Undergraduate students enrolled who are formally registered with office of disability services. Undergraduate Student Financial Aid, Varsity Athletic Admission Retention Enrollment. Fall First-to-Second Year Retention Rates Retention rates measure the percentage of first-time students who are seeking bachelor's degrees who return to the institution to continue their studies the following fall. No varsity sports data reported for this institution. Department of Education. Therefore, the Department cannot vouch for the accuracy of the data reported here.
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Copyright Innovateonline. Award of less than 1 academic year Award of at least 1 but less than 2 academic years Associate's degree Bachelor's degree Postbaccalaureate certificate Master's degree. Full-time beginning undergraduate students who paid the in-state or in-district tuition rate and were awarded grant or scholarship aid from federal, state or local governments, or the institution.
Full-time beginning undergraduate students who paid the in-state or in-district tuition rate and were awarded Title IV aid by income. Accounting and Finance. Marketing, Other. Organizational Leadership. Education Colleges. Educational Administration and Supervision, Other. Health Professions and Related Programs Colleges.
General Studies. An institution must, among other things, be authorized to offer its educational programs by each state in which it is physically located and maintain institutional accreditation by a recognized accrediting agency as discussed above. Other Approvals. Strayer University is approved by appropriate authorities for the education of veterans and members of the selective reserve and their dependents, as well as for the rehabilitation of veterans.
In addition, Strayer University is authorized by the U. Department of Homeland Security to admit foreign students for study in the United States subject to applicable requirements. Department of Homeland Security, working with the U. Department of State, has implemented a mandatory electronic reporting system for schools that enroll foreign students and exchange visitors. The University is also authorized to participate in state financial aid programs in Pennsylvania, Florida and Vermont.
Financing Student Education. Many financial aid programs are designed to assist eligible students whose financial resources are inadequate to meet the cost of education. With these programs, financial aid is awarded on the basis of financial need, generally defined under the Higher Education Act as the difference between the cost of attending a program of study and the amount a student reasonably can be expected to contribute to those expenses. All recipients of federal student financial aid must maintain a satisfactory grade point average and progress in a timely manner toward completion of a program of study.
In addition, many of our working adult students finance their own education or receive full or partial tuition reimbursement from their employers. Congress has enacted several tax credits for students pursuing higher education and has provided for a tax deduction for interest on student loans and exclusions from income of certain tuition reimbursement amounts. Eligible students at Strayer University may also participate in educational assistance programs administered by the Commonwealth of Pennsylvania, the State of Florida, State of Vermont, private organizations, the U.
Department of Veterans Affairs, and the U. In addition, eligible students pursuing an educational program solely through distance learning are eligible to receive a housing stipend, equal to half the amount available to students attending classroom-based programs or programs that combine classroom learning and distance learning. DOD promulgated regulations, published December 7, and effective January 7, , that require all institutions participating in DOD military tuition assistance programs to sign a Memorandum of Understanding, or MOU, by March 1, Strayer University participates in DOD military tuition assistance programs under a Memorandum of Understanding with the DOD and various branches of the armed services.
Thereunder, the University agrees to comply with DOD rules and procedures regarding the receipt of tuition assistance on behalf of active duty military personnel and qualifying family members in attendance at the University. Federal Grants. Grants under the Federal Pell Grant program are available to eligible students based on financial need and other factors. In April , year-round Pell Grant awards beginning with the award year were permanently eliminated.
In addition, effective July 1, , eligibility for Pell Grants was reduced from 18 semesters to 12 semesters. Campus-Based Programs. Federal Direct Student Loans. Under the William D. Students who demonstrate financial need may qualify for a subsidized loan. Unsubsidized loans are available to students who do not qualify for a subsidized loan or, in some cases, in addition to a subsidized loan. Federal Financial Aid Regulation. As part of those participation standards, the Department of Education determines whether, among other things, the institution meets certain standards of administrative capability and financial responsibility.
Some of the key provisions regarding institutional eligibility and processing federal financial aid are described below. Program Participation Agreement. Provisional Certification. During the period of provisional certification, the institution must comply with any additional conditions included in its program participation agreement. Administrative Capability. Financial Responsibility. Department of Education standards utilize a complex formula to assess financial responsibility. Student Loan Defaults.
The Department of Education uses a specific methodology to determine default rates and imposes varying sanctions based upon the results of that calculation. The Department of Education calculates a rate of student defaults known as a cohort default rate for each institution with 30 or more borrowers entering repayment in a given federal fiscal year. The Department of Education includes in the cohort all student borrowers at the institution who entered repayment on any Direct or FFEL Program loan during that year.
The cohort default rate is the percentage of those borrowers who default by the end of the following federal fiscal year, resulting in a two-year cohort default rate. Because of the need to collect data on defaults, the Department of Education publishes cohort default rates two years in arrears; for example, in the fall of , the Department issued cohort default rates for federal fiscal year The Department of Education may take adverse action against an institution if it has excessive cohort default rates, including the following:.
An institution whose participation ends under either of the foregoing provisions may not participate in the relevant programs for the remainder of the fiscal year in which the institution receives the notification, as well as for the next two fiscal years. The average cohort default rates for proprietary institutions nationally were Cohort Default Rate Provisions Effective The HEOA provides, however, that the current method of calculating cohort default rates will be used to determine any sanctions on institutions until , when three consecutive years of official cohort default rates calculated under the new formula will be available.
First, under the new provisions, the period for measuring defaults will be expanded by one year, resulting in a three-year cohort default rate. Beginning with cohort default rate calculations for federal fiscal year , the cohort default rate is the percentage of borrowers who become subject to their repayment obligation in the relevant federal fiscal year and default by the end of the second federal fiscal year following that fiscal year.
This change has several consequences:. The Department of Education may direct that the plan be amended to include actions, with measurable objectives, that it determines will promote loan repayment. The Department of Education will rely on the two-year cohort default rate and related thresholds to determine institutional eligibility until , when the Department of Education issues official three-year cohort default rates for the fiscal year cohort.
The Department of Education issued the first official three-year cohort default rate, for fiscal year , in September The average official three-year cohort default rate for proprietary institutions nationally was The average unofficial informational three-year cohort default rates for proprietary institutions nationally were As part of its compliance program related to the cohort default rate, Strayer University provides entrance and exit counseling to its students and engages the services of a third party to counsel students once they are in repayment status regarding their repayment obligations.
Our computation for has not yet been finalized and audited. Incentive Compensation. Failure to comply with the incentive payment rule could result in loss of certification to participate in federal student financial aid programs, limitations on participation in the federal student financial aid programs, or financial penalties.
The Department of Education has published a subsequent Dear Colleague Letter interpreting this regulation. Gainful Employment. A particular program offered by an institution would have become ineligible for Title IV funding if it could not pass one of the three above metrics in three out of four consecutive years, beginning with fiscal year After one failure, the institution would be required to disclose to students the amount by which the particular program missed the metric and what the institution plans to do to improve performance. After two failures consecutively or within a three-year period, the institution would have to inform each current and prospective student that their debts may be unaffordable, that the program may lose eligibility, and what transfer options exists.
After three failures consecutively or within four years, a program would lose eligibility for Title IV funds and could not re-establish eligibility for at least three years. On June 30, , the U. District Court for the District of Columbia, considering a challenge to the regulations brought by the Association of Private Sector Colleges and Universities, vacated the debt measures as well as the rules requiring institutions to report to the Department of Education information about students who complete gainful employment programs.
The court requested additional briefing on the issue, and a decision on the motion to alter or amend the judgment remains pending. If the debt measures or reporting requirements were to be reinstituted on appeal or by a future Department of Education rulemaking that passes judicial scrutiny, the gainful employment regulations will substantially increase our administrative burdens and could affect our student enrollment, persistence and retention.
Return of Federal Funds. Third-Party Servicers. An institution must report to the Department of Education new contracts or any significant modifications to contracts with third-party servicers as well as other matters related to third-party servicers. Strayer University also has a contract with Sallie Mae Business Solutions for processing stipends due to students and with General Revenue Corporation for loan default prevention. Lender Relationships. Strayer University has a code of conduct that it believes complies with the provisions of HEOA in all material respects. In addition to the code of conduct requirements that apply to institutions, HEOA contains provisions that apply to lenders, prohibiting lenders from engaging in certain activities as they interact with institutions.
Strayer University remains subject to those rules with respect to private education loans. Restrictions on Adding Locations and Educational Programs. State requirements and accrediting agency standards limit the ability of Strayer University to establish additional locations and programs. Most states require approval before institutions can add new programs, campuses or teaching locations. Middle States requires institutions that it accredits to notify it in advance of implementing new programs or locations, which may require additional approval.
At its discretion, Middle States may also conduct site visits to additional locations to ensure that accredited institutions that experience rapid growth in the number of additional locations maintain educational quality. All new Strayer University campus locations require Middle States approval before students are enrolled, and the Higher Education Act requires Middle States to monitor institutions with significant enrollment growth.
Under its provisional Program Participation Agreement with the Department of Education, Strayer University must obtain Department of Education approval for the addition of any new location. District Court for the District of Columbia, in addition to striking down the Gainful Employment debt measures and reporting requirements, also vacated the program approval rules.
Pending a final ruling in this case, the Department of Education has advised schools to follow the rules on additional programs that immediately preceded the gainful employment rules. Compliance Reviews. Strayer University is subject to announced and unannounced compliance reviews and audits by various external agencies, including the Department of Education, its Office of Inspector General, state licensing agencies, guaranty agencies, and accrediting agencies.
In addition, to enable the Secretary of Education to make a determination of financial responsibility, an institution must submit annually to the Secretary of Education audited financial statements prepared in accordance with Department of Education regulations. The Company has communicated its disagreement with this finding, has enrolled affected students in other programs, and is working with the Department of Education to resolve the matter. Strayer University continues to communicate with the Department of Education, and has provided requested data, but has not received a Final Program Review Determination Letter.
Potential Effect of Regulatory Violations. Change in Ownership Resulting in a Change of Control. Many states and accrediting agencies require institutions of higher education to report or obtain approval of certain changes in ownership or other aspects of institutional status, but the types of and triggers for such reporting or approval vary among states and accrediting agencies.
Examples of substantive changes requiring advance notice to and approval of Middle States include changes in the legal status, ownership or form of control of the institution, such as the sale of a proprietary institution. Middle States will undertake a site visit to an institution that has undergone a change in ownership or control no later than six months after the change. The Higher Education Act provides that the Department of Education may temporarily, provisionally certify an institution seeking approval of a change of ownership and control based on preliminary review by the Department of Education of a materially complete application received by the Department of Education within 10 business days after the transaction.
If the Department of Education determines to approve the application after a change in ownership and control, it issues a provisional certification, which extends for a period expiring not later than the end of the third complete award year following the date of provisional certification. The Higher Education Act defines one of the events that would trigger a change in ownership resulting in a change of control as the transfer of the controlling interest of the stock of the institution or its parent corporation.
The regulations also provide that a change in ownership and control of a publicly traded corporation occurs if a person who is a controlling stockholder of the corporation ceases to be a controlling stockholder. Strayer University currently is authorized by the U. In certain circumstances, the Department of Homeland Security may require an institution to obtain approval for a change in ownership and control. Pursuant to federal law providing benefits for veterans and reservists, some of the programs offered by Strayer University are approved for the enrollment of persons eligible to receive U.
In certain circumstances, state approving agencies may require an institution to obtain approval for a change in ownership and control. Recent or Pending Legislative and Regulatory Activity. Congress is considering legislation that would make further changes in the Higher Education Act and other education-related federal laws. Congressional activity may adversely affect enrollment in for-profit educational institutions. We cannot predict the impact, if any, of these recent or pending legislative changes on our long-term business model, although the uncertainty associated with Congressional activity has had a negative impact on the industry as a whole.
As discussed more fully above, on June 30, , the U. District Court for the District of Columbia invalidated these debt measures as well as the accompanying reporting and additional program approval requirements. HEOA provisions became effective upon enactment, unless otherwise specified in the law.
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HEOA includes numerous new and revised requirements for higher education institutions. In addition to HEOA, three other laws to amend and reauthorize aspects of the Higher Education Act have been enacted over the last few years. In May , then President Bush signed the Ensuring Continued Access to Student Loans Act of , or ECASLA, which was designed to facilitate student loan availability and to increase student access to federal financial aid in light of then-current market conditions.
The Consumer Financial Protection Bureau submitted two reports to Congress in with specific recommendations for restructuring the student borrowing experience, including requiring institutions to certify that a student is not eligible for any further federal funds before a private loan may be issued to such student. The Act would also require institutions to counsel students about their loan options, including discussion of differences between federal loans and private loans.
Private loan lenders would be required to provide students with quarterly account updates on the balance and interest accrued. On January 23, , Senator Durbin also introduced the Fairness for Struggling Students Act of , which would allow private student loans to be dischargeable in bankruptcy.
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We do not know what steps 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. This, in turn, could lead to lower enrollments at Strayer University or require Strayer University to increase its reliance upon alternative sources of student financial aid.
Appropriations for certain Title IV programs could be affected by sequestration, a process of automatic spending reductions. Pell Grants would be exempt from cuts through FY, but could be subject to sequestration in FY and beyond. Most other federal student aid programs would be subject to across-the-board cuts to discretionary programs at a rate of approximately 8. In , the U. Other Committees of the U. Congress have also held hearings into, among other things, the standards and procedures of accrediting agencies, credit hours and program length, the portion of federal student financial aid going to proprietary institutions, and the receipt of veterans and military education benefits by students enrolled at proprietary institutions.
Strayer University has cooperated with these inquiries. Tie access to federal financial aid to minimum student outcome thresholds. Prohibit institutions from funding marketing, advertising and recruiting activities with federal financial aid dollars. Expand the reporting period for cohort default rates beyond 3 years. Extend the ban on incentive compensation to include all employees of institutions of higher education, and clarify that this ban extends to numeric threshold or quota-based termination policies.
On September 21, , a group of senators wrote a letter to the Federal Trade Commission urging it to evaluate the marketing practices utilized by many proprietary institutions through the use of third-party lead generators. In addition, legislation was introduced in the Senate in April , which remains pending in Committee, which would prevent institutions from using Title IV funds for marketing activities.
The negotiations ended in April of The Department of Education has yet to issue a Notice of Proposed Rulemaking for public comment on these issues, which it must do prior to promulgating a final regulation.
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In May of , the Department of Education announced its intent to establish a negotiated rulemaking committee to prepare proposed regulations designed to prevent fraud and otherwise ensure proper use of Title IV, HEA program funds, especially in the context of current technologies. In particular, the Department of Education intends to propose regulations to address the use of debit cards and other banking mechanisms for disbursing Federal Student Aid funds, and to improve and streamline the campus-based Federal Student Aid programs.
Public hearings were held in May , and negotiations are anticipated to begin in the near future. State Licensure. Under the Program Integrity Regulations regarding state licensure, a proprietary institution is considered legally authorized by a state if the state has a process to review and appropriately act on complaints concerning the institution, including enforcing applicable state laws, and the institution complies with any applicable state approval or licensure requirements consistent with the Program Integrity Regulations.
To receive an extension, an institution must obtain from the state an explanation of how a one-year extension will permit the state to modify its procedures to comply with the new requirements. The revised rules specify that an institution is legally authorized in a state for Title IV purposes if it is established or licensed as an educational institution by name.
If an institution offers post-secondary education through distance or correspondence education to students in a state in which it is not physically located or in which it is otherwise subject to state jurisdiction as determined by the state, the institution must meet any state requirements for it to be legally offering post-secondary distance or correspondence education in that state. The final rule also amended the general provisions regarding student consumer information.
We are authorized to offer our programs by the applicable educational regulatory agencies in all states where our physical campuses and online delivery facilities are located, and these states have the applicable processes in place as required by the regulations. Merit-based adjustments to employee compensation may be made if they are not based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid. The Program Integrity Regulations set forth the types of activities that constitute misrepresentation and describe the adverse actions that the Department of Education may take if it finds that an institution or a third party that provides educational programs, marketing, advertising, recruiting or admissions services to the institution engaged in substantial misrepresentation.
Department of Education of the quality of its educational programs. On June 5, , the U. Gainful Employment Reporting and Disclosure. Under the Higher Education Act, a proprietary institution offering programs of study other than a baccalaureate degree in liberal arts for which there is a limited statutory exception must prepare students for gainful employment in a recognized occupation.
For each such program, Strayer University reported specific information regarding the program, the students enrolled in the program, and students who completed the program, including the amount the student received from private educational loans and institutional financing plans. In addition, the Program Integrity Regulations require institutions with gainful employment programs to disclose to prospective students certain information relating to those programs, including the occupations that the program prepares students to enter; the on-time graduation rate; tuition, fees, and costs; job placement rates, if applicable; and median loan debt of students who completed the program.
Strayer University makes such disclosures on its website and in promotional materials. The June 30, , U. District Court for the District of Columbia decision related to Gainful Employment vacated the reporting requirements, but the disclosure requirements remain in effect. The Department of Education required institutions to make disclosures by July 1, , and to update such disclosures for the award year by January 31, We made our first disclosures in , and completed a timely update of the disclosures for the year. New Programs. The Program Integrity Regulations established requirements intended to remain in place until the Department of Education implements performance-based standards for approving additional programs using gainful employment measures.
These regulations required an institution to notify the Department of Education of new programs defined in the regulations that are subject to gainful employment requirements. The institution could proceed to offer the program, unless the Department of Education advised the institution that the additional educational program must be approved. This new program approval process was vacated by the U. District Court for the District of Columbia in its June 30, decision invalidating the gainful employment regulation.
Administration of Financial Aid. Several of the Program Integrity Regulations relate to the administration of financial aid, including the areas of the definition of online attendance, definition of credit hours, measuring satisfactory academic progress, return of federal funds when a student withdraws, verification and disbursement. College Affordability and Transparency Lists. An institution that is placed on a list for high percentage increases in either tuition and fees or in net price must submit a report to the Department of Education explaining the increases and the steps that it intends to take to reduce costs.
The Department of Education will report annually to Congress on these institutions and will publish their reports on its web site. Under HEOA, 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.
The Principles relate broadly to information regarding tuition and fees, academic quality, marketing, and state authorization requirements. Credit Hours. If an accreditor does not comply with this requirement, its recognition by the Department of Education could be jeopardized. If the Department of Education determines that an institution is out of compliance with the credit hour definition, the Department could impose liabilities or other sanctions.
Additional Information. We maintain a website at www. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC; the website address is www. Investing in our common stock involves a high degree of risk.
The occurrence of any of the following risks could materially harm our business, adversely affect the market price of our common stock and could cause you to suffer a partial or complete loss of your investment. If we fail to comply with the extensive regulatory requirements for our business, we could face significant monetary liabilities, fines and penalties, including loss of access to federal student loans and grants for our students.
As a provider of higher education, we are subject to extensive regulation on both the federal and state levels. Regulatory changes by the Department of Education may have a material adverse effect on our business. As adopted, the first year that a program could become ineligible is , and a program will not lose eligibility unless it fails all three metrics in three of four years.
However, failure of a program in any given year would lead to heightened disclosure requirements. Although the regulations related to debt metrics were vacated by the U. District Court for the District of Columbia, if they were to be reinstated on appeal or otherwise properly promulgated by the Department of Education in the future, compliance with the rules could affect how we conduct our business, and insufficient time or lack of sufficient guidance for compliance could have a material adverse effect on our business.
Uncertainty surrounding the rules, interpretive regulations or guidance by the Department of Education may continue for some period of time and may adversely affect our business. Congressional examination of for-profit post-secondary education could lead to legislation or other governmental action that may negatively affect the industry.
Since June the Senate HELP Committee has held hearings to examine the proprietary education sector and the final report of the majority Members of the Committee was critical of the industry as a whole. Expand the reporting period for cohort default rates beyond three years. In addition, concerns generated by Congressional activity may adversely affect enrollment in and revenues of for-profit educational institutions.
Congress completed the most recent reauthorization through multiple pieces of legislation and may reauthorize the Higher Education Act in a piecemeal manner in the future. A reduction in government funding levels could lead to lower enrollments at our school and require us to arrange for alternative sources of financial aid for our students. Lower student enrollments or our inability to arrange such alternative sources of funding could adversely affect our business.
Because we operate in a highly regulated industry, we are subject to compliance reviews and claims of non-compliance and related lawsuits by government agencies, accrediting agencies and third parties, including claims brought by third parties on behalf of the federal government. Strayer continues to communicate with the Department of Education, and has provided requested data, but has not received a Final Program Review Determination Letter. In addition, an adverse action by Middle States other than loss of accreditation, such as issuance of a warning, could have a material adverse effect on our business.
Each Strayer University campus is authorized to operate and to grant degrees, diplomas or certificates by the applicable education agency of the state where the campus is located. An institution generally must seek recertification from the Department of Education at least every six years and possibly more frequently depending on various factors, such as whether it is provisionally certified. In certain circumstances, the Department of Education must provisionally certify an institution.
Under the provisional agreement, Strayer University must obtain Department of Education approval for substantial changes, including the addition of any new location, level of academic offering, or non-degree program. Beginning with cohort default rate calculations for federal fiscal year , the cohort default rate will be calculated by determining the rate at which borrowers who become subject to their repayment obligation in the relevant federal fiscal year, default by the end of the second rather than next federal fiscal year that follows that fiscal year.
The current method of calculating rates will remain in effect and will be used to determine institutional eligibility until three consecutive years of official cohort default rates calculated under the new formula are available. The average two-year cohort default rates for proprietary institutions nationally were Our school could lose its eligibility to participate in federal student financial aid programs or be provisionally certified with respect to such participation if the percentage of our revenues derived from those programs were too high.
To be eligible for Title IV funding, academic programs offered by proprietary institutions of higher education must prepare students for gainful employment in a recognized occupation. A program would become ineligible for Title IV funding if it failed one of these three metrics in three out of four consecutive years, beginning with fiscal year After one failure, the institution must disclose to students the amount by which the particular program missed the metric and what the institution plans to do to improve performance. After two failures consecutively or within a three-year period, the institution must inform each current and prospective student that their debts may be unaffordable, that the program may lose eligibility, and what transfer options exists.
As discussed more fully above, these metrics as well as the reporting requirements were invalidated by the U. District Court for the District of Columbia on June 30, The University must still comply with the gainful employment disclosure requirements, which were upheld by the District Court. Failure to comply with those requirements could result in sanctions or other liability, which could have a material adverse effect on our business. If we pay a bonus, commission or other incentive payment in violation of applicable Department of Education rules or if the Department or other third parties interpret our compensation practices as such, we could be subject to sanctions or other liability, which could have a material adverse effect on our business.
Although the U. If the Department of Education or other third parties interpret statements made by us or on our behalf to be in violation of the new regulations, we could be subject to sanctions and other liability, which could have a material adverse effect on our business. If refunds are not properly calculated or timely paid, we may be required to post a letter of credit with the Department of Education or be subject to sanctions or other adverse actions by the Department of Education, which could have a material adverse effect on our business.
Investigations, legislative and regulatory developments and general credit market conditions related to the student loan industry may result in fewer lenders and loan products and increased regulatory burdens and costs. The Higher Education Opportunity Act contains new requirements pertinent to relationships between lenders and institutions.
In the Department of Education promulgated regulations that address these relationships, and state legislators have also passed or may be considering legislation related to relationships between lenders and institutions. In addition, new procedures introduced and recommendations made by the Consumer Financial Protection Bureau create uncertainty about whether Congress will impose new burdens on private student lenders.
These developments as well as legislative and regulatory changes such as those relating to gainful employment and repayment rates creating uncertainty in the industry and general credit market conditions may cause some lenders to decide not to provide certain loan products and may impose increased administrative and regulatory costs. If our financial aid personnel, processes, and quality assurance procedures fail to comply with applicable regulation, such failure could have a material adverse effect on Strayer University, including loss of eligibility to participate in Title IV programs.
Congressional actions that reduce Title IV program funding whether through across-the-board funding reductions, sequestration or otherwise or materially affect the eligibility of Strayer University or its students to participate in Title IV programs would have a material adverse effect on our enrollment, financial condition, results of operations and cash flows. Most federal student aid programs would be subject to across-the-board cuts at a rate of approximately 8. A reduction in the maximum annual Pell Grant amount or changes in eligibility could increase student borrowing and make it more difficult for us to comply with other regulatory requirements, such as the cohort default rate regulations.
These events could make it more difficult for students to obtain funding for a Strayer University education, either in a timely manner or at all.
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Our business could be harmed if we experience a disruption in our ability to process student loans under the Federal Direct Loan Program. We collected the majority of our fiscal year total consolidated net revenue from receipt of Title IV financial aid program funds, principally from federal student loans under the Federal Direct Loan Program FDLP. If we experience a disruption in our ability to process student loans through the FDLP, either because of administrative challenges on our part or the inability of the Department of Education to process the volume of direct loans on a timely basis, our business, financial condition, results of operations and cash flows could be adversely and materially affected.
Risks Related to Our Business. Our growth rate is uncertain, and we may not be able to assess our future enrollments effectively. Our growth depends on a number of factors, including many of the regulatory risks discussed above. In we revised our business model to acknowledge lower growth or reductions in enrollments. Our enrollment in could be lower than our historical performance and will be affected by legislative uncertainty, regulatory activity, and market conditions.
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Increased unemployment and the resulting lower confidence in job prospects may be factors contributing to lower enrollments. Until legislative, regulatory, and market uncertainty are resolved, it may be difficult to assess whether and to what extent there is an impact on our long term growth prospects.
We plan to continue to invest in new campuses and to pursue our strategic goals. However, there can be no assurance as to what our growth rate will be or as to the steps we may need to take if regulatory and legislative matters are not clarified or if market conditions do not stabilize. Our strategy of opening new campuses and adding new services is dependent on our forecast of the demand for adult-focused post-secondary education and on regulatory approvals. Establishing new locations and adding new services require us to expend significant resources, including making human capital and financial capital investments, incurring marketing expenses and reallocating other resources.
Since significant growth in enrollment in new campuses is required for them to become profitable, our willingness to add new campuses depends on our ability to predict growth in enrollment. The recent activity by the Department of Education and the U. Congress has introduced uncertainties into our business model and has slowed our pace of opening of new campuses, and we do not currently have plans to open new campuses in To open a new location, we are required to obtain appropriate federal, state, and accrediting agency approvals, which may be conditioned or delayed in a manner that could significantly affect our growth plans.
We cannot assure investors that we will continue to open new campus locations or add new services in the future. Our future success depends in part upon our ability to recruit and retain key personnel. Our success to date has been, and our continuing success will be, substantially dependent upon our ability to attract and retain highly qualified executive officers, faculty and administrators and other key personnel.
If we cease to employ any of these integral personnel or fail to manage a smooth transition to new personnel, our business could suffer. Our success depends in part on our ability to update and expand the content of existing academic programs and develop new programs in a cost-effective manner and on a timely basis. Prospective employers of our graduates increasingly demand that their entry-level employees possess appropriate technological and other skills.
The update and expansion of our existing programs and the development of new programs may not be received favorably by students, prospective employers or the online education market. If we cannot respond to changes in industry requirements, our business may be adversely affected. Even if we are able to develop acceptable new programs, we may not be able to introduce these new programs as quickly as students require due to regulatory constraints or as quickly as our competitors introduce competing new programs.
Our financial performance depends in part on our ability to continue to develop awareness of the academic programs we offer among working adult students. The continued development of awareness of the academic programs we offer among working adult students is critical to the continued acceptance and growth of our programs. If we are unable to continue to develop awareness of the programs we offer, this could limit our enrollments and negatively impact our business. The following are some of the factors that could prevent us from successfully marketing our programs:.
Congressional and other governmental activities could damage the reputation of Strayer University and limit our ability to attract and retain students. Since , the U. Congress has increased its focus on proprietary educational institutions, including administration of Title IV programs, military assistance programs, and other federal programs. The Department of Education has indicated to Congress that it intends to increase its regulation of and attention to proprietary educational institutions.
And the Government Accountability Office has released several reports of investigations into proprietary educational institutions.
These and other governmental activities, including new regulations on program integrity and gainful employment, even if resulting in no adverse findings or actions against Strayer, singly or cumulatively could affect public perception of investor-funded higher education, damage the reputation of Strayer University, and limit our ability to attract and retain students.
We face strong competition in the post-secondary education market. Post-secondary education in our market area is highly competitive. We compete with traditional public and private two-year and four-year colleges, other for-profit schools and alternatives to higher education, such as employment and military service.
Public colleges may offer programs similar to those of Strayer University at a lower tuition level as a result of government subsidies, government and foundation grants, tax-deductible contributions and other financial sources not available to proprietary institutions. Some of our competitors in both the public and private sectors have substantially greater financial and other resources than we do. Congress, the Department of Education, and other agencies require increasing disclosure of information to consumers.
While we believe that Strayer University provides valuable education to its students, we cannot predict the bases on which individual students and potential students will choose among the range of educational and other options available to them. This strong competition could adversely affect our business. Strayer University relies on exclusive proprietary rights and intellectual property, and competitors may attempt to duplicate Strayer programs and methods.
Any such attempt, if successful, could adversely affect our business. In the ordinary course of its business, Strayer develops intellectual property of many kinds that is or will be the subject of copyright, trademark, service mark, patent, trade secret or other protections. Seasonal and other fluctuations in our operating results could adversely affect the trading price of our common stock. Our business is subject to seasonal fluctuations, which cause our operating results to fluctuate from quarter to quarter.
This fluctuation may result in volatility or have an adverse effect on the market price of our common stock. We experience, and expect to continue to experience, seasonal fluctuations in our revenue. Historically, our quarterly revenues and income have been lowest in the third quarter July through September because fewer students are enrolled during the summer months. We also incur significant expenses in preparing for our peak enrollment in the fourth quarter October through December , including investing in online and campus infrastructure necessary to support increased usage.
These investments result in fluctuations in our operating results which could result in volatility or have an adverse effect on the market price of our common stock. In addition, the online education market is a rapidly evolving market, and we may not be able to forecast accurately future enrollment growth and revenues. Regulatory requirements may make it more difficult to acquire us. These factors may discourage takeover attempts.
We cannot assure you that Strayer University, including its online educational platform, will be able to expand its program infrastructure on a timely basis sufficient to meet demand for its programs. A user who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations.
As a result, Strayer University may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. The personal information that we collect may be vulnerable to breach, theft or loss that could adversely affect our reputation and operations.
Possession and use of personal information in our operations subjects us to risks and costs that could harm our business. We collect, use and retain large amounts of personal information regarding our students and their families, including social security numbers, tax return information, personal and family financial data and credit card numbers. We also collect and maintain personal information of our employees in the ordinary course of our business.
Some of this personal information is held and managed by certain of our vendors. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy.
In addition, errors in the storage, use or transmission of personal information could result in a breach of student or employee privacy. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require notification of data breaches and restrict our use of personal information.
We cannot assure you that a breach, loss or theft of personal information will not occur.
A breach, theft or loss of personal information regarding our students and their families or our employees that is held by us or our vendors could have a material adverse effect on our reputation and results of operations and result in liability under state and federal privacy statutes and legal actions by state authorities and private litigants, and any of which could have a material adverse effect on our business.
Strayer University, with its online programs, operates in a highly competitive market with rapid technological changes and it may not compete successfully. Online education is a highly fragmented and competitive market that is subject to rapid technological change. Competitors vary in size and organization from traditional colleges and universities, many of which have some form of online education programs, to for-profit schools, corporate universities and software companies providing online education and training software.
We expect the online education and training market to be subject to rapid changes in technologies. We may not be able to complete or integrate any future acquisitions successfully. As part of our growth strategy, we expect to consider selective acquisitions. We cannot assure investors that we will be able to complete successfully any acquisitions on favorable terms, or that if we do, we will be able to integrate successfully the personnel, operations and technologies of any such acquisitions.
Our failure to complete or integrate successfully future acquisitions could disrupt our business and materially and adversely affect our profitability and liquidity by distracting our management and employees and increasing our expenses. If we were unable to obtain such approvals of an institution we acquired, depending on the size of that acquisition, that failure could have a material adverse effect on our business. We lease our campus and administrative facilities except for five campus facilities which we own. We evaluate current utilization of our facilities and anticipated enrollment to determine facility needs.
We do not anticipate any significant addition of campus or administrative space in From time to time, the Company is involved in litigation and other legal proceedings arising out of the ordinary course of its business. On October 15, , a putative securities class action styled Kinnett v. On April 4, , a shareholder derivative action alleging similar facts was filed in the Circuit Court of Fairfax County, Virginia, which action was voluntarily dismissed by nonsuit on June 12, There are no pending material legal proceedings to which we are subject or to which our property is subject.
Not applicable. First Quarter. Second Quarter. Third Quarter. Fourth Quarter. In addition, there are approximately 7, institutional and other holders of common stock whose shares are held in nominee accounts by brokers. Whether to declare dividends and the amount of dividends to be paid in the future will be reviewed periodically by our Board of Directors in light of our earnings, cash flow, financial condition, capital needs, investment opportunities and regulatory considerations.
There is no requirement or assurance that common dividends will be paid in the future. Peer Group Performance Graph. Index and a self-determined peer group consisting of Apollo Group, Inc. At present, there is no comparative index for the education industry. Among Strayer Education, Inc.
Index and a Peer Group. Peer Group. Index and the peer companies selected by us. In November , our Board of Directors authorized us to repurchase shares of common stock in open market purchases from time to time at the discretion of our management, depending on market conditions and other corporate considerations. Our Board of Directors amended the program on various dates, increasing the repurchase amount authorized and extending the expiration date. Our share repurchase program may be modified, suspended or terminated at any time by us without notice.
A summary of our share repurchases since the inception of the plan is as follows:. All shares repurchased were part of a publicly announced plan. The following table sets forth, for the periods and at the dates indicated, selected consolidated financial and operating data. The financial information has been derived from our consolidated financial statements. Effective during the first quarter of , we made changes in our presentation of operating expenses and reclassified prior periods to conform to the current presentation.
We determined that these changes would provide more meaningful information and increased transparency of our operations. Also effective during the first quarter of , we changed the presentation of tuition receivable and unearned tuition in our consolidated balance sheets to record tuition receivable and unearned tuition for our students upon the start of the academic term.
These changes did not affect our revenue recognition policies. All prior period amounts have been reclassified to conform to the current period presentation. Dollar and share amounts in thousands, except per share data. Income Statement Data:. Costs and expenses:. Instruction and educational support. Admissions advisory. General and administration. Income from operations. Investment and other income. Interest expense.
Income before income taxes. Provision for income taxes. Net income. Net income per share:. Weighted average shares outstanding:. Diluted a. Other Data:. Depreciation and amortization. Stock-based compensation expense. Capital expenditures. Cash dividends per common share paid :. Average enrollment b. Campuses c. Full-time employees d. In thousands. Balance Sheet Data:. Cash, cash equivalents and marketable securities. Working capital e. Total assets.
Long-term debt. Other long-term liabilities. Total liabilities. Diluted weighted average shares outstanding include common shares issued and outstanding, and the dilutive impact of restricted stock and outstanding stock options using the Treasury Stock Method. Reflects average student enrollment for the four academic terms for each year indicated. Reflects number of campuses offering classes during the fourth quarter of each year indicated.
Working capital is calculated by subtracting current liabilities from current assets. Background and Overview. We are an education services holding company that owns Strayer University. Set forth below are average enrollment, full-time tuition rates, revenues, income from operations, net income, and diluted net income per share for the last three years. Average enrollment. Full-time tuition per course. Revenues in thousands. Income from operations in thousands.
Net income in thousands. Diluted net income per share. The academic year of the University is divided into four quarters, which approximately coincide with the four quarters of the calendar year. Students make payment arrangements for the tuition for each course at the time of enrollment. Tuition revenue is recognized in the quarter of instruction.
If a student withdraws from a course prior to completion, the University refunds a portion of the tuition depending on when the withdrawal occurs. Tuition revenue is shown net of any refunds, withdrawals, corporate discounts, employee tuition discounts and scholarships. The University also derives revenue from other sources such as textbook-related income, application fees, technology fees, placement test fees, withdrawal fees, certificate revenue, and other income, which are all recognized when earned.
We record tuition receivable and unearned tuition for our students upon the start of the academic term. Based upon past experience and judgment, the University establishes an allowance for doubtful accounts with respect to accounts receivable. Any uncollected account more than six months past due is charged against the allowance. There were no changes to the total operating expenses or operating income as a result of these reclassifications.
Below is a description of the nature of the costs included in our operating expense categories:. Instruction and educational support expenses generally contain items of expense directly attributable to educational activities of the University. This expense category includes salaries and benefits of faculty and academic administrators, as well as administrative personnel who support and serve student interests. Instruction and educational support expenses also include costs of educational supplies and facilities, including rent for campus facilities, certain costs of establishing and maintaining computer laboratories and all other physical plant and occupancy costs, with the exception of costs attributable to the corporate offices.
Bad debt expense incurred on delinquent student account balances is also included in instruction and educational support expenses. Marketing expenses include the costs of advertising and production of marketing materials and related personnel costs. Admissions advisory expenses include salaries, benefits and related costs of personnel engaged in admissions. General and administration expenses include salaries and benefits of management and employees engaged in accounting, human resources, legal, regulatory compliance, and other corporate functions, along with the occupancy and other related costs attributable to such functions.
Investment income consists primarily of earnings and realized gains or losses on investments, and interest expense consists of interest incurred on our outstanding borrowings, unused revolving credit facility fees, and amortization of deferred financing costs. Critical Accounting Policies and Estimates. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities.
On an ongoing basis, management evaluates its estimates and judgments related to its allowance for doubtful accounts, income tax provisions, the useful lives of property and equipment, valuation of deferred tax assets, goodwill, and intangible assets, valuation of its interest rate swap arrangement, forfeiture rates and achievability of performance targets for stock-based compensation plans, and accrued expenses.
Management bases its estimates and judgments on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly reviews its estimates and judgments for reasonableness and may modify them in the future. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the following critical accounting policies are its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Tuition revenue is recognized as income, net of any refunds or withdrawals, in the respective quarter of instruction. Advance registrations for future quarters are recorded as unearned tuition at the start of each academic term. Any cash received prior to the start of an academic term is recorded as unearned tuition. We record estimates for our allowance for doubtful accounts for tuition receivable from students. If the financial condition of our students were to deteriorate, resulting in impairment of their ability to make required payments for tuition payable to us, additional allowances may be required.
We record estimates for certain of our accrued expenses and income tax liabilities. We estimate the useful lives of our property and equipment. We periodically assess goodwill and intangible assets for impairment. We assess the value of our interest rate swap arrangement every quarter. We periodically review our assumed forfeiture rates and ability to achieve performance targets for stock-based awards and adjust them as necessary.
Should actual results differ from our estimates, revisions to our accrued expenses, carrying amount of goodwill and intangible assets, stock-based compensation expense, and income tax liabilities may be required. New Campuses. Our goal is to serve the demand for post-secondary adult education nationwide by opening new campuses. For the last twelve years, we have pursued this goal by opening new campuses.
A new campus is typically expected to begin generating operating income on a quarterly basis after six quarters of operation, which is generally upon reaching an enrollment level of about students. Our new campus notional model assumes an increase of average enrollment by students per year until reaching a level of about 1, students.
Given the potential internal rate of return achieved with each new campus, opening new campuses is an important part of our strategy. We believe opening new campuses and having the option to attend classes on campus is important to attracting, retaining and servicing students. We believe we have sufficient capital resources from cash, cash equivalents, cash generated from operating activities and availability on our credit facility discussed below to continue to open new campuses, although we currently are not planning to open any in We opened eight new campuses in and eight in Results of Operations.
Key enrollment trends by quarter were as follows:. Academic Term. Although we do not know for sure why our recent enrollment trends and that of the proprietary higher education sector generally have been negative, we believe that sustained levels of high unemployment and the resulting lower confidence in job prospects are contributing factors. We believe it will take several quarters of new student growth in order to achieve overall enrollment growth. We cannot predict future enrollments or whether new student enrollment will decline further, stabilize or increase in response to the economy or other factors.
We can describe what we think our business model may look like financially under different enrollment scenarios. Finally, this model assumes an effective tax rate of The following table sets forth certain income statement data as a percentage of revenues for the periods indicated:. Investment income.