What changed in this filing

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Item 1A. Risk Factors

2025-11-06 compared with 2025-07-30 · 49 added, 57 removed, 178 unchanged (37% of the section changed)

59 unchanged sentences

On January 21, 2025, NC-SARA initiated its 2025 policy manual modification process with a call for proposals for SARA policy changes.

The call for proposals ended February 7, 2025 and yielded 32 proposed changes to NC-SARA policies, some of which, if adopted, could significantly alter the distance education reciprocity agreements.

Such proposals included circumstances under which an institution may be denied participation in SARA or have its participation limited as a result of investigations or adverse actions against it related to the institution’s academic quality, financial stability, or student consumer protection issues.

On April 25, 2025, NC-SARA held its public comment forum to seek input on these potential changes.

In addition to the public comment forum, NC-SARA permitted submission of written comments in two rounds:

between March 6, 2025 and April 7, 2025 and between June 9, 2025 and July 7, 2025 (both now closed).

NC-SARA’s regional compacts/regional steering committees and the NC-SARA board of directors will vote on each proposal presented by September 2, 2025, and October 23, 2025, respectively.

In September, 2025, NC-SARA announced that all four regional compacts had approved nine policy changes, which will be considered by the NC-SARA board on October 23, 2025.

We cannot predict whether NC-SARA will adopt any of these proposals.

The adoption of certain proposals, including those described above, to the extent they affect the ability of institutions to participate in the agreements, could have a material adverse effect on Capella University, Strayer University, and the Company.

The adoption of certain proposals, including any that affect the ability of institutions to participate in the agreements, could have a material adverse effect on Capella University, Strayer University, and the Company.

Pursuant to new U.S.

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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;

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.

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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.

Capella University and Strayer

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

Dep’t of Educ.

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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.

The Department did not appeal this decision before the March 10, 2025 appeal deadline passed;

however, a nonprofit legal organization is seeking to intervene in support of the 2024 Title IX Rule.

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

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.

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If Capella University or Strayer University loses eligibility to participate in Title IV programs because of high student loan default rates, the loss would have a material adverse effect on our business.

Capella University’s three-year cohort default rates for federal fiscal years 2019, 2020, and 2021 were 1.1%, 0.0%, and 0.0%, respectively.

Strayer University’s three-year cohort default rates for federal fiscal years 2019, 2020, and 2021 were 2.2%, 0.0%, and 0.0%, respectively.

The average official cohort default rates for proprietary institutions nationally were 3.1%, 0.0%, and 0.0% for federal fiscal years 2019, 2020, and 2021, respectively.

Capella University’s three-year cohort default rates for federal fiscal years 2020, 2021, and 2022 were 0.0%.

Strayer University’s three-year cohort default rates for federal fiscal years 2020, 2021, and 2022 were 0.0%.

The average official cohort default rates for proprietary institutions nationally were 0.0% for federal fiscal years 2020, 2021, and 2022.

The federal government’s elimination of the pause on federal student loan payments could result in an increase in the number of borrowers defaulting on their student loans, including among our graduates.

The One Big Beautiful Bill Act (“OBBB”) was signed into law on July 4, 2025.

Among other things related to loan repayment plans, OBBB requires that for new loans issued on or after July 2026, borrowers choose between two plans:

The One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025.

Among other things related to loan repayment plans, OBBBA requires that for new loans issued on or after July 2026, borrowers choose between two plans:

a Standard Repayment Plan (with fixed monthly payments and fixed terms ranging from 10-25 years) or a new Income-Based Repayment Assistance Plan (RAP).

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For example, borrowers currently on an Income-Contingent Repayment (ICR) plan must transition to a different plan by July 1, 2028.

OBBB also eliminates unemployment and economic hardship deferments for loans issued on or after July 1, 2027, and reduces the permitted forbearance period to 9 months per 24-month period.

OBBBA also eliminates unemployment and economic hardship deferments for loans issued on or after July 1, 2027, and reduces the permitted forbearance period to 9 months per 24-month period.

Additionally, borrowers will be permitted to rehabilitate defaulted loans twice beginning July 2027, rather than only once under the current rule.

On July 24, 2025, the Department of Education announced its intention to establish a negotiated rulemaking committee to prepare proposed regulations implementing the OBBB’s federal student loan-related changes.

The committee is scheduled to meet for two

multi-day sessions between September 2025 and November 2025.

OBBB provisions that change repayment plans could affect borrowers’ ability to repay their student loans and could result in an increase in the number of borrowers defaulting on their student loans, including among our graduates.

On July 24, 2025, the Department of Education announced its intention to establish a negotiated rulemaking committee to prepare proposed regulations implementing OBBBA’s federal student loan-related changes.

The committee is scheduled to meet for two multi-day sessions between September 2025 and November 2025.

OBBBA provisions that change repayment plans could affect borrowers’ ability to repay their student loans and could result in an increase in the number of borrowers defaulting on their student loans, including among our graduates.

The failure by Capella University or Strayer University to comply with the Department of Education’s misrepresentation rules could result in sanctions and other liability.

The Higher Education Act prohibits an institution that participates in Title IV programs from engaging in “substantial misrepresentation” of the nature of its educational program, its financial charges, or the employability of its graduates.

The Higher Education Act prohibits an institution that participates in Title IV programs from engaging in “substantial

misrepresentation” of the nature of its educational program, its financial charges, or the employability of its graduates.

Final regulations that defined misrepresentation to include “any statement that has the likelihood or tendency to mislead under the circumstances” and “any statement that omits information in such a way as to make the statement false, erroneous, or misleading” were scheduled to take effect July 1, 2017 but, after a series of delays, became effective October 16, 2018.

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a statement, act, or omission by an eligible school to a borrower (a) that is false, misleading, or deceptive, (b) that was made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth, and (c) that directly and clearly relates to either (1) enrollment or continuing enrollment at the institution or (2) the provision of educational services for which the loan was made.

In 2021, the Department began the process to amend the Borrower Defense to Repayment rules, including the definition of misrepresentation, and on October 31, 2022, the Department released final Borrower Defense to Repayment regulations, which include among other defenses “substantial misrepresentation,” with a significantly expanded definition of misrepresentation that also includes “omissions of fact.” Specifically, the new rule defines a “misrepresentation” to include any false, erroneous or misleading statement made by the institution or its representatives, or its marketing, advertising, recruiting or admissions agents, as well as any omission of fact that a reasonable person would have considered in deciding to enroll in or continue attendance at the institution.

On October 31, 2022, the Department released final Borrower Defense to Repayment regulations, which include among other defenses “substantial misrepresentation,” with a significantly expanded definition of misrepresentation that also includes “omissions of fact.” Specifically, the new rule defines a “misrepresentation” to include any false, erroneous or misleading statement made by the institution or its representatives, or its marketing, advertising, recruiting or admissions agents, as well as any omission of fact that a reasonable person would have considered in deciding to enroll in or continue attendance at the institution.

A statement is deemed misleading if it has the likelihood or tendency to mislead under the circumstances.

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This new definition was effective July 1, 2023;

however, it has since been delayed by the OBBB as described below.

however, it has since been delayed by OBBBA as described below.

On June 22, 2022, in litigation in which neither SEI nor Capella University is a party, Sweet, et al.

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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.

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.

On June 23, 2025, at the Department’s request, the Supreme Court agreed to resume the briefing schedule.

On July 8, 2025, the Supreme Court granted a motion related to the briefing schedule, with the Department’s brief due August 20, 2025, and the Respondent’s brief due October 2, 2025.

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 (i.e., the Sweet case).

On August 8, 2025, on the parties’ joint stipulation, the U.S.

Supreme Court dismissed the Department’s appeal.

In stipulating to dismissal of the appeal, the Department referenced the effect of OBBBA, which is described below.

The case remains with the federal district court on remand.

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

As a result of a Fifth Circuit August 7, 2023 nationwide injunction of the 2022 Borrower Defense to Repayment Regulations, the Department announced that while it will not adjudicate any borrower defense applications under the 2022 Borrower Defense to Repayment Regulations unless and until the effective date is reinstated, it will continue to adjudicate applications under a prior version of the rule if required pursuant to a court ordered settlement.

For the Sweet post-class applicants, the Department agreed to adjudicate such claims under the 2016 BDTR Rule, and, if the Department does not adjudicate the applications by January 28, 2026, it will provide the applicants “Full Settlement Relief” (i.e., federal student loan(s) associated with the borrower’s attendance at the school will be discharged, the Department will refund any amounts paid to the Department on those loans, and the credit tradeline for those loans will be deleted from the borrower’s credit report).

In 2023, the Department informed institutions that:

it would be notifying most schools of all applications received from June 23, 2022 to November 15, 2022 in a single send (and anticipates completing notification to all schools by approximately April 2024);

it is not reviewing applications prior to sending them to institutions;

it is optional for institutions to respond to the applications;

and not responding will result in no negative inference by the Department.

For the Sweet post-class applicants, the Department agreed to

adjudicate such claims under the 2016 BDTR Rule, and, if the Department does not adjudicate the applications by January 28, 2026, it will provide the applicants “Full Settlement Relief” (i.e., federal student loan(s) associated with the borrower’s attendance at the school will be discharged, the Department will refund any amounts paid to the Department on those loans, and the credit tradeline for those loans will be deleted from the borrower’s credit report).

The Department has also explained that it will separately decide whether to seek recoupment on any approved claim.

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The One Big Beautiful Bill Act, signed into law on July 4, 2025, amends the Higher Education Act to delay the effective date of the 2022 borrower defense to repayment rules, including their closed school discharge provisions, until July 1, 2035.

The OBBB reinstated the 2019 version of those rules, which took effect July 1, 2020.

OBBBA reinstated the 2019 version of those rules, which took effect July 1, 2020.

In the event of substantial misrepresentation, the Department of Education may revoke or terminate an institution’s program participation agreement, limit the institution’s participation in Title IV programs, deny applications from the institution, such as to add new programs or locations, initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs;

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To be eligible for Title IV funding, academic programs offered by proprietary institutions of higher education generally must prepare students for gainful employment in a recognized occupation.

On September 27, 2023, the Department of Education released final regulations on gainful employment, effective July 1, 2024.

On September 27, 2023, the Department of Education released final regulations on gainful employment, effective July 1, 2024 (the “2023 Gainful Employment Rule”).

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

graduates from a program that received federal financial aid to an “earnings threshold” based on 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 passes if the median annual earnings exceed the earnings threshold).

In May 2025, the Trump administration filed a brief defending the 2024 gainful employment rule in pending cases challenging their lawfulness under the Higher Education Act.

The two metrics are 1) a debt-to-earnings ratio that compares the median annual earnings and median discretionary earnings of graduates who received federal financial aid to the median annual payments on loan debt borrowed for the program (a program passes if the annual debt-to-earnings ratio is less than or equal to 8% of annual earnings or 20% of discretionary earnings), and 2) an earnings premium test that compares the median annual earnings of graduates from a program that received federal financial aid to an “earnings threshold” based on 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 passes if the median annual earnings exceed the earnings threshold).

In May 2025, the Trump administration filed a brief defending the 2023 Gainful Employment Rule in cases challenging their lawfulness under the Higher Education Act.

On October 2, 2025, the U.S.

District Court for the Northern District of Texas upheld the Department of Education’s 2023 Gainful Employment Rule, rejecting all legal challenges brought by a group of cosmetology schools and associations.

The court affirmed that the rule—designed to assess Title IV eligibility based on graduates’ debt-to-earnings ratios and earnings premiums—was within the Department’s statutory authority under the Higher Education Act and complied with constitutional and administrative law standards.

As a result, the 2023 Gainful Employment Rule remains in full effect, and institutions offering programs that fail the rule’s metrics for two out of three consecutive years may lose access to federal student aid.

Plaintiffs have until December 1, 2025, to appeal the decision to the Fifth Circuit.

Beginning on July 1, 2026, any gainful employment program that fails either or both metrics in a single year would be required to provide a warning to all to current and prospective students that meets certain minimum requirements specified by the Department of Education, including that the program failed one or both metrics for the year and may be subject to loss of Title IV eligibility.

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The Department has indicated that it will release metrics beginning in the 2025 financial aid award year, and, if so, we expect that the earliest a program could lose eligibility is 2026.

OBBB creates an accountability framework, effective July 2026, that institutions must satisfy at the program level in order for students to continue to receive Federal Direct Loans for such programs.

OBBB requires that an undergraduate program become ineligible for Federal Direct Loans if, in two out of three consecutive years, the median earnings of a cohort of program completers are less than the median earnings of working adults aged 25-34 with only a high school diploma, either in the state where the institution is located or, if fewer than 50% of students at the institution reside in the institution’s state, the national average.

OBBB requires that a graduate or professional program become ineligible for Federal Direct Loans if, in two out of three consecutive years, the median earnings of a cohort of program completers are less than the median earnings of working adults aged 25–34 with only a bachelor’s degree.

OBBBA creates an accountability framework, effective July 2026, that institutions must satisfy at the program level in order for students to continue to receive Federal Direct Loans for such programs.

OBBBA requires that an undergraduate program become ineligible for Federal Direct Loans if, in two out of three consecutive years, the median earnings of a cohort of program completers are less than the median earnings of working adults aged 25-34 with only a high school diploma, either in the state where the institution is located or, if fewer than 50% of students at the institution reside in the institution’s state, the national average.

OBBBA requires that a graduate or professional program become ineligible for Federal Direct Loans if, in two out of three consecutive years, the median earnings of a cohort of program completers are less than the median earnings of working adults aged 25–34 with only a bachelor’s degree.

Comparator median earnings for graduate or professional programs will be calculated based on Bureau of the Census data for working adults aged 25-34 with only a bachelor’s degree, and will be the lesser of:

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If a program fails the earnings test for one year, institutions must notify students that the program is at risk of losing Federal Direct Loan eligibility.

OBBB requires that an institutional appeals process be established by the Secretary of Education, and a program’s Federal Direct Loan eligibility will continue during such appeal.

OBBBA requires that an institutional appeals process be established by the Secretary of Education, and a program’s Federal Direct Loan eligibility will continue during such appeal.

Programs that lose eligibility under the accountability framework may reapply for eligibility after two years, consistent with requirements that will be established by the Secretary of Education.

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The committee is scheduled to meet for two multi-day sessions between December 2025 and January 2026.

The requirements associated with the gainful employment regulations and OBBB’s accountability framework (which is distinct from and in addition to the gainful employment regulations) may substantially increase our administrative burdens and could affect our program offerings, student enrollment, persistence and retention.

At this time, it is difficult to predict whether our programs will satisfy the gainful employment metrics or OBBB accountability metrics.

The requirements associated with the gainful employment regulations and OBBBA’s accountability framework (which is distinct from and in addition to the gainful employment regulations) may substantially increase our administrative burdens and could affect our program offerings, student enrollment, persistence and retention.

At this time, it is difficult to predict whether our programs will satisfy the gainful employment metrics or OBBBA accountability metrics.

Further, the continuing eligibility of our academic programs will be affected by factors beyond management’s control such as changes in our graduates’ employment and income levels, changes in student borrowing levels, increases in interest rates, and various other factors.

Even if we were able to correct any deficiency in the gainful employment or OBBB accountability metrics in a timely manner, the disclosure requirements associated with a program’s failure to meet at least one metric may adversely affect student enrollments in that program and may adversely affect the reputation of our institution.

Even if we were able to correct any deficiency in the gainful employment or OBBBA accountability metrics in a timely manner, the disclosure requirements associated with a program’s failure to meet at least one metric may adversely affect student enrollments in that program and may adversely affect the reputation of our institution.

Our business could be harmed if Congress makes changes to the availability of Title IV funds.

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To date, these changes have not had a material impact on our business, but we cannot predict any effect they may have in the future.

OBBB eliminates, effective July 2026, Federal Direct PLUS loans for graduate and professional students, with some limited grandfathering for current graduate and professional student borrowers.

OBBBA eliminates, effective July 2026, Federal Direct PLUS loans for graduate and professional students, with some limited grandfathering for current graduate and professional student borrowers.

The law also sets new annual and aggregate loan limits for such borrowers, with some limited grandfathering.

1 unchanged sentence

With respect to graduate students who are or have been professional students, the aggregate graduate loan limit is $200,000 minus the amounts borrowed for the professional degree program.

OBBB also created a lifetime maximum aggregate amount for Title IV loans that a student may borrow of $257,500 (other than a loan made to the student as a parent borrower on behalf of a dependent student).

OBBB provides institutions the opportunity to limit the amount of loans a student may borrow in an academic year as long as any such limit is applied consistently to all students enrolled in such program of study.

Additionally, OBBB requires that the amount of loan funds available under a student’s annual loan eligibility must be reduced in direct proportion to the degree to which that student is not enrolled on a full-time basis during an academic year.

OBBBA also created a lifetime maximum aggregate amount for Title IV loans that a student may borrow of $257,500 (other than a loan made to the student as a parent borrower on behalf of a dependent student).

OBBBA provides institutions the opportunity to limit the amount of loans a student may borrow in an academic year as long as any such limit is applied consistently to all students enrolled in such program of study.

Additionally, OBBBA requires that the amount of loan funds available under a student’s annual loan eligibility must be reduced in direct proportion to the degree to which that student is not enrolled on a full-time basis during an academic year;

the Department plans to release a schedule of reductions for

public comment later this year, which institutions will be required to use for students who enrolled less than full-time for academic years 2026-27 and beyond.

Effective July 2026, students with a Student Aid Index that equals or exceeds twice the maximum Pell Grant amount will be ineligible for Pell Grants.

A student will also be ineligible for a Federal Pell Grant during any period for which the student receives grant aid from a non-federal source (including states, institutional aid, or private sources) in an amount that equals or exceeds the student’s cost of attendance.

Additionally, OBBB creates Workforce Pell Grants effective July 2026 for students enrolled in eligible workforce programs.

Additionally, OBBBA creates Workforce Pell Grants effective July 2026 for students enrolled in eligible workforce programs.

Eligible workforce programs must meet a specific definition, including that they are accredited, short-term, career-focused programs (150 to 600 clock hours of instruction over 8 to 15 weeks), which prepare students to pursue one or more certificate or degree programs.

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

What changed 10-Q

Item 1A. Risk Factors