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Item 1. Business

2025-02-27 compared with 2024-02-29 · 268 added, 280 removed, 992 unchanged (36% of the section changed)

Strategic Education, Inc.

is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.

(“SEI,” “we,” “us,” “our,” or “the Company”) is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets.

We operate primarily through our wholly-owned subsidiaries, Capella University and Strayer University, both accredited post-secondary institutions of higher education located in the United States, and Torrens University, an accredited post-secondary institution of higher education located in Australia.

Our operations emphasize relationships through our Education Technology Services segment with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.

We generated net revenue of $1.1 billion in 2023.

Our operations also include the Education Technology Services segment, which primarily develops and maintains relationships with employers to build employee education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs.

We generated revenue of $1.2 billion in 2024.

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

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Higher Education (“USHE”) Segment

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

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

USHE also offers non-degree web and mobile application development courses through Hackbright Academy (“Hackbright”) and Devmountain, which are units of Strayer University.

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The following is a breakdown of students by program level enrolled in the USHE Universities as of the 2024 fall term:

Capella University students Strayer University students Total USHE

Capella University

students Strayer University

students Total USHE

students Percentage of

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

These marketing activities include online advertising (display, social, mobile, search, and through aggregators), television, print, radio, email, and direct mail advertising campaigns.

These marketing activities include online advertising (display, social, mobile, search, and through aggregators), television, email, and direct mail advertising campaigns.

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

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

Capella University has also introduced tuition cap pricing for certain programs, wherein tuition is waived once the student has reached the designated dollar cap threshold for their program, regardless of how many credits the student takes or how long it takes the student to complete their degree.

Career Development Services

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Strayer University

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

Founded in 1892, Strayer University is an accredited institution of higher education offering undergraduate and graduate degree programs in business, criminal justice, education, health services, information technology, and public administration, primarily online, but also at physical campuses, predominantly located in the eastern United States.

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

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In accordance with Strayer University’s educational mission, Strayer University faculty members focus their efforts only on teaching and student support, and not on research and/or publishing.

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

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

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If a student’s undergraduate major varies widely from the student’s proposed graduate course of study, certain undergraduate prerequisite courses may also be necessary for admission.

To maximize undergraduate students’ chances for academic success and to give them the support they need, Strayer University evaluates incoming students’ proficiency in fundamental English and math prior to the first quarter’s registration.

International students applying for admission must meet the same admission requirements as other students.

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Career Development Services

Although most of Strayer University’s students are already employed, Strayer University actively assists its students and alumni with career-related matters.

The focus for Career Services at Strayer University is to provide career guidance and resources to assist students and alumni in reaching their educational and professional goals.

Strayer University actively assists its students and alumni with career-related matters.

The focus of the career center at Strayer University is to provide career guidance and resources to assist students and alumni in reaching their educational and professional goals.

Services are delivered through various media including online, in person, recorded video, books, periodicals, and by telephone.

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Australia/New Zealand Segment

The Australia/New Zealand (“ANZ”) segment is comprised of Torrens University, Think Education, and Media Design School (collectively the “ANZ institutions”).

Our Australia/New Zealand (“ANZ”) segment is comprised of Torrens University, Think Education, and Media Design School (collectively the “ANZ institutions”).

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

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Students generally enroll in one to three subjects per trimester, depending on their mode of study, and for international students, depending on minimum load requirements attached to their visa.

Students are assessed in full each trimester, and will re-enroll into further subjects in subsequent trimesters.

Students are assessed in full each trimester, and may re-enroll into further subjects in subsequent trimesters.

Courses are offered either in person or online, and students may elect to take a combination thereof.

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

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

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

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

In addition, domestic applicants who wish to access VET student loans will be assessed to establish if they have the aptitude to complete the qualification.

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

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

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

search and apply for jobs;

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

complete virtual mock interviews;

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

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

The ANZ institutions also collaborate with industry partners to bring students free virtual work experience to help them build their employability skills.

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

Through the platform, students can access resume and cover letter review services and search and apply for jobs, volunteering opportunities, fieldwork placements, internships and virtual experiences.

Through the Careers Connect platform, students can access videos, templates and guides in an online resources library, complete virtual mock interviews, and register for industry events and workshops.

The ANZ institutions also collaborate with industry partners to bring students a range of on-campus recruitment events, expos, trade fairs and professional development opportunities.

In addition, students are provided Success Coaches upon starting their course of study to help prepare and connect to the university support network.

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Education Technology Services Segment

Our Education Technology Services segment is primarily focused on developing and maintaining relationships with employers to build employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate, and degree programs.

The employer relationships developed by the Education Technology Services segment are an important source of student enrollment for Capella University and Strayer University, and the majority of the revenue attributed to the Education Technology Services segment 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 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.

Our Education Technology Services segment primarily develops and maintains relationships with employers to build employee education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs.

The employer relationships developed by the Education Technology Services segment are an important source of student enrollment for Capella University and Strayer University, and a significant portion of the revenue attributed to the Education Technology Services segment 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 offers low-cost online general education-level courses recommended by the American Council on Education for credit at other colleges and universities.

Industry Background

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

According to the National Center for Education Statistics, the total estimated number of post-secondary students enrolled as of the fall of 2022 was approximately 19.0 million.

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

According to the National Student Clearinghouse Research Center, the total estimated number of post-secondary students enrolled as of the fall of 2023 was approximately 18.4 million.

Approximately 0.8 million of these students attended proprietary institutions.

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

Further, the COVID-19 pandemic significantly reduced the number of students enrolled in post-secondary education institutions in recent years.

According to estimates released by the National Student Clearinghouse Research Center, total enrollments in all higher education sectors declined 0.7% and 2.5% in the fall of 2022 and 2021, respectively.

Enrollment at proprietary colleges increased 2.6% in the fall of 2022 and declined 2.1% in the fall of 2021.

According to estimates released by the National Student Clearinghouse Research Center, total combined undergraduate and graduate enrollments in all higher education sectors increased 1.1% in the fall of 2023, which was the first annual increase since the COVID-19 pandemic.

Estimated total enrollment at proprietary colleges increased 3.2% in the fall of 2023.

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

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

Census Bureau has reported that approximately 64.5 million adults over the age of 25 in the United States do not have more than a high school education, and approximately 33.0 million adults over the age of 25 have some college experience but have not completed a college degree.

Notwithstanding weaker demand dynamics in past years, including the adverse impact from the COVID-19 pandemic, we believe that over time, demand for post-secondary education among working adults in the United States will continue to increase as a result of demographic, economic, and social trends.

In 2022, the U.S.

Census Bureau reported that approximately 64.5 million adults over the age of 25 in the United States do not have more than a high school education, and approximately

33.0 million adults over the age of 25 have some college experience but have not completed a college degree.

Other trends that could positively affect demand for our programs include:

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

Prior to the COVID-19 pandemic and the corresponding closure of Australia’s borders, the Australian higher education market experienced consistent enrollment growth.

However, due to Australia closing its borders in response to the COVID-19 pandemic in early 2020 and visa processing delays when the borders reopened in early 2022, international enrollments have declined in recent years, resulting in overall enrollment declines in Australia.

Estimated total higher education enrollments in Australia decreased approximately 5% between 2019 and 2022, driven largely by the decline in international enrollments.

With Australia’s borders fully reopened, the Australian higher education market is expected to return to enrollment growth.

Prior to the COVID-19 pandemic, the Australian higher education market experienced consistent annual enrollment growth.

However, due to Australia closing its borders in response to the COVID-19 pandemic in early 2020 and student visa processing delays when the borders reopened in early 2022, total enrollments at Australian universities declined 1.3% and 3.2% in 2021 and 2022, respectively, driven largely by declines in international student enrollments.

In 2023, Australia higher education enrollment grew 3.2%, driven by a significant increase in international student enrollments following the reopening of Australia’s borders, partially offset by a decline in domestic enrollments, which peaked during the early pandemic years.

In response to this strong growth in international students, which has contributed to record levels of migration into Australia, the Australian government is considering measures to limit the number of international students that can enroll at an Australia institution.

Any enrollment caps or other measures implemented to control the number of students migrating to Australia could negatively impact the Australian higher education market.

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

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We have identified the following strategic priorities as key to achieving our goal:

• Improve student success — Our success depends on the success of our students.

• Improve student success.

Our success depends on the success of our students.

The more we focus on helping our students succeed, the more likely it is that we will succeed.

In order to improve student success, we must continue to hire outstanding faculty, produce high quality academic content, and employ cutting edge technology that enables us to deploy faculty and content in increasingly efficient and effective ways.

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

• Enhance student experience.

Our students are predominately working adults who are furthering their education in order to advance their careers and professional lives.

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

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

This initiative includes leveraging technology, including artificial intelligence and automation, to improve student support in the areas of advising, tutoring, registration, campus and online technology, and administration.

This initiative includes leveraging technology, including

artificial intelligence and automation, to improve student support in the areas of advising, tutoring, registration, campus and online technology, and administration.

We measure our performance through student surveys and focus groups as well as through metrics like persistence, continuation, and return on student investment.

• Address affordability — Recognizing that affordability is a significant factor in a prospective student’s decision to further his or her education, we have implemented various initiatives to make our programs more affordable.

• Address affordability.

Recognizing that affordability is a significant factor in a prospective student’s decision to further his or her education, we have implemented various initiatives to make our programs more affordable.

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

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We are also focused on deploying more robust technology innovations, including artificial intelligence and automation, which enable us to lower our operating costs and thus improve our ability to support lower tuition.

• Establish new platforms for growth — We are continuously looking for new ways to leverage our existing resources and capabilities to accelerate growth and expand benefits to our students through our best-in-class processes and practices and through opportunistic business combinations.

• Establish new platforms for growth.

We are continuously looking for new ways to leverage our existing resources and capabilities to accelerate growth and expand benefits to our students through our best-in-class processes and practices and through opportunistic business combinations.

We are investing in new platforms and channel capabilities to create improved access and value for students and employers.

We also continue to develop new programs and concentrations.

• Build employer relationships — We are actively building relationships with employers to create employee education benefits programs that provide employees with access to affordable and industry relevant training, certificate and degree programs.

• Build employer relationships.

We are actively building relationships with employers to create employee education benefits programs that provide employees with access to affordable and industry-relevant training, certificate and degree programs.

These relationships are an important source of corporate-funded enrollment for Capella University and Strayer University.

Our Workforce Edge platform, which provides a full-service education benefits administration solution for employers, is also positioned to drive enrollment in our universities that is less reliant on federal funding.

• Maintain a high performing, innovative, and adaptable culture — In order to be a leading provider of educational services, we must have talented and motivated faculty and employees who are passionate about serving students.

• Maintain a high performing, innovative, and adaptable culture.

In order to be a leading provider of educational services, we must have talented and motivated faculty and employees who are passionate about serving students.

We encourage all employees to be innovative in their way of thinking and adaptable to change.

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and ANZ employees:

employees ANZ employees

employees ANZ

Female 67 % 61 %

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Not Declared 8.6 %

The Company embeds the following principles about who we are and what we value into everything we do.

• Student Centricity .

We are mission-driven in everything we do.

• High Standards .

We operate with the utmost integrity and strive for excellence, quality, and continuous improvement.

• Global Mindset .

We encourage enterprise thinking and continuously expanding our worldview.

• Innovative Solutions .

We respect everyone’s unique perspective and ideas and challenge the status quo.

We thrive on collaboration.

When individuals can be authentic, connections and performance are stronger.

• Great People Leaders .

We believe every SEI employee has the right to work for a great leader.

• Transparency .

We share what we know, when we know it, and seek and act on employee feedback.

• Growth Opportunities .

We ensure everyone has access to the same development and career growth opportunities.

• Health & Wellbeing .

We believe in flexibility, work-life balance, and physical, mental, and financial wellbeing.

• Community Service .

We give back and celebrate those who contribute to our communities and a thriving workplace.

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

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

SEI honors and celebrates diversity, equity and inclusion (“DEI”) as core institutional principles.

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

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

In 2019, the Company launched the CEO’s Council on Diversity, Equity, and Inclusion, an advisory council which is charged with promoting DEI initiatives across the organization.

In 2021, we established a DEI Programs Team;

appointed from amongst our leadership a Chief Diversity Officer for the Company;

and the presidents of Capella and Strayer Universities appointed university-level Diversity Officers.

The DEI Programs Team continues to shape and drive forward our enterprise diversity, equity, and inclusion strategy.

SEI is committed to fostering an inclusive, collaborative and high-performance culture where individuals can contribute fully and grow their careers.

SEI values and embraces a broad range of perspectives and backgrounds as central to our mission.

The Company is dedicated to creating an environment that fosters innovation and reflects the needs of all those we serve.

We believe respect and belonging fuel creativity, innovation, and success.

We honor each person’s uniqueness and the common threads that connect us.

By embracing multiple perspectives, we cultivate a culture of care, accountability and performance.

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

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Environmental Responsibilities

SEI is dedicated to creating economic mobility for working adults through innovative learning programs.

In our pursuit of this mission, we maintain physical locations to support our employees and students, and are committed to managing these facilities in a manner that minimizes the environmental impact in the communities where we work and live.

The Company strives to uphold environmental practices that reduce climate change risks from energy consumption, greenhouse gas emissions, water usage, and waste generation.

These practices include:

• Reducing the physical footprint of corporate offices and campuses reduces energy consumption, water usage, and waste generation

◦ SEI continues to pursue a goal of reducing its physical footprint, and reduced its overall real estate by approximately 10% compared to square footage occupied in 2022 by implementing more efficient workspace design and eliminating underused campus facilities.

The Company will continue to pursue additional opportunities when appropriate.

• Reducing energy consumption, including from non-renewable energy resources

The Company maintains physical locations to support our employees and students and is committed to managing our facilities in a way that reduces energy consumption, water usage, and waste generation.

• The Company continues to pursue its goal of reducing the size of its physical footprint, and reduced its overall real estate at the end of 2024 by more than 10% compared to the square footage occupied at the end of 2022, by implementing more efficient workspace design and eliminating underused campus facilities.

• Capella University and Strayer University offer robust online curriculums, with 100% of instruction delivered online at Capella University and the majority of instruction delivered online at Strayer University.

this online curriculum gives students the ability to access and complete coursework online, reducing the need for physical space and commuting, which in turn reduces energy and water usage, greenhouse gas emissions, and waste generation.

◦ Much of SEI’s workforce is accustomed to working remotely, again reducing the need for physical space and commuting, which in turn reduces energy and water usage, greenhouse gas emissions, and waste generation.

◦ Our Minneapolis, MN corporate office is located within a LEED Gold certified building (Leadership in Energy and Environmental Design), which is a U.S.

This online curriculum gives students the ability to access and complete coursework online, reducing the need for physical space and commuting, which in turn reduces energy, water usage, and waste generation;

• Much of our workforce is accustomed to working remotely, again reducing the need for physical space and commuting, which in turn reduces energy, water usage, and waste generation;

• Our Minneapolis, Minnesota corporate office is located within a LEED Gold certified building (Leadership in Energy and Environmental Design), which is a U.S.

Green Building Council certification;

◦ The Herndon, VA corporate office is located in a building that is benchmarked within the ENERGY STAR program, which is a joint program of the U.S.

• Our Herndon, Virginia corporate office is located in a building that is benchmarked within the ENERGY STAR program, which is a joint program of the U.S.

Environmental Protection Agency and the U.S.

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• Our Media Design School campus in Auckland, New Zealand is located in a 6 Star Green Star rated building, which represents leadership in environmentally sustainable building practices;

◦ SEI is investing in energy-saving interior design options, including updated lighting packages with more efficient LED lighting;

• The Company is investing in energy-saving interior design options, including updated lighting packages with more efficient LED lighting;

occupancy sensors to reduce energy consumption in areas that are not being used;

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• Within campus locations, many property management teams are equipping spaces with energy-saving features including more efficient LED lighting, motion sensor lighting, and energy efficient HVAC systems;

◦ As a provider of online education, data centers are a critical component of business operations;

one of SEI’s largest power usages from a data center is from a data center powered entirely by renewable wind energy.

• Reducing greenhouse gas emissions

◦ Public transportation is an alternative, green-commuting option.

For employees in Minneapolis, MN, SEI covers a portion of public transit costs as an employee benefit.

◦ Vehicle charging stations have been installed at the corporate office in Herndon, VA to support employees that choose to utilize alternative fuel vehicles.

◦ Many campus city locations are located near mass transportation options.

◦ All campuses in Australia and New Zealand are located near a city center and public transportation hubs.

• Reducing water usage

◦ Our Herndon, VA and Minneapolis, MN corporate offices and many campus locations, including Australia and New Zealand campuses, use water efficient fixtures to decrease the amount of water usage.

• Reducing waste generation from business operations

◦ SEI has recycling programs within operations in the U.S., Australia, and New Zealand to encourage employees to recycle products, including a national contract with a document management company which provides corporate and campus locations with shredding bins on-site to allow business materials to be recycled.

• Our Herndon, Virginia and Minneapolis, Minnesota corporate offices and many campus locations, including Australia and New Zealand campuses, use water efficient fixtures to decrease the amount of water usage.

• The Company has recycling programs within operations in the U.S., Australia, and New Zealand to encourage employees to recycle products, including a national contract with a document management company which provides corporate and campus locations with shredding bins on-site to allow business materials to be recycled.

Between January 2021 and December 2022, the Company securely recycled approximately 50 U.S.

short tons of paper resulting in significant environmental benefits, including benefits from not

having to generate new paper.

In 2023, the Company securely recycled another approximately 8 U.S.

short tons of paper.

• Additional efforts to reduce environmental impacts

◦ Green cleaning products are utilized at both the Herndon, VA and Minneapolis, MN corporate offices to reduce impacts to the environment.

◦ Within certain campus locations, janitorial companies also use green cleaning products to reduce impacts to the environment.

◦ Torrens University Australia, Think Education, and Media Design School are Certified B Corporations, meaning they meet high standards of verified performance, accountability, and transparency on factors including supply chain practices and overall environmental sustainability.

short tons of paper resulting in significant environmental benefits, including benefits from not having to generate new paper.

In 2023 and 2024, the Company securely recycled another approximately 8 and 7 U.S.

short tons of paper, respectively.

Information About Our Executive Officers

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

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

Such intellectual property includes, but is not limited to, our courseware materials for classes taught online or by other distance-learning means and business know-how and

internal processes and procedures developed to respond to the requirements of our operations and various education regulatory agencies.

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

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The regulations, standards, and policies of these regulatory agencies are subject to frequent change.

We cannot predict the actions that the Administration, Congress, accreditors, or states may take or their effect on Capella University, Strayer University, or the Company.

We cannot predict the actions that the presidential administration (the “Administration”), Congress, accreditors, or states may take or their effect on Capella University, Strayer University, or the Company.

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

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

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

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

For purposes of Title IV programs, Capella University is considered a single institution of higher education.

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

On December 13, 2021, the Department and Strayer University executed a new Program Participation Agreement, approving Strayer University’s continued participation in Title IV programs with full certification through September 30, 2025.

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In the United States, this recognition comes primarily through private voluntary associations of institutions and programs of higher education.

These associations establish criteria for accreditation, conduct peer-review evaluations of institutions and programs, and publicly designate those institutions and programs that meet their standards.

These associations establish criteria for accreditation, conduct peer-review evaluations of institutions and programs, and publicly designate those institutions and programs that meet their

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

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The rule also repeals the strict geographic scope of institutional accreditors.

Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on accreditation and related issues.

Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on accreditation;

the Department terminated the negotiated rulemaking process without any regulatory changes in December 2024.

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

On May 31, 2023, the Department of Education, acting on the recommendation of NACIQI, renewed its recognition of the Higher Learning Commission for a period of five years and required it provide a monitoring report regarding one item of substantial compliance, and continued the current recognition of the Middle States Commission on Higher Education for one year, requiring a compliance report regarding one item of noncompliance.

Middle States is scheduled to be reevaluated by NACIQI at its summer 2025 meeting.

If an institutional accreditor loses recognition by the Secretary of Education, an institution may be allowed to continue its participation in Title IV programs on a provisional basis for a period not to exceed 18 months to allow the institution to seek accreditation from another recognized accrediting agency.

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Capella University has been institutionally accredited since 1997 by the Higher Learning Commission, a higher education institutional accrediting agency recognized by the Secretary of Education that accredits degree-granting public and private colleges and universities throughout the United States.

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

On January 13, 2023, the Higher Learning Commission communicated that it reaffirmed and continued Capella University’s accreditation, with the next reaffirmation of accreditation set for 2032-33.

HLC is the same accrediting agency that accredits such universities as Northwestern University, the University of Chicago, the University of Minnesota and other degree-granting public and private colleges and universities.

On January 13, 2023, HLC communicated that it reaffirmed and continued Capella University’s accreditation, with the next reaffirmation of accreditation set for 2032-33.

The reaffirmation enables Capella University to continue to participate in Title IV programs.

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

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

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

Consistent with that approach, HLC’s current policies give HLC discretion to designate institutions to be in “financial distress” or under “government investigation.” Receipt of these designations could affect future accreditation status and eligibility for Title IV aid under the Department of Education’s “financial responsibility” triggers.

In addition, HLC’s current policies provide for the collection of student success data, and HLC’s interpretation of institutional data can lead to monitoring or other HLC measures.

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

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

The Association for Behavior Analysis International;

Commission on Accreditation of the

American Psychological Association;

Commission on Collegiate Nursing Education;

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

Council for Accreditation of Counseling and Related Programs;

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

Council for Accreditation of Counseling and Related Educational Programs;

Council for the Accreditation of Educator Preparation;

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Council for Standards in Human Services Education;

the National Security Agency and the U.S.

National Security Agency and U.S.

Department of Homeland Security;

Project Management Institute - Global Accreditation Center for Project Management;

The Bachelor of Science in Nursing, Master of Science in Nursing, and Doctor of Nursing Practice degree programs at Capella University are accredited by the Commission on Collegiate Nursing Education.

and Society for Human Resource Management.

Strayer University

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

Strayer University’s period of accreditation by Middle States extends into 2025.

Strayer University’s period of accreditation by Middle States extends into 2025, with the next evaluation visit scheduled for 2025-26.

In 2016, Middle States provided that reaccreditation for all of its institutions will be for a period of eight years (rather than ten, as previously was the case) and that institutions will be required to submit annual reports on student achievement and financial sustainability.

Middle States may request supplemental information reports following receipt of an institution’s annual report.

In November 2023, Middle States requested that Strayer University provide a supplemental information report regarding graduation rates and annual enrollment in accordance with Middle States’ monitoring policies and procedures as well as 34 C.F.R.

§ 602.19(d) (related to monitoring of institutions experiencing enrollment growth).

Strayer University submitted its supplemental information report to Middle States in December 2023.

The University’s next periodic evaluation date is scheduled for 2025-2026.

In January 2025, Middle States requested that Strayer University provide a supplemental information report regarding graduation rates and annual enrollment in accordance with Middle States’ monitoring policies and procedures as well as 34 C.F.R.

§ 602.19(b)-(c) (related to monitoring of institutions experiencing enrollment growth).

The report is due on February 28, 2025.

The University’s next periodic evaluation is currently underway and is scheduled to be conducted through 2026.

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

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

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

the Accreditation Council for Business

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

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

Accreditation Council for Business Schools and Programs, Society for Human Resource Management, and the National Security Agency’s Committee on National Security Systems.

Shared-Services Agreements

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These new laws and interpretations may relate to issues such as the requirement that online education institutions be licensed as a school in one or more jurisdictions even where they have no physical location.

New laws, regulations, or interpretations related to doing business over the internet could increase the Universities’ cost of doing business, affect the Universities’ ability to increase enrollments and revenues, or otherwise have a material adverse effect on our business.

New laws, regulations, or interpretations related to doing business over the internet could increase Capella and/or Strayer University’s cost of doing business, affect Capella and/or Strayer University’s ability to increase enrollments and revenues, or otherwise have a material adverse effect on our business.

Various regulations regarding state authorization of distance education have been issued in recent years.

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

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

The rules granted

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

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

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Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on, among other things, state authorization of distance education programs.

This rulemaking was terminated, without producing any regulatory changes, in December 2024.

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

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

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

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

SARA is intended to make it easier for students to take online courses offered by post-secondary institutions based in another state, while also facilitating more effective and efficient oversight and monitoring processes nationally for the benefit of states and institutions.

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

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

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

Regulations that will take effect on July 1, 2024, will require NC-SARA-participating institutions to comply in all states in which it enrolls students with all applicable state laws related to closure, including record retention, teach-out plans or agreements, and tuition recovery funds or surety bonds.

Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on, among other things, state authorization reciprocity agreements and distance education.

SARA does not affect university operations that constitute a physical presence in a particular state, and Capella University and Strayer University will continue to follow individual state regulations for on-ground campuses and activities.

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

Regulations that took effect on July 1, 2024, require NC-SARA-participating institutions to comply in all states in which it enrolls students with all applicable state laws related to closure, including record retention, teach-out plans or agreements, and tuition recovery funds or surety bonds.

Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on, among other things, state authorization (including state authorization reciprocity agreements) and distance education.

In December 2024, the Department released final distance education regulations that define “distance education course” and establish new reporting requirements.

The Department also terminated, without any regulatory changes, the state authorization negotiated rulemaking process.

State Professional Licensure

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Department of Education.

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

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

Pursuant to new U.S.

Department of Education regulations, beginning July 1, 2024, in each state where an institution is located, students enrolled by the institution are located, or students attest that they intend to seek employment, the institution must determine that each program eligible for Title IV:

Department of Education administrative capability regulations, that took effect July 1, 2024, in each state where an institution is located, students enrolled by the institution are located, or students attest that they intend to seek employment, the institution must determine that each program eligible for Title IV:

(i) is programmatically accredited if the state or a Federal agency requires such accreditation, including as a condition for employment in the occupation for which the program prepares the student;

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Institutions may not enroll for Title IV purposes a student located in a state in which the program does not meet such requirements, unless at the time of initial enrollment the student attests their intent to seek employment in another state that would satisfy such requirements.

In addition, institutions must provide students within 45 days of successful completion of required coursework, geographically accessible clinical or externship opportunities related to and required for completion of the credential or licensure.

Capella University and Strayer University must determine whether, in each state where either university or a student is located in which either university offers a program leading to employment in an occupation that requires programmatic accreditation or licensure or certification, that such program meets the accreditation and professional licensure educational requirements necessary to support a student’s application for licensure in such state.

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Financing Student Education

Students finance their education at Capella University and Strayer University in a variety of ways, and historically about 75% of students participated in one or more Title IV programs.

Students at Capella University and Strayer University finance their education in a variety of ways, and historically a majority of our students have participated in one or more financial aid program provided through Title IV of the Higher Education Act.

Many financial aid programs are designed to assist eligible students whose financial resources are inadequate to meet the cost of education.

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Department of Veterans Affairs (“VA”) (and related state agencies), the U.S.

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

Department of Defense (“DOD”), and various

private organizations.

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

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In addition, eligible students pursuing an educational program solely through distance learning are eligible to receive a housing stipend of approximately $1,178 per month, half the national average amount available to students attending certain classroom-based programs or programs that combine classroom learning and distance learning.

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

Colmery Veterans Educational Assistance Act of 2017, commonly known as the “Forever GI Bill.” The law makes several changes to the administration of VA education benefits.

Colmery Veterans Educational Assistance Act of 2017, commonly known as the “Forever GI Bill,” made several changes to the administration of VA education benefits.

Among other things, for service members who left the military after January 1, 2013, the bill removes the requirement that they use their Post-9/11 GI Bill benefits within 15 years after their last 90-day period of active-duty service.

The bill also alters the way the VA calculates eligibility for VA education benefits by providing additional benefits to service members with at least 90 days but less than six months of active-duty service.

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

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

The law also alters the way the VA calculates eligibility for VA education benefits by providing additional benefits to service members with at least 90 days but less than six months of active-duty service.

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

On January 5, 2021, the Veterans Health Care and Benefits Improvement Act of 2020 became law, 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, under provisional approval status by the Department of Education, subject to any punitive action by a federal or state entity, facing the loss or risk of loss of accreditation, or has converted from for-profit to non-profit status.

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

During the period of provisional certification, the institution must comply with any additional conditions included in its program participation agreement, which typically require approval by the Department of Education for establishment of an additional location, increase in the level of academic offering, and addition of any educational program (including degree, non-degree, or short-term training programs) before awarding or disbursing Title IV aid to students enrolled at such a location or in such a program.

During the period of provisional certification, the institution must comply with any additional conditions included in its program participation agreement, which typically require, among other things, approval by the Department of Education for establishment of an additional location, increase in the level of academic offering, and addition of any educational program (including degree, non-degree, or short-term training programs) before awarding or disbursing Title IV aid to students enrolled at such a location or in such a program.

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

Department of Education revoke eligibility during the provisional period, the institution may request reconsideration, and the Secretary of Education’s decision whether or not revocation is warranted constitutes final agency action.

Should the Department of Education revoke eligibility during the provisional period, the institution may request reconsideration, and the Secretary of Education’s decision whether or not revocation is warranted constitutes final agency action.

Pursuant to new regulations effective July 1, 2024, the Department’s certification procedures provide for heightened scrutiny of institutions that the Department believes may pose a risk to taxpayers.

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• Require the repayment of Title IV funds;

• Transfer the institution from the Department of Education’s advance system of receiving Title IV program funds to a cash monitoring or reimbursement system, under which an institution must disburse its own funds to students and document the students’ eligibility for Title IV program funds before receiving such funds from the Department of Education;

document the students’ eligibility for Title IV program funds before receiving such funds from the Department of Education;

• Place the institution on provisional certification status;

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On October 23, 2023, the Department released final rules on administrative capability.

Pursuant to new regulations effective July 1, 2024, among other things, institutions will be required to offer adequate services to students, including financial aid counseling and career services support.

Pursuant to new regulations effective July 1, 2024, among other things, institutions are required to offer adequate services to students, including financial aid counseling and career services support.

The regulations also include, among other requirements, a new requirement that institutions provide students with geographically accessible clinical or externship opportunities as required for licensure and that at least half of an institution’s total Title IV, HEA funds from the most recent award year must not be from programs that are “failing” under the Gainful Employment Rules.

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

We have applied the financial responsibility standards to our financial statements as of and for the

year ended December 31, 2023, and based on our calculated composite score and other relevant factors, we believe we meet the Department of Education’s financial responsibility standards.

We have applied the financial responsibility standards to our financial statements as of and for the year ended December 31, 2024, and based on our calculated composite score and other relevant factors, we believe we meet the Department of Education’s financial responsibility standards.

On November 1, 2016, the Department of Education released a new regulation, which after a series of delays became effective as of October 16, 2018, under which an institution may no longer be considered financially responsible if one or more of a list of triggering events occurs.

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In 2022, the Department of Education considered as part of the Institutional and Programmatic Eligibility negotiated rulemaking new regulations regarding, among other things, financial responsibility.

Negotiated rulemaking committee meetings completed in March 2022 with no consensus reached on the topic.

Negotiated rulemaking committee meetings

completed in March 2022 with no consensus reached on the topic.

On October 23, 2023, the Department released final rules on financial responsibility.

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Capella University’s and Strayer University’s official three-year cohort default rates for 2019, 2020, and 2021, as well as the average official three-year cohort default rates for proprietary institutions nationally, were as follows:

Cohort Year Capella

University Strayer

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2021 0.0 % 0.0 % 0.0 %

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

repayment status regarding their repayment obligations.

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

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As part of the return to repayment, the Department has also announced a 12 month “on-ramp” during which time delinquent borrowers will not be reported to credit bureaus or be counted as in default for the purpose of cohort default rate calculations.

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.

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

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

Among other things, this new regulation—known as the Saving on a Valuable Education (SAVE) Plan—revised the Revised Pay As You Earn (REPAYE) regulations, eliminated negative amortization, and offered $0 monthly payments for any individual borrower who makes less than roughly $32,800 annually and any borrower in a family of four who makes less than about $67,500 annually (using the 2023 Federal poverty guidelines).

The SAVE Plan was scheduled to be fully implemented in July 2024, but a federal appeals court paused implementation of the entire SAVE Plan pending resolution of legal challenges brought by several states.

Meanwhile, the Department published an interim final rule to allow borrowers to enroll in the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) repayment plans, designated for early implementation on December 16, 2024, through July 1, 2027, while the SAVE Plan is paused.

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

The 90/10 Rule

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Historically, by statute, only Title IV funds have been considered within the 90% metric;

however as described below, that will change for fiscal years beginning on or after January 1, 2023.

however as described below, that changed for fiscal years beginning on or after January 1, 2023.

A proprietary institution of higher education that violates the 90/10 Rule for any fiscal year will be placed on provisional certification for up to two fiscal years.

Proprietary institutions of higher education that violate the 90/10 Rule for two consecutive fiscal years will become ineligible to participate in Title IV programs for at least two fiscal years and will be required to demonstrate compliance with Title IV eligibility and certification requirements for at least two fiscal years prior to

resuming Title IV program participation.

In addition, the Department of Education discloses on its website any proprietary institution of higher education that fails to meet the 90/10 requirement, and reports annually to Congress the relevant ratios for each proprietary institution of higher education.

Using the statutory formula under the definition of federal funds included within the 90% metric then in effect, Capella University derived approximately 65.30% of its cash-basis revenues from Title IV program funds in fiscal year 2022.

Strayer University derived approximately 80.57% of its cash-basis revenues from Title IV program funds in fiscal year 2022.

Our computation for 2023, which will be the first year under the new 90/10 Rule requirements, has not yet been finalized and audited;

Using the statutory formula, Capella University derived approximately 66.79% of its cash-basis revenues from federal funds in fiscal year 2023.

Strayer University derived approximately 89.48% of its cash-basis revenues from federal funds in fiscal year 2023.

Our computation for 2024 has not yet been finalized and audited;

however, we believe we will remain in compliance with the 90/10 Rule requirement.

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

The key components of non-federal revenue for Capella University and Strayer University are individual student payments, employer tuition reimbursement payments, private loans, state grants, and scholarships.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021, which included a change to the 90/10 methodology to include all federal funding.

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In addition, certain members of Congress have proposed to revise the 90/10 Rule to reduce the limit on federal funding to 85% of total revenue.

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

In the context of Higher Education Act reauthorization, defense bills and appropriations bills, other

members of Congress have proposed legislation that would eliminate the 90/10 Rule.

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

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On September 27, 2023, the Department released final regulations on financial value transparency and gainful employment, which are largely consistent with the proposed rule.

The gainful employment final rule establishes two independent metrics, both of which must be passed by a gainful employment program subject to the rule in order to maintain Title IV eligibility.

The gainful employment final rule establishes two independent metrics, both of which must

be passed by a gainful employment program subject to the rule in order to maintain Title IV eligibility.

Any gainful employment program that fails either or both metrics in a single year would be required to provide a disclosure to current and prospective students, and any such program that fails the same metric in two out of three consecutive years for which the program’s metrics are calculated would lose its access to federal financial aid.

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The final rule also includes the requirement that, beginning July 1, 2026, all schools provide a link to a Department of Education-hosted website that includes information on cost, earnings, and licensure information, and the gainful employment metrics.

The final gainful employment regulations will take effect July 1, 2024.

The Department has indicated that it will release metrics beginning in the 2025 financial aid award year.

Beginning July 1, 2026, if a program fails a metric, an institution must provide warnings to students and prospective students meeting certain minimum requirements to be specified by the Department;

The final gainful employment regulations took effect July 1, 2024.

The Department initially indicated that it will release metrics beginning in the 2025 financial aid award year.

Based on that timeline, beginning July 1, 2026, if a program fails a metric, an institution must provide warnings to students and prospective students meeting certain minimum requirements to be specified by the Department;

programs that fail the same metric in the first two years the rates are issued will lose eligibility in 2026.

On December 22, 2023, a lawsuit was filed against the Department in the United States District Court for the Northern District of Texas alleging that the rulemaking process and final rule were based on arbitrary and capricious decisions made by the Department, and that the rule violates constitutional rights related to speech, equal protection, and due process.

On March 20, 2024, another lawsuit was filed against the Department in the United States District Court for the Northern District of Texas seeking a preliminary and permanent injunction enjoining the Department from enforcing the final rule on the grounds that the rule exceeds the Department’s statutory authority, and is arbitrary, capricious, an abuse of discretion, and otherwise is not in accordance with law, and the motion for preliminary injunction was denied on June 20, 2024.

On July 2, 2024, the court consolidated the two Gainful Employment cases into one.

Capella University and Strayer University are not parties to the lawsuit.

The Company is unable to predict the ultimate outcome of the litigation.

Return of Federal Funds

In a March 29, 2024 Electronic Announcement (GE-24-01), the Department released additional information and updates to help institutions prepare for complying with the Financial Value Transparency (“FVT”) and Gainful Employment (“GE”) Regulations, including that the deadline for initial institutional data reporting was extended from July 31, 2024 to October 1, 2024.

The Department indicated that in early 2025, it plans to publish the FVT/GE metrics and notify institutions of failing GE programs, as well as provide additional information on the program eligibility effects of the metrics on failing GE programs.

In a September 13, 2024 Electronic Announcement (GE-24-08), the Department announced the deadline for initial institutional data reporting was further extended from October 1, 2024 to January 15, 2025.

Capella University and Strayer University submitted the appropriate data ahead of the extended deadline.

On January 17, 2025, the Department reopened the reporting process for debt reporting until February 18, 2025.

On February 14, 2025, the Department announced that it would further extend the deadline for all reporting data associated with FVT/GE to September 30, 2025;

it does not plan to produce any FVT/GE metrics prior to the new deadline and will take no enforcement or other punitive actions against institutions that had not completed reporting to date;

and it anticipates that there will be no additional extensions of the reporting deadline beyond September 30, 2025.

Return of Federal Funds (“R2T4”)

Under the Higher Education Act’s return-of-funds provision, an institution must return Title IV funds to a Title IV program in a timely manner if a student received funds from that program, but did not earn them due to the student’s withdrawal from the institution.

In order to determine if funds should be returned, the institution must first determine the amount of Title IV program funds that the student earned.

If the student attends the institution, but withdraws during the first 60% of any period of

enrollment or payment period, the amount of Title IV program funds that the student earned is equal to a pro rata portion of the funds for which the student would otherwise be eligible.

If the student attends the institution, but withdraws during the first 60% of any period of enrollment or payment period, the amount of Title IV program funds that the student earned is equal to a pro rata portion of the funds for which the student would otherwise be eligible.

If the student withdraws after the 60% point, then the student has earned 100% of the Title IV program funds.

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Beginning in January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on, among other things, return of Title IV funds.

In December 2024, the Department released final regulations regarding R2T4, which codify longstanding policies into regulation and address unique circumstances for what constitutes a withdrawal.

The new rules are effective July 1, 2026.

Misrepresentation

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Misrepresentation also includes the dissemination of a student endorsement or testimonial that a student gives either under duress or because the institution required such an endorsement or testimonial to participate in a program.

On September 25, 2024, the Department issued a Federal Student Aid Enforcement Bulletin (Electronic Announcement GENERAL-24-115) with examples of “conduct that creates a risk of engaging in a substantial misrepresentation” which could form the basis of a BDTR complaint or otherwise result in adverse administrative action by the Department, including a fine or limitation of an institution’s participation in the Title IV programs.

Topics identified included certain claims related to general salary information (including use of Bureau of Labor Statistics salary data), job placement rates, rankings, licensure, faculty qualifications, for- or non-profit status, and cost of attendance or price.

Borrower Defenses to Repayment

Pursuant to the Higher Education Act and following negotiated rulemaking, on November 1, 2016, the Department of Education released a final regulation specifying the acts or omissions of an institution that a borrower may assert as a defense to repayment of a loan made under the Direct Loan Program and the consequences of such borrower defenses for borrowers,

institutions, and the Secretary of Education (the “2016 BDTR Rule”).

Under the 2016 BDTR Rule, for Direct Loans disbursed after July 1, 2017, a student borrower may assert a defense to repayment if:

(1) the student borrower obtained a state or federal court judgment against the institution;

(1) the student borrower obtained a state or federal

court judgment against the institution;

(2) the institution failed to perform on a contract with the student;

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Negotiated rulemaking committee meetings completed in December 2021 with no consensus reached on the topic.

On July 6, 2022, the Department released proposed Borrower Defense to Repayment regulations for public comment and subsequently published a final rule on October 31, 2022.

Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending Borrower Defense to Repayment claims as of July 1, 2023, regardless of the date of a borrower’s loan disbursement;

On July 6, 2022, the Department released proposed Borrower Defense to Repayment regulations for public comment and subsequently published a final rule on October 31, 2022 (the “2022 BDTR Rule”).

Among other things, the 2022 BDTR Rule sets a single standard and streamlined process for relief that will apply to all future and pending Borrower Defense to Repayment claims as of July 1, 2023, regardless of the date of a borrower’s loan disbursement;

defines the types of misconduct that 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 Borrower Defense to Repayment claim;

establishes a presumption that

borrowers reasonably relied upon misrepresentations or omissions;

establishes a presumption that borrowers reasonably relied upon misrepresentations or omissions;

establishes a reconsideration process for borrowers whose claims are not approved for a full discharge, including based on a state law standard;

and creates a process for the adjudication of group claims based on common facts.

The final rule permits nonprofit legal assistance organizations to request group claims.

The final rule also establishes a recoupment process separate from the approval of Borrower Defense to Repayment 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.

The rule also modified the closed school discharge rule to provide an automatic discharge one year after an institution or location’s closure date for borrowers who were enrolled at the time of closure or left 180 days before closure and who do not accept an approved teach-out agreement or continuation of the program at another location of the school.

The 2022 BDTR Rule permits

nonprofit legal assistance organizations to request group claims.

The 2022 BDTR Rule also establishes a recoupment process separate from the approval of Borrower Defense to Repayment claims.

In addition, the 2022 BDTR 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.

The 2022 BDTR Rule also modified the closed school discharge rule to provide an automatic discharge one year after an institution or location’s closure date for borrowers who were enrolled at the time of closure or left 180 days before closure and who do not accept an approved teach-out agreement or continuation of the program at another location of the school;

those who accept but do not complete a teach-out agreement or program continuation will receive a discharge one year after their last date of attendance.

The final rule became effective July 1, 2023.

On August 7, 2023, the U.S.

Court of Appeals for the Fifth Circuit granted a nationwide emergency injunction preventing the Department of Education’s enforcement of the final BDTR and closed school discharge rules.

The matter was heard by the Fifth Circuit panel on November 6, 2023, and the previous versions of the BDTR and closed school discharge rules remain in effect until further determination.

The Department has stated that it will not adjudicate any borrower defense applications under the latest rule unless and until the effective date is reinstated;

the Department will continue to adjudicate borrower defense applications using an earlier version of the regulations where required under a court settlement (the Sweet case discussed below).

The 2022 BDTR Rule became effective July 1, 2023.

On August 7, 2023, in the matter of Career Colleges and Schs.

Dep’t of Educ.

23-50491), the U.S.

Court of Appeals for the Fifth Circuit granted a nationwide emergency injunction preventing the Department of Education’s enforcement of the 2022 BDTR Rule.

On April 4, 2024, the Fifth Circuit reversed the underlying district court decision denying injunctive relief and remanded the case to the district court with instructions to enjoin and postpone the effective date of the 2022 BDTR Rule pending final judgment.

The Department petitioned the Fifth Circuit for panel rehearing, which the Fifth Circuit denied on June 12, 2024.

On October 10, 2024, the Department timely filed a petition for a writ of certiorari, seeking review by the Supreme Court of the United States.

The Respondent (i.e., Career Colleges and Schools of Texas) filed a response to the Department’s petition on December 12, 2024, and the Department filed a reply on December 23, 2024.

On January 10, 2025, the Supreme Court agreed to hear arguments on the Department’s appeal, and on February 6, 2025, at the Department’s request, the Supreme Court agreed to pause the briefing schedule.

The Department has previously stated that it will not adjudicate any borrower defense applications under the latest rule unless and until the effective date is reinstated.

The Department will continue to adjudicate borrower defense applications using an earlier version of the regulations, including where required under the court settlement (the Sweet case discussed below).

The Company is unable to predict the ultimate outcome of the litigation.

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On April 11, 2023, the Department again delayed the effective date until six months after the Department publishes a new, revised final guidance letter on the topic, and on May 16, 2023, the Department formally rescinded its 2023 and prior guidance (DCL GEN-16-15 and the March 8, 2017 Electronic Announcement) prohibiting contracts between colleges and foreign-owned or operated servicers.

In a November 2023 press release, the Department indicated it intends to issue updated guidance in early 2024.

On November 14, 2024, the Department formally rescinded the 2023 DCL (GEN 23-03) in its entirety.

Lender Relationships

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

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

Middle States requires its accredited institutions to notify it in advance of

implementing new programs or additional locations as defined by Middle States, which may require additional approval.

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

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

The Higher Learning Commission, the Minnesota Office of Higher Education, and other state educational regulatory agencies that license or authorize Capella University and its

degree programs require institutions to notify them in advance of implementing new programs and, upon notification, may undertake a review of the institution’s licensure, authorization or accreditation.

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

The Higher Education Act requires proprietary institutions of higher education to be in full operation for two years before qualifying to participate in Title IV programs.

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

Under their Program Participation Agreements with the Department of Education, the Universities must notify the Department of Education of the addition of any such location within ten days of opening, but need not seek prior approval.

Under their Program Participation Agreements with the Department of Education, Capella University and Strayer University must notify the Department of Education of the addition of any such location within ten days of opening, but need not seek prior approval.

Institutions are responsible for knowing whether they need approval, and institutions that add locations and disburse Title IV program funds without having obtained any necessary approval may be subject to administrative repayments and other sanctions.

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

COVID-19 Related Legislation and Administrative Actions

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

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

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

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

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

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARP”), which included an adjustment to the tax code by making any student loan debt discharged through 2025 tax-free, and an adjustment to the 90/10 rule.

The change includes all federal funding – not just Title IV funds – in the 90/10 calculation.

ARP’s 90/10 changes require the Department to issue regulations, with an effective date no earlier than institutional fiscal years beginning January 1, 2023.

On December 8, 2021 the Department of Education announced its intention to establish a rulemaking committee to develop proposed regulations on, among other things, the 90/10 rule via the Institutional and Programmatic Eligibility rulemaking and

the committee reached consensus on the topic in March 2022.

The Department released final regulations in October 2022.

The regulatory changes require proprietary institutions to count all “federal education assistance funds” as federal revenue in the 90/10 calculation for fiscal years beginning on or after January 1, 2023.

Such funds include not only Title IV funds but also certain funds from the U.S.

Department of Defense, Department of Veterans Affairs, and other agencies.

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

The Department of Education extended student loan relief several times and announced on August 24, 2022, 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, the Department proposed forgiving up to $10,000 in student debt for individual borrowers earning less than $125,000 or married couples or heads of household earning less than $250,000, and forgiving up to $20,000 for such borrowers who formerly received Pell Grants.

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

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

Supreme Court granted petitions to review injunctions issued by two federal courts that blocked implementation of the Department’s student loan relief program and on June 30, 2023, the Supreme Court held that the HEROES Act did not authorize the Secretary to establish the student loan forgiveness program.

The Department subsequently established a negotiated rulemaking committee to develop proposed student loan forgiveness plans under the Higher Education Act.

Negotiations occurred in October-December 2023, with negotiators reaching consensus on some language including waiver of student loan debt in circumstances of repayment plans, program and institution closures, and gainful employment failures.

The Department has not yet released proposed rules for public comment.

Other Regulations Governing Title IV Programs

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Capella University and Strayer University must comply with the campus safety and security reporting requirements as well as other requirements in the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (the “Clery Act”).

In addition, the Department has interpreted Title IX of the Education Amendments of 1972 (“Title IX”) to categorize sexual violence as a form of prohibited sex discrimination and to require institutions to follow certain disciplinary procedures with respect to such offenses.

In addition, the Department has interpreted Title IX of the Education Amendments of 1972 (“Title IX”) to categorize

sexual violence as a form of prohibited sex discrimination and to require institutions to follow certain disciplinary procedures with respect to such offenses.

Failure by the universities to comply with the Clery Act or Title IX requirements or regulations thereunder could result in action by the Department fining the universities, or limiting or suspending their participation in Title IV programs, could lead to litigation, and could harm the universities’ reputations.

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

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

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

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

The final rules became effective August 14, 2020.

On August 24, 2021, the Department of Education Office for Civil Rights (“OCR”) issued guidance indicating it would cease enforcement of the rules’ prohibition against consideration of statements made by individuals failing to submit to cross-examination at a live hearing.

We believe that Capella University and Strayer University are in compliance with these requirements.

The 2020 Title IX Rule defines what constitutes sexual harassment for purposes of Title IX in the administrative enforcement context, describes what actions trigger an institution’s obligation to respond to incidents of alleged sexual harassment, and specifies how an institution must respond to allegations of sexual harassment.

Among other things, the 2020 Title IX Rule includes a requirement for live hearings on Title IX sexual harassment claims, which includes direct and cross-examination of parties, university-provided advisors (in the event a student or party does not provide an advisor), rulings on questions of relevance by decision-makers, and the creation and maintenance of a record of the live hearing proceedings.

The 2020 Title IX Rule became effective August 14, 2020.

On August 24, 2021, the Department of Education Office for Civil Rights (“OCR”) issued guidance indicating it would cease enforcement of the 2020 Title IX Rule’s prohibition against consideration of statements made by individuals failing to submit to cross-examination at a live hearing.

The Department of Education conducted public hearings concerning its Title IX regulations and on June 23, 2022, the Department of Education released proposed Title IX regulations for public comment.

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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, the 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.

On October 4, 2022, the OCR released a resource document for students and institutions in which it reinforced that the 2020 Title IX Rule prohibits 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.

On April 19, 2024, the U.S.

Department of Education released its final rule regarding the implementation of Title IX (the “2024 Title IX Rule”).

The 2024 Title IX Rule applies to all forms of sex-based harassment (not only sexual harassment);

clarifies 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 eliminates the requirement for live hearings with an opportunity for cross-examination at the post-secondary level.

Multiple states have joined lawsuits against the Department challenging the 2024 Title IX Rule, and federal district courts have granted preliminary injunctions enjoining the Department from enforcing the rule in Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.

Certain courts have issued orders expanding the injunction to named schools, irrespective of where those schools are located;

Capella University and Strayer University were named among nearly 700 schools in one such order on July 15, 2024.

Dep’t of Educ.

5:24-cv-4041 (D.

Except where enjoined, the 2024 Title IX Rule otherwise became effective on August 1, 2024.

On January 9, 2025, in State of Tennessee et al v.

Cardona , 2:24-cv-00072, the U.S.

District Court for the Eastern District of Kentucky granted summary judgment against the U.S.

Department of Education, vacating the 2024 Title IX Rule as unlawful.

On February 4, 2025, the Department’s Office for Civil Rights issued a Dear Colleague Letter confirming that it will enforce Title IX under the 2020 Title IX Rule, and that open investigations initiated under the 2024 Title IX Rule should be reevaluated for consistency with the 2020 Title IX Rule.

In December 2024, the Department terminated the notice of proposed rulemaking regarding the athletic-related provisions of Title IX, which were yet to be finalized.

Students with Disabilities

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

In 2010, the Department of Education’s Office for Civil Rights, which enforces Section 504, together with the Department of Justice, which enforces the ADA, asserted that requiring the use of technology in a classroom environment when such technology is inaccessible to individuals with disabilities violates Section 504, unless those individuals are provided accommodations or modifications that permit them to receive all the educational benefits provided by the technology in an equally effective and integrated manner.

In recent years, the Department of Education’s Office of Civil Rights and third parties have brought enforcement actions against institutions related to website accessibility of online course material.

In 2010, the Department of Education’s Office for Civil Rights,

which enforces Section 504, together with the Department of Justice, which enforces the ADA, asserted that requiring the use of technology in a classroom environment when such technology is inaccessible to individuals with disabilities violates Section 504, unless those individuals are provided accommodations or modifications that permit them to receive all the educational benefits provided by the technology in an equally effective and integrated manner.

In recent years, the Department of Education’s Office for Civil Rights and third parties have brought enforcement actions against institutions related to website accessibility of online course material.

As a result of such enforcement action or as a result of new laws and regulations that require greater accessibility, the Department of Education or the Department of Justice may require an institution to modify its online classrooms and other uses of technology to satisfy applicable requirements.

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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:

The Office of Enforcement is comprised of four existing divisions:

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

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Potential Effect of Regulatory Violations

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

Education as a condition for continued Title IV certification, taking emergency action against the university, or referring the matter for criminal prosecution or initiating proceedings to impose a fine or to limit, condition, suspend, or terminate the university’s participation in Title IV programs.

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

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In 2024, Capella University had such approval in Minnesota, and because all of its programs are online only, this approval allows it to extend VA education benefits to students in all states and abroad.

In 2023, Strayer University had such approval in Alabama, Arkansas, Delaware, Florida, Georgia, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Washington, D.C.

In 2024, Strayer University had such approval in Delaware, Florida, Georgia, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Washington, D.C.

In certain circumstances, state approving agencies may require an institution to obtain approval for a change in ownership and control.

If Capella University or Strayer University underwent a change of control that required approval by any state authority, accrediting agency, or any federal agency, and such approval were significantly delayed, limited, or denied, there could be a material adverse effect on the university’s ability to offer certain educational programs, award certain degrees, diplomas, or certificates, operate one or more of its locations, admit certain students, or participate in Title IV programs, which in turn, could materially and adversely affect the university’s operations.

A change that required approval by a state regulatory authority, an

accrediting agency, or a federal agency could also delay the University’s ability to establish new campuses or educational programs and may have other adverse regulatory effects.

A change that required approval by a state regulatory authority, an accrediting agency, or a federal agency could also delay the university’s ability to establish new campuses or educational programs and may have other adverse regulatory effects.

Furthermore, the suspension from Title IV programs and the necessity of obtaining regulatory approvals in connection with a change of control could materially limit the university’s flexibility in future financing or acquisition transactions.

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

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

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

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

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Congress reviews and determines appropriations for Title IV programs on an annual basis.

On January 19, 2024, the President signed the “Further Additional Continuing Appropriations and Other Extensions Act, 2024,” which provides staggered fiscal year 2024 appropriations to Federal agencies through March 1, 2024 for some Departments and March 8, 2024 for others, including the Department of Education.

On December 21, 2024, the President signed the “American Relief Act, 2025,” which provides fiscal year 2025 appropriations to Federal agencies through March 14, 2025.

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

An elimination of certain Title IV programs, a reduction in federal funding levels of such programs, material changes in the requirements for participation in such programs, or the substitution of materially different programs could reduce the ability of certain students to finance their education.

An elimination of certain Title IV programs, a reduction in federal funding levels of such programs, material changes in the requirements for or terms and conditions of participation in such programs, or the substitution of materially different programs could reduce the ability of certain students to finance their education.

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

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The Consumer Financial Protection Bureau (“CFPB”) has pursued enforcement actions against certain proprietary institutions of higher education and has released several reports that directly address issues related to institutions of higher education.

In October 2023, the CFPB Student Loan Ombudsman released its annual report analyzing more than 2,300 complaints the CFPB received from private student loan borrowers between September 1, 2022 and August 31, 2023 and more than 6,900 federal student loan financing complaints the CFPB received from federal student loan borrowers.

In November 2024, the CFPB Student Loan Ombudsman released its annual report analyzing a sample set of more than 3,300 private student loan complaints the CFPB received from private student loan borrowers between July 1, 2023 and June 30, 2024 and more than 13,500 federal student loan complaints the CFPB received from federal student loan borrowers.

We do not know what steps the CFPB or Congress may take in response to these actions and whether such actions, if any, will have an adverse effect on our business or results of operations.

In addition, in February 2025, the Administration ordered the CFPB to cease nearly all of its activities, including enforcement activities;

several lawsuits challenging the Administration’s actions were filed in response.

On February 14, 2025, in National Treasury Employees Union v.

Vought, et al.

District Court for the District of Columbia entered a temporary order to prevent certain actions by the Administration pending resolution of a preliminary injunction hearing scheduled for March 3, 2025.

Department of Education

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Current Federal Rulemaking

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, misrepresentation, 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.

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

Negotiations occurred in October-December 2021, with negotiators reaching consensus on total and permanent disability discharge, eliminating interest capitalization for non-statutory capitalization events, false certification discharge and Pell Grant eligibility for prison education programs.

The committee did not reach consensus on the remainder of the 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.

Proposed and final rules related to the topics above were announced by the Department on July 6, 2022 and October 31, 2022, respectively.

On December 8, 2021, the Department announced its intention to establish the Institutional and Programmatic Eligibility committee, to prepare proposed regulations to address the following topics:

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.

Meetings of this negotiated rulemaking committee completed in March 2022 and the committee reached consensus on two topics:

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

It did not reach consensus on the remainder of the topics.

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.

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).

The Department indicated that it will publish periodic updates to the list as needed.

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 subsequent sub-regulatory guidance, the Department indicated that non-Title IV programs that are offered in part or in full via 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 funds because of failing 90/10 calculations.

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.

On May 17, 2023, the Department released proposed rules on financial value transparency and gainful employment, financial responsibility, administrative capability, certification procedures, and ability to benefit.

On September 27, 2023, the Department released final regulations on financial value transparency and gainful employment, which are largely consistent with the proposed rule.

The gainful employment final rule establishes two independent metrics, both of which must be passed by a gainful employment program subject to the rule in order to maintain Title IV eligibility.

calculated would lose its access to federal financial aid.

The two metrics are 1) a debt-to-earnings ratio that compares the median earnings of graduates who received federal financial aid to the median annual payments on loan debt borrowed for the program, which must be less than or equal to 8% of annual earnings or 20% of discretionary earnings, and 2) an earnings premium test that measures whether the typical graduates from a program that received federal financial aid earn more than a typical high school graduate in their state (or, in some cases, nationally) and within a certain age range in the labor force.

A program that fails in two out of three consecutive years, or is voluntarily discontinued by the institution, would not be eligible to have Title IV reinstated for the program or launch and receive Title IV for a “substantially similar program” (generally defined as a program with the same four-digit CIP code) for a minimum of three years.

The final rule describes that the Department will now measure earnings six years after graduation (instead of the proposed rule’s three years after graduation) for certain qualifying graduate programs such as clinical psychology, marriage and family therapy, clinical social work, and clinical counseling.

The final gainful employment regulations will take effect July 1, 2024.

The Department has indicated that it will release metrics beginning in the 2025 financial aid award year.

Beginning July 1, 2026, if a program fails a metric, an institution must provide warnings to students and prospective students meeting certain minimum requirements to be specified by the Department;

programs that fail the same metric in the first two years the rates are issued will lose eligibility in 2026.

On October 23, 2023, the Department released final rules on financial responsibility, administrative capability, certification procedures, and ability to benefit.

The Department’s final rules regarding financial responsibility establish new mandatory triggers—including but not limited to failing 90/10, receiving at least 50% of funds from programs that are failing gainful employment, or being subject to a Department action to recover losses from approved Borrower Defense to Repayment claims that would cause a recalculated composite score to fall below 1.0—that allow the Department to seek financial protection or recalculate the institution’s financial composite score to determine whether an institution’s financial condition has materially weakened.

The rules also establish new discretionary triggers that will result in the Department conducting case-by-case analysis to see if additional protection is needed.

In general, institutions will be required to report triggering events within 21 days of occurrence.

According to the regulation, such triggering events may result in a financial protection requirement that would most likely take the form of a letter of credit or cash escrow and provisional certification to participate in Title IV.

Under the final administrative capability rule, institutions will be required to, among other things, offer adequate services to students, including financial aid counseling and career services support.

The final language also includes a new requirement that institutions provide students with geographically accessible clinical or externship opportunities as required for licensure and that at least half of an institution’s total Title IV, HEA funds from the most recent award year must not be from programs that are “failing” under the Gainful Employment Rules.

In final rules regarding certification procedures, the Department indicates, among other things, that it will consider withdrawal rates, gainful employment rates, licensure passage rates, and instructional and advertising spend when making institutional eligibility determinations.

The regulation also provides the Secretary authority to require institutions to submit all marketing materials in cases where the institution is provisionally certified and is found to have engaged in substantial misrepresentation, aggressive recruitment, or a failure to comply with incentive compensation rules.

The final regulation also makes changes regarding licensure-track programs, including preventing an institution from offering Title IV aid to a student enrolled in a program that does not meet educational prerequisites for licensure in the state in which the student is located.

The Department’s final regulation also requires institutions to comply with all State laws related to closure, including record retention, teach-out plans or agreements and tuition recovery funds or surety bonds for each state in which the institution is located and in each state in which students enrolled by the institution in distance education courses are located.

Beginning January 2024, the Department convened a negotiated rulemaking committee to consider new proposed regulations on distance education, cash management, return of federal funds, state authorization, accreditation and related issues, and TRIO programs.

We cannot predict the outcome of the negotiated rulemaking process.

On December 30, 2024, the Department released final regulations on distance education, return of federal funds and the TRIO program, which make modest changes to existing regulatory language requiring additional data collection and reporting, or, in the case of the TRIO program, make technical changes.

Also in December 2024, the Department officially terminated the negotiated rulemaking process for cash management, state authorization and accreditation, prior to releasing any draft rules.

College Affordability and Transparency Lists

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The Department of Education also posts lists of the top 10% of institutions in each of the four categories with lowest tuition and fees or the lowest net price for the most recent academic year.

Under the Higher Education Act, net price means average yearly price actually charged to first-time, full-time undergraduate students who receive

student aid at a higher education institution after such aid is deducted.

Under the Higher Education Act, net price means average yearly price actually charged to first-time, full-time undergraduate students who receive student aid at a higher education institution after such aid is deducted.

On January 11, 2023, the Department published a request for information regarding how to best identify low-financial-value educational programs.

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The Department of Education enforces FERPA by initiating corrective actions against noncompliant institutions, which could lead to the loss of federal funding.

The Department has indicated its intention to publish draft FERPA rules in April 2023 that would update, clarify, and improve the current regulations by addressing outstanding policy issues and implementing statutory amendments.

Institutions that participate in Title IV also agree to comply with the Gramm-Leach-Bliley Act Safeguards Rule.

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state and federal privacy and data security laws.

The GDPR applies to entities that process personal information (1) in the context of the activities of an establishment of the entity in the European Union (“EU”), regardless of whether the processing takes place in the EU or not, or (2) of individuals who are in the EU, where the processing activities are related to (a) targeting of individuals in the EU in its offering of goods or services, or (b) the monitoring of the behavior of individuals in the EU as far as that behavior takes place within the EU.

The GDPR applies to entities that process personal

information (1) in the context of the activities of an establishment of the entity in the European Union (“EU”), regardless of whether the processing takes place in the EU or not, or (2) of individuals who are in the EU, where the processing activities are related to (a) targeting of individuals in the EU in its offering of goods or services, or (b) the monitoring of the behavior of individuals in the EU as far as that behavior takes place within the EU.

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

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Both Torrens and Think are registered for the purposes of these plans (a precondition to their students being eligible to receive such loans).

On May 16, 2024, the Education Services for Overseas Students Amendment (Quality and Integrity) Bill 2024 , which would amend the Education Services for Overseas Students Act 2000 , was introduced into the House of Representatives of the Australian Parliament.

On August 15, 2024, the Bill was introduced into the Senate of the Australian Parliament.

The Bill contained several measures that would authorize the Minister for Education to regulate the provision of education to overseas students, including, among other things, by limiting the enrollments of overseas students.

These limits would apply to Torrens and to Think.

The Bill has not passed the Senate;

however, on December 19, 2024, the Australian Federal Government introduced Ministerial Direction 111, which, like the Bill, seeks to limit the number of international students, and is expected to draw student allocations determined by the Government on a prioritization approach.

We operate a post-secondary educational institution in New Zealand, Media Design School Limited (“MDS”).

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It is a globally renowned and specialist provider of design and creative technology education with qualifications ranging from diplomas to postgraduate degrees.

MDS also has access to New Zealand Government student finance where study loans are offered to students who are New Zealand citizens or ordinarily resident in New Zealand, subject to certain conditions.

also has access to New Zealand Government student finance where study loans are offered to students who are New Zealand citizens or ordinarily resident in New Zealand, subject to certain conditions.

Privacy and Data Security

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The information on our website is not incorporated by reference in this Annual Report on Form 10-K and our web address is included as an inactive textual reference only.

We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,

and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC;

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business