were permitted to seek waivers for certain sections of the new law if they were not able to satisfy compliance requirements by August 1, 2021, but neither Strayer University nor Capella University sought a waiver.

On June 8, 2021, President Biden signed into law the Training in High-Demand Roles to Improve Veteran Employment Act (the “THRIVE Act”), which amended provisions of the Veterans Health Care and Benefits Improvement Act and the American Rescue Plan Act.

The law requires the Department of Labor and VA to collaborate on a list of high-demand occupations for a rapid retraining assistance program.

The law requires the U.S.

Department of Labor and VA to collaborate on a list of high-demand occupations for a rapid retraining assistance program.

Additionally, the law requires the Government Accountability Office to report on the outcomes and effectiveness of retraining programs.

The THRIVE Act amends the Veterans Health Care and Benefits Improvement Act by clarifying that programs pursued solely through distance education on a half-time basis or less are not eligible for the housing stipend that is generally available for retraining programs.

The THRIVE Act amended the Veterans Health Care and Benefits Improvement Act by clarifying that programs pursued solely through distance education on a half-time basis or less are not eligible for the housing stipend that is generally available for retraining programs.

As noted above, the Veterans Health Care and Benefits Improvement Act prohibits certain high-pressure recruiting tactics.

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The law includes changes to help institutions satisfy the Veterans Health Care and Benefits Improvement Act’s requirements by using the College Financing Plan template, in addition to extending some COVID-related flexibilities previously granted amid the pandemic.

The law also extends remote learning waivers, simplifies the Department of Veterans Affairs verification process for tuition reimbursement, and fixes a technical error to ensure US institutions of higher education can continue to recruit foreign students without losing GI bill funding for their students.

On March 27, 2020, Congress passed and former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

Through the CARES Act, Congress provided institutions of higher education relief from conducting a return to Title IV (R2T4) calculation in cases where the student withdrew because of COVID-19, including removing the requirement that the institution return unearned funds to the Department of Education and providing loan cancellation for the

portion of the Direct Loan associated with a payment period that the student did not complete due to COVID-19.

The CARES Act also allows institutions to exclude from satisfactory academic progress calculations any attempted credits that the student did not complete due to COVID-19, without requiring an appeal from the student.

Additionally, under the legislation, institutions are permitted to transfer up to 100% of Federal Work Study funds into their Federal Supplemental Educational Opportunity Grant allocation and are granted a waiver of the 2019/2020 and 2020/2021 non-federal share institutional match.

Institutions may continue to make Federal Work Study payments to student employees who are unable to meet their employment obligations due to COVID-19.

The Department issued sub-regulatory guidance to institutions regarding implementation of the provisions included in the CARES Act.

On March 30, 2021, the Secretary of Education also extended student loan relief to all Federal Family Education Loans (“FFEL”) not previously covered.

Through a series of administrative actions, student loan relief has been extended through May 1, 2022.

Finally, the CARES Act allocated $14 billion to higher education through the creation of the Education Stabilization Fund.

Students who were previously enrolled in exclusively online courses prior to March 13, 2020 are not eligible for these grants.

Institutions may use remaining emergency funds not given to students for costs associated with significant changes to the delivery of instruction due to COVID-19, as long as such costs do not include payment to contractors for the provision of pre-enrollment recruitment activities, including marketing and advertising;

or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.

On April 9, 2020, the Department published guidance and funding levels for the Education Stabilization Fund, indicating that Strayer University was eligible to receive $ 5,792,122 .

Given that Strayer University is predominantly online, and very few students take only on-ground classes, Strayer declined to accept the funds allocated to it because most students would not have expenses related to the disruption of campus operations.

Instead, Strayer University provided a $ 500 tuition grant for all students who had enrolled in on-ground classes for the Spring term, prior to the classes being converted to online.

Because Capella University’s students are exclusively online, Capella was ineligible for Education Stabilization funding.

The law also extended remote learning waivers through June 1, 2022, simplified the VA verification process for tuition reimbursement, and fixed a technical error to ensure U.S.

institutions of higher education can continue to use incentive compensation to recruit foreign students without losing GI Bill funding for their students.

Ensuring the Best Schools for Veterans Act of 2022

On August 26, 2022, President Biden signed into law the Ensuring the Best Schools for Veterans Act of 2022, which amended prior statutory language and made modifications to how the VA operationalizes the 85/15 requirement (that is, the rule that generally forbids use of Department of Veterans Affairs benefits for students enrolling in a program in which more than 85% of students enrolled in the program have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA).

Among other things, the law clarifies that reporting associated with the 85/15 requirement does not apply to institutions at which 35% or fewer students receive GI bill benefits.

The law also exempts programs for which fewer than 10 students have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA.

Consolidated Appropriations Act, 2022

On March 15, 2022, President Biden signed into law the Consolidated Appropriations Act of 2022.

The bill allocated $76.4 billion to the Department of Education and its programs, including an increase to the maximum Pell Grant award, bringing the total to $6,895 for the 2022-23 award year.

In addition, campus-based aid programs were increased, with $895 million allocated for the FSEOG program, an increase of $15 million above the FY 2021 enacted level, and $1.21 billion allocated for FWS, an increase of $20 million above the FY 2021 enacted level.

In addition to the increases in federal student aid funding, the bill provided $2.1 billion for career, technical, and adult education, $61 million above the FY 2021 enacted level, and an additional $3 billion for higher education programs, $452 million more than the FY 2021 enacted level.

The bill also dictated Department requirements related to federal loan servicing, including appropriations for just over $2 billion for expenses related to the administration of the federal loan program, and made a number of changes to the FAFSA Simplification Act.

Consolidated Appropriations Act, 2023

In December 2022, the President signed the 2023 Consolidated Appropriations Act.

Among other things, the act provides a $500 increase to the maximum Pell Grant, totaling $7,395 for FY 2023-24.

The bill also increases funding to Federal Work Study, FSEOG, Federal TRIO programs, and HBCUs and MSIs.

Additionally, the bill enacted language that would allow companies to make matching contributions to a retirement account for employees making qualified student loan payments.

The bill level funds the Office of Federal Student Aid at $2.03 billion and does not provide new funding for President Biden’s student loan forgiveness plan.

Current Negotiated Rulemaking

On May 26, 2021, the Department first announced its intention to establish negotiated rulemaking committees to prepare proposed regulations for programs authorized under Title IV of the Higher Education Act of 1965, as amended.

As part of the

notice, the Department suggested the following topics for regulation:

change of ownership and change in control of institutions of higher education under 34 CFR § 600.31;

certification procedures for participation in Title IV, HEA programs under 34 CFR § 668.13;

standards of administrative capability under 34 CFR § 668.16;

ability to benefit under 34 CFR § 668.156;

borrower defense to repayment under 34 CFR §§ 682.410, 668.411, 685.206, and 685.222;

discharges for borrowers with a total and permanent disability under 34 CFR §§ 674.61, 682.402, and 685.213;

closed school discharges under 34 CFR §§ 685.214 and 682.402;

discharges for false certification of student eligibility under 34 CFR §§ 685.215(a)(1) and 682.402;

loan repayment plans under 34 CFR §§ 682.209, 682.215, 685.208, and 685.209;

the Public Service Loan Forgiveness program under 34 CFR § 685.219;

mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements (formerly under 34 CFR § 685.300) and associated counseling about such arrangements under 34 CFR § 685.304;

financial responsibility for participating institutions of higher education under 34 CFR subpart L, such as events that indicate heightened financial risk;

gainful employment (formerly located in 34 CFR subpart Q);

and Pell Grant eligibility for prison education programs under 34 CFR part 690.

Additionally, the Department invited public input on how it could address, through regulations, gaps in post-secondary outcomes such as retention, completion, loan repayment, and student loan default by race, ethnicity, gender, and other key student characteristics.

To support this work, the Department held a series of virtual public hearings in June 2021, as well as accepted written comments.

At the virtual public hearings and via written comments, members of the public discussed proposed changes for all of the issues noted above, as well as comments addressing data transparency, including disclosures of outcomes for veteran students.

The Department indicated its intention to convene multiple committees, including the Affordability and Student Loans committee and the Institutional and Programmatic Eligibility committee, to engage in negotiated rulemaking in late 2021 and early 2022.

See “Affordability and Student Loans Committee” and “Institutional and Programmatic Eligibility Committee” below.

In January 2023, the Department indicated its intention to establish one or more rulemaking committees in 2023 to propose new regulations on distance education, improving the use of deferments and forbearances, third-party servicers and related issues, cash management, return of federal funds, state authorization, accreditation and related issues, and TRIO programs.

Following completion of negotiated rulemaking committee meetings, the Department of Education issues proposed rules for public comment.

If the negotiated rulemaking committee reaches consensus on a topic, the Department of Education is bound to propose a rule consistent with the consensus.

Following public comment, the Department issues final regulations, which, if published by November 1, would generally take effect July 1 of the following year.

Gainful Employment

Under the Higher Education Act (“HEA”), a proprietary institution offering programs of study other than a baccalaureate degree in liberal arts (for which there is a limited statutory exception) must prepare students for gainful employment in a recognized occupation.

The Department of Education published final regulations related to gainful employment that went into effect on July 1, 2015, with the additional disclosure requirements that became effective January 1, 2017 and July 1, 2019 (the “2015 Regulations”).

On July 1, 2019, the Department of Education released final gainful employment regulations, which contained a full repeal of the 2015 Regulations and became effective on July 1, 2020.

Both Strayer University and Capella University implemented the July 2019 regulations early, by means permitted by the Secretary, and accordingly were not required to report gainful employment data for the 2018-2019 award year.

Under the Higher Education Act of 1965, as amended (“HEA”), a proprietary institution offering programs of study other than a baccalaureate degree in liberal arts (for which there is a limited statutory exception) must prepare students for gainful employment in a recognized occupation.

The Department of Education published final regulations related to gainful employment that went into effect on July 1, 2015, with additional disclosure requirements that became effective January 1, 2017 and July 1, 2019 (the “2015 Regulations”).

On July 1, 2019, the Department of Education updated gainful employment final regulations, which contained a full repeal of the 2015 Regulations and became effective on July 1, 2020 (the “2019 Regulations”).

Both Strayer University and Capella University implemented the 2019 Regulations early, by means permitted by the Secretary of Education, and accordingly were not required to report gainful employment data for the 2018-2019 award year.

For the period between July 2019 and July 1, 2020, Strayer University and Capella University were not required to comply with gainful employment disclosure and template publication requirements and were 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.

On December 8, 2021, the Department announced its intention to establish negotiated rulemaking committees to develop proposed regulations for gainful employment and other topics related to programs authorized under Title IV of the Higher Education Act of 1965, as amended, with negotiations scheduled to occur January-March 2022.

Negotiated rulemaking committee sessions occurred January-March 2022, and the Institutional and Programmatic Eligibility committee did not reach consensus on the Gainful Employment topic.

The Department has indicated its intention to publish draft Gainful Employment rules in April 2023, which would be effective no earlier than July 2024.

We cannot predict what a future gainful employment regulation may include.

Borrower Defenses to Repayment

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, the date the 2019 BDTR Rule became effective.

The 2019 BDTR Rule supplants the 2016 Borrower Defense to Repayment rule.

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;

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

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;

(2) the misrepresentation directly and clearly related to the borrower’s enrollment or continuing enrollment at the institution or the institution’s provision of education services for which the loan was made;

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Institutions are required to accept responsibility for the repayment of amounts discharged by the Secretary pursuant to the borrower defense to repayment, closed school discharge, false certification discharge, and unpaid refund discharge regulations.

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.

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

On December 10, 2019, the Secretary of Education released a formula to calculate the amount of relief a borrower may receive for a successful BDTR application.

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On March 11, 2020, the 116th Congress passed a joint resolution providing for Congressional disapproval of the 2019 BDTR Rule.

Former President Trump vetoed the joint resolution on May 29, 2020, and the House subsequently failed to override the veto during a vote on June 26, 2020.

The President vetoed the joint resolution on May 29, 2020, and the House subsequently failed to override the veto during a vote on June 26, 2020.

On March 18, 2021, the Department revised its BDTR review process and repealed the previous administration’s partial relief formula.

Under the new BDTR procedures, the Department will grant full loan relief to borrowers with approved BDTR applications.

Under the updated BDTR procedures, the Department will grant full loan relief to borrowers with approved BDTR applications.

Additionally, the Department has eliminated certain evidentiary requirements for borrowers who have received a loan cancellation due to total or permanent disability.

These borrowers will no longer be required to provide proof of insufficient income for the relief program for the three years after discharge of their loans.

On August 10, 2021, the Department announced its intention to establish a negotiated rulemaking committee to develop proposed regulations for borrower defenses to repayment and other topics related to programs authorized under Title IV of the Higher Education Act of 1965, as amended, and solicited negotiator nominations.

Negotiated rulemaking for the Affordability and Student Loans Committee began October 4, 2021 and concluded December 10, 2021.

See “Current Negotiated Rulemaking” below.

We cannot predict the outcome of the negotiated rulemaking process.

Negotiated rulemaking for the Affordability and Student Loans Committee began in October 2021 and concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment.

On October 31, 2022, the Department released final BDTR regulations.

Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending BDTR claims as of July 1, 2023, instead of various standards based on the date of the borrower’s first loan disbursement;

define what kinds of misconduct could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final Department of Education actions that could give rise to a BDTR claim;

establish a reconsideration process for borrowers whose claims are not approved for a full discharge;

and create a process for forming groups of borrowers and adjudicating claims based on the common facts of those group claims.

The final rule also sets the expectation that the Department will hold colleges accountable for the cost of discharges, including by establishing a recoupment process separate from the approval of BDTR claims.

In addition, the final rule prohibits institutions from requiring borrowers to sign mandatory pre-dispute arbitration agreements or class action waivers for claims related to the making of a Federal Direct Loan or the provision of educational services for which the loan was obtained.

On October 31, 2022, the Department published final rules updating the eligibility criteria for and the process by which borrowers can be eligible to receive a closed school loan discharge.

The updated rules allow the Secretary to process automatic closed school discharges and establishes a discharge window of 180 days prior to the school’s closure.

The regulation also

states that eligible borrowers may receive a discharge if the borrower does not complete either a teach-out or the continuation of their program at another location of the school, and gives the Secretary the authority to adjust the closure date in cases where the institution discontinues the programs in which most borrowers were enrolled.

The new regulation is effective July 1, 2023.

Accrediting Agencies and State Authorization

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The regulations also clarify that state authorization requirements related to distance education courses are based on the state where a student is “located,” as determined by the institution, and not the state of the student’s “residence.” In addition, the final rules remove certain disclosure requirements related to programs offered solely through distance education, and they replace those requirements with certain disclosure requirements applicable to all programs that lead to professional licensure or certification, regardless of the delivery modality of those programs.

The Department’s new rules also refine the process for recognition and review of accrediting agencies, the criteria used by the Department to recognize accrediting agencies, and the Department’s requirements for

accrediting agencies in terms of their oversight of accredited institutions and programs.

The final regulations became effective on July 1, 2020, excepting certain provisions which were eligible to be implemented early by institutions, and certain provisions relating to recognition of accrediting agencies effective January 1 and July 1, 2021.

In January 2023, the Department indicated its intention to establish one or more negotiated rulemaking committees in 2023 to propose regulations regarding, among other things, accreditation and related issues and state authorization.

On July 29, 2020, the National Advisory Committee on Institutional Quality and Integrity (“NACIQI”) held a meeting to review compliance by the Higher Learning Commission (“HLC”) with Department of Education requirements for recognized accrediting agencies.

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HLC did not appeal the Secretary’s decision.

Both HLC and Middle States Commission on Higher Education (“Middle States”), the institutional accreditor for Strayer University, have applied for renewal of their recognition by the Department.

NACIQI is scheduled to consider their applications in winter 2023 and already has solicited written comments from the public (which were due January 2022).

Distance Education and Innovation

On August 24, 2020, the Department of Education published final rules related to distance education and innovation to amend the sections of the institutional eligibility regulations issued under the HEA regarding establishing eligibility, maintaining eligibility, and losing eligibility.

Among other changes, the final rules establish an updated definition of distance education;

amend the existing definition of the credit hour;

create a definition of academic engagement;

and update eligibility and program design, for programs offered through the direct assessment of learning.

The final rules also make operational changes to several financial aid awarding, disbursing and refunding rules, including how aid can be delivered to students enrolled in subscription period programs, such as Capella’s FlexPath offerings.

Among other changes, the final rules established an updated definition of distance education;

amended the existing definition of the credit hour;

created a definition of academic engagement;

and updated eligibility and program design, for programs offered through the direct assessment of learning.

The final rules also made operational changes to several financial aid awarding, disbursing and refunding rules, including how aid can be delivered to students enrolled in subscription period programs, such as Capella University’s FlexPath offerings.

The final rule became effective July 1, 2021.

In January 2023, the Department indicated its intention to establish a negotiated rulemaking committee in 2023 to consider new proposed regulations on distance education.

On May 6, 2020, the Department of Education published final rules related to implementation of Title IX of the Education Amendments of 1972 (“Title IX”), which prohibits discrimination on the basis of sex in education programs that receive funding from the federal government.

The 2020 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.

Among other things, the 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 obtain its own advisor), rulings on

questions of relevance by decision-makers, and the creation and maintenance of a record of the live hearing proceedings.

The final rule became effective August 14, 2020.

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In June 2021, the Department of Education held virtual public hearings to gather information for providing enforcement of Title IX, as part of the Office for Civil Rights’ (“OCR”) comprehensive review of the regulation.

After the public hearings, the Department of Education indicated that it plans to introduce proposed rule changes for Title IX in May 2022.

On June 16, 2021, the OCR issued a notice of interpretation clarifying that the Department interprets Title IX and its enforcement authority under the regulation to include the prohibition of sex discrimination based on sexual orientation and gender identity.

On July 20, 2021, the Department of Education released a Questions and Answers document outlining the OCR's interpretation of the Title IX regulations related to sexual harassment.

On June 16, 2021, OCR issued a notice of interpretation clarifying that the Department interprets Title IX and its enforcement authority under the regulation to include the prohibition of sex discrimination based on sexual orientation and gender identity.

On July 20, 2021, the Department of Education released a Questions and Answers document outlining OCR’s interpretation of the Title IX regulations related to sexual harassment.

On August 24, 2021, OCR, in alignment with recent federal court decisions, issued guidance indicating it would cease enforcement of Title IX’s current prohibition against consideration of statements made by individuals failing to submit to cross-examination.

In December 2021, OCR indicated that proposed rule changes for Title IX can be expected in April 2022, one month ahead of the anticipated schedule.

Current Negotiated Rulemaking

On May 26, 2021, the Department announced its intention to establish negotiated rulemaking committees to prepare proposed regulations for programs authorized under Title IV of the Higher Education Act of 1965, as amended.

As part of the notice, the Department suggested the following topics for regulation:

change of ownership and change in control of institutions of higher education under 34 CFR § 600.31;

certification procedures for participation in Title IV, HEA programs under 34 CFR § 668.13;

standards of administrative capability under 34 CFR § 668.16;

ability to benefit under 34 CFR § 668.156;

borrower defense to repayment under 34 CFR §§ 682.410, 668.411, 685.206, and 685.222;

discharges for borrowers with a total and permanent disability under 34 CFR §§ 674.61, 682.402, and 685.213;

closed school discharges under 34 CFR §§ 685.214 and

discharges for false certification of student eligibility under 34 CFR §§ 685.215(a)(1) and 682.402;

loan repayment plans under 34 CFR §§ 682.209, 682.215, 685.208, and 685.209;

the Public Service Loan Forgiveness program under 34 CFR § 685.219;

financial responsibility for participating institutions of higher education under 34 CFR subpart L, such as events that indicate heightened financial risk;

gainful employment (formerly located in 34 CFR subpart Q);

and Pell Grant eligibility for prison education programs under 34 CFR part 690.

Additionally, the Department invited public input on how it could address, through regulations, gaps in postsecondary outcomes such as retention, completion, loan repayment, and student loan default by race, ethnicity, gender, and other key student characteristics.

To support this work, the Department held a series of virtual public hearings in June 2021, as well as accepted written comments.

The Department has indicated its intention to convene multiple committees, including the Affordability and Student Loans Committee.

See “Affordability and Student Loans Committee” below.

On October 4, 2021 the Department announced its intention to establish a negotiated rulemaking committee to prepare proposed regulations affecting institutional and programmatic eligibility, including the 90/10 rule.

As part of the notice, the Department announced public hearings on October 26 and October 27.

Meetings of this negotiated rulemaking committee are scheduled to occur January-March 2022.

We cannot predict the outcome of the negotiated rulemaking process.

The June 2021 notice of interpretation is currently under legal challenge in Tennessee et al.

United States Department of Education et al., United States District Court for the Eastern District of Tennessee, Case No.

3:21-cv-00308-CEA-DCP.

A July 15, 2022 court-issued preliminary injunction prohibits the Department of Education from enforcing the challenged guidance in the plaintiff states.

On June 23, 2022, the Department of Education released proposed Title IX regulations for public comment.

Among other changes, the proposed rule would address all forms of sex-based harassment (not only sexual harassment);

clarify that Title IX’s prohibition against sex discrimination includes discrimination on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation and gender identity;

and eliminate the requirement for live hearings at the post-secondary level.

The public comment period on the proposed rule ended on September 12, 2022.

When the Department publishes a final Title IX rule, it will indicate an effective date.

On October 4, 2022, OCR released a resource document for students and institutions in which it reinforced that current Title IX regulations prohibit discrimination based on pregnancy, childbirth, false pregnancy, termination of pregnancy or recovery therefrom.

The resource document further emphasized that Title IX requires institutions to treat pregnancy, childbirth, false pregnancy, termination of pregnancy and recovery therefrom the same as other temporary disabilities with respect to medical benefits, services, plans, and policies, and detailed requirements for leave and reinstatement for both students and employees.

Affordability and Student Loans Committee

On August 10, 2021, the Department announced its intention to establish the Affordability and Student Loans committee, to prepare proposed regulations to address the following topics:

borrower defense to repayment, closed school discharges, discharges for borrowers with a total and permanent disability, discharges for false certification of student eligibility, loan repayment plans, interest capitalization, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements and associated counseling about such arrangements, Pell Grant eligibility or prison education programs, and the Public Service Loan Forgiveness program.

borrower defense to repayment, closed school discharges, discharges for borrowers with a total and permanent disability, discharges for false certification by a school of a student’s eligibility to receive a loan, loan repayment plans, interest capitalization, mandatory pre-dispute arbitration and prohibition of class action lawsuits provisions in institutions’ enrollment agreements and associated counseling about such arrangements, Pell Grant eligibility for prison education programs, and the Public Service Loan Forgiveness program.

The Department also announced the formation of a Prison Education Program Subcommittee.

The Department selected negotiators in September 2021, with negotiations occurring October-December 2021.

Issue papers provided by the Department indicate the Department is considering changes to borrower to defense to repayment regulations that include eliminating a limitations period on claims, making the group claims process the default process for loan relief, establishing the borrower defense application as a form of evidence, and redefining misrepresentation.

See “Current Negotiated Rulemaking” above.

We cannot predict the outcome of the negotiated rulemaking process.

In December 2021, the Affordability and Student Loans committee reached consensus on four of twelve topics:

discharges for false certification of student eligibility, Pell Grant eligibility for prison education programs, discharges for borrowers with total and permanent disability, and interest capitalization.

It did not reach consensus on borrower defenses to repayment and other topics.

If the negotiated rulemaking committee reaches consensus on a topic, the Department of Education is bound to propose a rule consistent with the consensus.

In the absence of consensus, the Department of Education has discretion to propose a rule for public comment.

On July 6, 2022, the Department released proposed rules governing student loan discharges and processes, including borrower defense to repayment.

The proposed rules also addressed closed school discharges, arbitration proceedings, public service loan forgiveness, interest capitalization, total and permanent disability discharges, and false certification.

The public comment period on the proposed rules ended on August 12, 2022.

As discussed above, the Department published final rules on October 31, 2022.

Institutional and Programmatic Eligibility Committee

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90/10, ability to benefit, certification procedures for participating in Title IV programs, change of ownership and change in control of institutions of higher education, financial responsibility for participating institutions of higher education, gainful employment, and standards of administrative capability.

Committee meetings began on January 18, 2022 and are to be completed in March 2022.

Public Service Loan Forgiveness Program

On October 6, 2021, the Department of Education announced new changes and initiatives related to the Public Service Loan Forgiveness (“PSLF”) program.

This announcement aimed to make discharge of federal student loans easier for those that participate in the PSLF.

One such way the Department of Education is streamlining the PSLF process is by implementing a time-limited waiver, which gives borrowers flexibility in counting prior payments towards PSLF, even if the previous payments were for different loan programs such as FFEL or if the payments were partial payments.

Borrowers with Direct Loans will be able to seek this waiver until October 31, 2022.

The Department of Education announced that the waiver will help over 550,000 borrowers progress towards loan relief under PSLF.

Additionally, the Department of Education plans to automate aspects of the PSLF process for federal employees and military service members.

The Department of Education plans to pair these changes to the program with increased support and communications to borrowers who may benefit from PSLF.

Committee meetings occurred January-March 2022.

In March 2022, the committee reached consensus on two of seven topics:

ability to benefit and changes to the 90/10 rule.

On July 26, 2022, the Department released proposed regulations related to the 90/10 rule, and change of ownership and change in control of institutions of higher education.

On October 27, 2022, the Department of Education released final 90/10 regulations, which are consistent with the consensus language.

The 90/10 rule’s final regulations include changes to requirements impacting non-Title IV program revenue, and the treatment of “federal education assistance funds” within the calculation.

The final regulations indicate that the Secretary of Education will identify via Federal Register notice, the federal agencies and educational assistance funds provided by that agency that will count toward the “90” portion of the 90/10 calculation.

On December 21, 2022, the Department released a list of federal agencies and federal education assistance programs that must be included as federal revenue in the 90/10 calculation.

Such agencies include the U.S.

Department of Defense (military tuition assistance) and the Department of Veterans (veterans education benefits), in addition to the Title IV programs already covered by the 90/10 Rule.

The final regulations also include modifications to the criteria for revenue generated from non-Title IV programs, allowing institutions to count funds as non-Federal revenue only for programs that:

(1) do not include any courses offered in an eligible program that is provided by the institution;

(2) are provided by the institution and taught by one of the institution’s instructors;

and (3) are located at the institution’s main campus, one of its approved additional locations, at another school facility approved by the appropriate State agency or accrediting agency, or at an employer facility.

In the preamble to the final 90/10 regulations and in subsequent sub-regulatory guidance, the Department indicated that non-Title IV programs that are offered in part or in whole through distance education are not eligible to be included in the “10” portion of the calculation.

The final regulations establish new disclosure requirements for institutions that fail the 90/10 rule, including a student notification requirement, and clarify reporting requirements and liabilities for institutions that lose access to Title IV because of failing the 90/10 calculation.

The new 90/10 regulations are effective for fiscal years beginning on or after January 1, 2023.

During the negotiated rulemaking process, the Department also proposed a number of changes to financial responsibility regulations, but did not reach consensus on the language.

The proposal included new mandatory and discretionary triggers that would require the posting of financial protections.

Among other things, the Department proposed a discretionary trigger in the event of significant fluctuations in Title IV aid;

a discretionary trigger for pending borrower defense claims;

and a discretionary trigger for when institutions close most or all on-ground locations but maintain an online presence.

The Department also proposed as part of the negotiated rulemaking process the reestablishment of gainful employment regulations, which would apply to all programs (including non-degree programs) at proprietary institutions and non-degree programs at public and private nonprofit institutions.

Among other items, the Department proposed to use the first four digits of the CIP (Classification of Instructional Program) code to identify gainful employment programs;

to remove the “zone” concept pertaining to debt-to-earnings rates;

and to establish that a program would fail the debt-to-earnings rate measure if, among other measures, its debt-to-earnings rate is greater than 8 percent and its discretionary earnings rate is greater than 20 percent.

The Department also proposed including Parent PLUS loans when determining student debt load, and included a new “earnings threshold” measure comparing the median annual earnings for students who completed the program to the median earnings for a working adult aged 25-34 with only a high school diploma in the state in which the institution is located (or nationally based on the percentage of students located in the same state as the institution).

The Department’s proposal would deem a program ineligible for Title IV funding if the program failed either metric (debt-to-earnings or earnings threshold) two out of three consecutive years.

Among other topics, the Department proposed a number of additional changes to regulations regarding administrative capability, change of control and certification issues, none of which reached consensus.

In June 2022, the Department indicated its intention to publish proposed rules regarding gainful employment, ability to benefit, financial responsibility, administrative capability, and certification procedures in April 2023.

We cannot predict the outcome of the negotiated rulemaking process.

Student Loan Relief

On August 24, 2022, the Department announced that it would provide student loan relief to eligible borrowers to address financial hardships in connection with the COVID-19 pandemic.

Under the relief measures, up to $10,000 in student debt will be forgiven for individual borrowers earning less than $125,000 or married couples or heads of household earning less than $250,000, and up to $20,000 will be forgiven for such borrowers who formerly received Pell Grants.

In a memorandum prepared by the Department’s General Counsel, the Department stated that it has interpreted provisions of the Higher Education Relief Opportunities for Students Act of 2003 to authorize the Secretary to exercise broad discretion in granting student loan relief.

Since the Department’s student loan relief announcement, multiple lawsuits have been filed against the Department challenging its authority to grant such relief.

Supreme Court has granted petitions to review injunctions issued by two federal courts that blocked implementation of the Department’s student loan relief program, with oral arguments scheduled for February 28, 2023.

We cannot predict the outcome of these lawsuits.

On November 22, 2022, the Department announced further extension of the pause on student loan repayment and noted that payments will resume 60 days following

implementation of the relief program or resolution of the litigation.

If the Department has not implemented the relief program or the litigation has not resolved by June 30, 2023, the Department has stated that payments would resume 60 days thereafter.

On January 10, 2023, the Department proposed regulations to create a new income-driven repayment plan to reduce future monthly payments for lower- and middle-income borrowers.

Among other things, the proposed regulation would revise the Revised Pay As You Earn (REPAYE) regulations, eliminate negative amortization, and offer $0 monthly payments for any individual borrower who makes less than roughly $30,600 annually and any borrower in a family of four who makes less than about $62,400.

The Department accepted public comments on the proposal for 30 days.

Compliance Reviews

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On January 18, 2019, consistent with standard procedure upon a Title IV institution’s change of ownership, the Department and Capella University executed a new Provisional Program Participation Agreement, approving Capella’s continued participation in Title IV programs with provisional certification through December 31, 2022.

As is typical, the Provisional Program Participation Agreement subjects Capella University to certain requirements during the period of provisional certification, including that Capella must apply for and receive approval from the Department in connection with new locations or the addition of new Title IV-eligible educational programs.

Capella will be required to apply for recertification by September 30, 2022.

As is typical, the Provisional Program Participation Agreement subjects Capella University to certain requirements during the period of provisional certification, including that Capella University must apply for and receive approval from the Department in connection with new locations or the addition of new Title IV-eligible educational programs.

Capella University filed its application for recertification in advance of the September 30, 2022 deadline and, consistent with Department of Education practice, continues to offer federal financial aid under a Provisional Program Participation Agreement, until the Department addresses the recertification application.

Office of Enforcement

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 post-secondary schools that participate in federal student loan, grant, and work-study programs.

The Office of Enforcement restores an office first established by the Department in 2016.

The Department announced the Office of Enforcement would comprise four existing divisions:

Administrative Actions and Appeals Services Group, Borrower Defense Group, Investigations Group, and Resolution and Referral Management Group.

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.

Federal Trade Commission

On October 6, 2021 the Federal Trade Commission (“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.

unfair or deceptive.

Entities that have actual knowledge of acts or practices the FTC has found to be unlawful and that subsequently engage in such unlawful acts or practices may be held liable for civil penalties up to $43,792 per violation.

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The notice included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC.

Strayer and Capella University received the FTC’s notice on October 7, 2021.

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.

Office of Enforcement

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.

The Office of Enforcement restores an office first established by the Department in 2016.

The Office of Enforcement will be comprised of four existing divisions:

Administrative Actions and Appeals Services Group, Borrower Defense Group, Investigations Group, and Resolution and Referral Management Group.

Strayer University and Capella University received the FTC’s notice on October 7, 2021.

The FTC made 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.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (“CFPB”) is a U.S.

government agency established to protect the interests of consumers in their dealings with banks, lenders and other financial institutions.

On April 4, 2022, the Company received correspondence from the 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.

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.

5301 et seq., due to alleged student loan servicing and collections practices or policies.

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.

The CFPB subsequently sent a letter on July 8, 2022, indicating that it believed the withholding of transcripts was a violation, and requiring the Company to cease withholding transcripts for those with an outstanding balance and to take other remedial actions.

The Company had already discontinued its historical practice prior to the CFPB’s notice and informed the CFPB that it completed the remedial actions in the allotted thirty days.

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.

On April 26, 2022, the CFPB informed the Company that it intended to conduct an announced education loan exam in June 2022.

The examination started on June 13, 2022.

Fieldwork concluded on August 5, 2022.

On September 12, 2022, the CFPB informed the Company of a preliminary finding related to a product that is no longer utilized, and invited the Company’s response.

The Company timely responded to the CFPB’s letter, disagreeing with the preliminary finding and noting that the product to which it related is no longer utilized.

On November 29, 2022, the CFPB informed the Company that, within 90 days, it should remediate the finding for any impacted students, and it identified areas for the Company to address to ensure regulatory compliance.

The Company has taken remedial action and responded to the CFPB within the 90-day deadline.

Australian Regulation

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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 8. Financial Statements and Supplementary Data