{"url_path":"/sec/stra/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 Financial Statements and Supplementary Data","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-27","source_url":"https://www.sec.gov/Archives/edgar/data/1013934/0001013934-26-000006-index.html","accession_number":"0001013934-26-000006","cik":"0001013934","ticker":"STRA","issuer_name":"Strategic Education, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1013934/0001013934-26-000006-index.html","primary_entity_key":"0001013934","primary_entity_name":"Strategic Education, Inc."},"word_count":27573,"has_tables":true,"body_markdown":"Item 8.    Financial Statements and Supplementary Data\n\nINDEX TO CONSOLIDATED FINANCIAL STATEMENTS\n\n Page\n\nStrategic Education, Inc. \n\n[Report of](#i8f80a9a4601c45bfaeb6727ac654564b_67)[Deloitte & Touche LLP,](#i8f80a9a4601c45bfaeb6727ac654564b_67)[Independent Registered Public Accounting Firm ](#i8f80a9a4601c45bfaeb6727ac654564b_67)(PCAOB ID: 34)\n\n[74](#i8f80a9a4601c45bfaeb6727ac654564b_67)\n\n[Report of](#i8f80a9a4601c45bfaeb6727ac654564b_1602)[Pricewaterhouse](#i8f80a9a4601c45bfaeb6727ac654564b_1602)[Coopers LLP,](#i8f80a9a4601c45bfaeb6727ac654564b_1602)[Independent Registered Public Accounting Firm](#i8f80a9a4601c45bfaeb6727ac654564b_1602) (PCAOB ID: 238)\n\n[76](#i8f80a9a4601c45bfaeb6727ac654564b_1602)\n\n[Consolidated Balance Sheets as of December 31, 202](#i8f80a9a4601c45bfaeb6727ac654564b_70)[4](#i8f80a9a4601c45bfaeb6727ac654564b_70)[and 202](#i8f80a9a4601c45bfaeb6727ac654564b_70)[5](#i8f80a9a4601c45bfaeb6727ac654564b_70)[ ](#i8f80a9a4601c45bfaeb6727ac654564b_70)\n\n[77](#i8f80a9a4601c45bfaeb6727ac654564b_70)\n\n[Consolidated Statements of Income for each of the three years in the period ended December 31, 202](#i8f80a9a4601c45bfaeb6727ac654564b_73)[5](#i8f80a9a4601c45bfaeb6727ac654564b_73)[ ](#i8f80a9a4601c45bfaeb6727ac654564b_73)\n\n[78](#i8f80a9a4601c45bfaeb6727ac654564b_73)\n\n[Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 202](#i8f80a9a4601c45bfaeb6727ac654564b_76)[5](#i8f80a9a4601c45bfaeb6727ac654564b_76)\n\n[78](#i8f80a9a4601c45bfaeb6727ac654564b_76)\n\n[Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 202](#i8f80a9a4601c45bfaeb6727ac654564b_79)[5](#i8f80a9a4601c45bfaeb6727ac654564b_79)[ ](#i8f80a9a4601c45bfaeb6727ac654564b_79)\n\n[79](#i8f80a9a4601c45bfaeb6727ac654564b_79)\n\n[Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 202](#i8f80a9a4601c45bfaeb6727ac654564b_82)[5](#i8f80a9a4601c45bfaeb6727ac654564b_82) \n\n[80](#i8f80a9a4601c45bfaeb6727ac654564b_82)\n\n[Notes to Consolidated Financial Statements ](#i8f80a9a4601c45bfaeb6727ac654564b_85)\n\n[81](#i8f80a9a4601c45bfaeb6727ac654564b_85)\n\nAll other schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.\n\n73\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\nTo the stockholders and the Board of Directors of Strategic Education, Inc.\n\nOpinion on the Financial Statements\n\nWe have audited the accompanying consolidated balance sheet of Strategic Education, Inc. and subsidiaries (the “Company”) as of December 31, 2025, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.\n\nWe have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2026, expressed an unqualified opinion on the Company’s internal control over financial reporting.\n\nBasis for Opinion\n\nThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\nCritical Audit Matter\n\nThe critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.\n\nLearn and Earn Scholarship Liability related to Undergraduate Degree Programs — Refer to Note 3 to the financial statements\n\nCritical Audit Matter Description\n\nThe Company offers the Learn and Earn Scholarship (formerly known as the Graduation Fund), which allows undergraduate students to earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program. Students registering in credit-bearing courses in any undergraduate degree program receive one free course for every three courses that the student successfully completes. The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs. The portion of the Learn and Earn Scholarship liability balance related to students enrolled in undergraduate degree programs was $37.8 million as of December 31, 2025.\n\nWe identified the Learn and Earn Scholarship liability as a critical audit matter because estimating credits to be redeemed in the future involves significant estimation by management using a high volume of historical information. This required an increased audit effort due to the volume of historical information when performing audit procedures to evaluate whether the Learn and Earn Scholarship liability was appropriately recorded as of December 31, 2025.\n\n74\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nHow the Critical Audit Matter Was Addressed in the Audit\n\nOur audit procedures related to the Learn and Earn Scholarship liability for undergraduate degree programs included the following, among others:\n\n•We tested the effectiveness of controls over management’s estimation of the Learn and Earn Scholarship liability for undergraduate degree programs, including those related to management’s methodology and the deferred value of credits estimated to be redeemed in the future.\n\n•We evaluated the appropriateness of the methodology used by management to determine the Learn and Earn Scholarship liability for undergraduate degree programs.\n\n•We tested the completeness and accuracy of the underlying information used to determine the Learn and Earn Scholarship liability for undergraduate degree programs.\n\n•We recalculated the deferred value of credits estimated to be redeemed in the future used to determine the Learn and Earn Scholarship liability for undergraduate degree programs.\n\n/s/ Deloitte & Touche LLP\n\nMcLean, Virginia\n\nFebruary 27, 2026\n\nWe have served as the Company’s auditor since 2025.\n\n75\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nReport of Independent Registered Public Accounting Firm\n\nTo the Board of Directors and Stockholders of Strategic Education, Inc.\n\nOpinion on the Financial Statements\n\nWe have audited the consolidated balance sheet of Strategic Education, Inc. and its subsidiaries (the “Company”) as of December 31, 2024, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the two years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.\n\nBasis for Opinion\n\nThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.\n\nOur audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n/s/ PricewaterhouseCoopers LLP\n\nWashington, District of Columbia\n\nFebruary 27, 2025\n\nWe served as the Company’s auditor from 1993 to 2024.\n\n76\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nSTRATEGIC EDUCATION, INC.\n\nCONSOLIDATED BALANCE SHEETS\n\n(in thousands, except share and per share data)\n\n December 31, 2024December 31, 2025\n\nASSETS\n\nCurrent assets:\n\nCash and cash equivalents$137,074 $140,757 \n\nMarketable securities46,949 7,297 \n\nTuition receivable, net76,127 78,202 \n\nIncome taxes receivable— 2,511 \n\nOther current assets44,793 49,090 \n\nTotal current assets304,943 277,857 \n\nProperty and equipment, net111,247 107,373 \n\nRight-of-use lease assets103,673 91,140 \n\nMarketable securities, non-current14,981 5,000 \n\nIntangible assets245,098 249,243 \n\nGoodwill1,206,883 1,242,413 \n\nOther assets62,910 65,514 \n\nTotal assets$2,049,735 $2,038,540 \n\nLIABILITIES & STOCKHOLDERS’ EQUITY\n\nCurrent liabilities:\n\nAccounts payable and accrued expenses$101,749 $105,791 \n\nIncome taxes payable2,926 — \n\nContract liabilities89,563 96,247 \n\nLease liabilities22,222 15,905 \n\nTotal current liabilities216,460 217,943 \n\nDeferred income tax liabilities27,586 35,835 \n\nLease liabilities, non-current103,004 93,216 \n\nOther long-term liabilities40,186 45,140 \n\nTotal liabilities387,236 392,134 \n\nCommitments and contingencies\n\nStockholders’ equity:\n\nCommon stock, par value $0.01; 32,000,000 shares authorized; 24,502,385 and 22,968,860 shares issued and outstanding at December 31, 2024 and 2025, respectively\n245 230 \n\nAdditional paid-in capital1,532,414 1,436,795 \n\nAccumulated other comprehensive loss(88,565)(46,115)\n\nRetained earnings218,405 255,496 \n\nTotal stockholders’ equity1,662,499 1,646,406 \n\nTotal liabilities and stockholders’ equity$2,049,735 $2,038,540 \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\n77\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nSTRATEGIC EDUCATION, INC.\n\nCONSOLIDATED STATEMENTS OF INCOME\n\n(in thousands, except per share data)\n\nFor the Year Ended December 31,\n\n202320242025\n\nRevenues$1,132,924 $1,219,930 $1,268,220 \n\nCosts and expenses:\n\nInstructional and support costs623,903 650,496 647,111 \n\nGeneral and administration384,443 412,158 424,969 \n\nAmortization of intangible assets11,457 — — \n\nMerger and integration costs1,544 — — \n\nRestructuring costs16,256 1,648 21,909 \n\nTotal costs and expenses1,037,603 1,064,302 1,093,989 \n\nIncome from operations95,321 155,628 174,231 \n\nOther income5,405 5,804 3,162 \n\nIncome before income taxes100,726 161,432 177,393 \n\nProvision for income taxes30,935 48,748 50,779 \n\nNet income$69,791 $112,684 $126,614 \n\nEarnings per share:\n\nBasic$2.98 $4.81 $5.57 \n\nDiluted$2.91 $4.67 $5.41 \n\nWeighted average shares outstanding:\n\nBasic23,403 23,406 22,749 \n\nDiluted23,956 24,140 23,402 \n\nSTRATEGIC EDUCATION, INC.\n\nCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME\n\n(in thousands)\n\nFor the Year Ended December 31,\n\n202320242025\n\nNet income$69,791 $112,684 $126,614 \n\nOther comprehensive income (loss):\n\nForeign currency translation adjustments533 (54,564)42,669 \n\nUnrealized gains (losses) on marketable securities, net of tax288 246 (219)\n\nComprehensive income$70,612 $58,366 $169,064 \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\n78\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nSTRATEGIC EDUCATION, INC.\n\nCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY\n\n(in thousands, except share data)\n\nCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated\nOther Comprehensive Income (Loss)Total\n\nSharesPar Value\n\nBalance at December 31, 202224,402,891 $244 $1,510,924 $159,690 $(35,068)$1,635,790 \n\nStock-based compensation— — 19,557 215 — 19,772 \n\nExercise of stock options4,138 — 223 — — 223 \n\nIssuance of restricted stock, net128,860 1 (5,048)— — (5,047)\n\nRepurchase of common stock(129,073)(1)(8,006)(2,006)— (10,013)\n\nCommon stock dividends ($2.40 per share)\n— — — (58,819)— (58,819)\n\nForeign currency translation adjustment— — — — 533 533 \n\nUnrealized gains on marketable securities, net of tax— — — — 288 288 \n\nNet income— — — 69,791 — 69,791 \n\nBalance at December 31, 202324,406,816 $244 $1,517,650 $168,871 $(34,247)$1,652,518 \n\nStock-based compensation— — 25,571 — — 25,571 \n\nExercise of stock options8,056 — 512 — — 512 \n\nIssuance of restricted stock, net207,439 2 (3,833)— — (3,831)\n\nRepurchase of common stock(119,926)(1)(7,486)(4,051)— (11,538)\n\nCommon stock dividends ($2.40 per share)\n— — — (59,099)— (59,099)\n\nForeign currency translation adjustment— — — — (54,564)(54,564)\n\nUnrealized gains on marketable securities, net of tax— — — — 246 246 \n\nNet income— — — 112,684 — 112,684 \n\nBalance at December 31, 202424,502,385 $245 $1,532,414 $218,405 $(88,565)$1,662,499 \n\nStock-based compensation— — 22,904 50 — 22,954 \n\nExercise of stock options4,898 — 306 — — 306 \n\nIssuance of restricted stock, net169,945 2 (10,027)— — (10,025)\n\nRepurchase of common stock(1,708,368)(17)(108,802)(32,257)— (141,076)\n\nCommon stock dividends ($2.40 per share)\n— — — (57,316)— (57,316)\n\nForeign currency translation adjustment— — — — 42,669 42,669 \n\nUnrealized losses on marketable securities, net of tax— — — — (219)(219)\n\nNet income— — — 126,614 — 126,614 \n\nBalance at December 31, 202522,968,860 $230 $1,436,795 $255,496 $(46,115)$1,646,406 \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\n79\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nSTRATEGIC EDUCATION, INC.\n\nCONSOLIDATED STATEMENTS OF CASH FLOWS\n\n(in thousands)\n\nFor the Year Ended December 31,\n\n202320242025\n\nCash flows from operating activities:\n\nNet income$69,791 $112,684 $126,614 \n\nAdjustments to reconcile net income to net cash provided by operating activities:\n\nGain on sale of property and equipment(2,136)— — \n\nGain on early termination of operating leases(141)(6,166)(2,196)\n\nAmortization of deferred financing costs557 674 425 \n\nAmortization of investment discount/premium(65)(290)(432)\n\nDepreciation and amortization57,313 44,378 48,410 \n\nDeferred income taxes(6,322)(150)7,733 \n\nStock-based compensation19,772 25,571 22,954 \n\nImpairment of right-of-use lease assets5,135 677 4,685 \n\nChanges in assets and liabilities:\n\nTuition receivable, net(12,874)221 (1,086)\n\nOther assets(7,631)(11,622)(7,593)\n\nAccounts payable and accrued expenses552 11,577 4,222 \n\nIncome taxes payable and income taxes receivable(4,688)1,067 (5,563)\n\nContract liabilities4,495 (2,948)6,062 \n\nOther liabilities(6,639)(6,342)(6,037)\n\nNet cash provided by operating activities117,119 169,331 198,198 \n\nCash flows from investing activities:\n\nPurchases of property and equipment(36,943)(40,580)(44,252)\n\nPurchases of marketable securities(26,905)(54,117)(28,094)\n\nProceeds from marketable securities9,800 31,025 79,078 \n\nProceeds from sale of property and equipment5,890 — 2,200 \n\nProceeds from other investments457 20 — \n\nOther investments(314)(531)(390)\n\nCash paid for acquisition, net of cash acquired(530)(177)(36)\n\nNet cash provided by (used in) investing activities(48,545)(64,360)8,506 \n\nCash flows from financing activities:\n\nCommon dividends paid(58,780)(58,971)(57,543)\n\nPayments on long-term debt(40,000)(61,275)— \n\nNet payments for stock awards(4,828)(3,318)(9,720)\n\nPayments of deferred financing costs— (1,698)— \n\nRepurchase of common stock(9,999)(11,510)(138,892)\n\nNet cash used in financing activities(113,607)(136,772)(206,155)\n\nEffect of exchange rate changes on cash, cash equivalents, and restricted cash(496)(3,468)2,306 \n\nNet increase (decrease) in cash, cash equivalents, and restricted cash(45,529)(35,269)2,855 \n\nCash, cash equivalents, and restricted cash — beginning of period227,454 181,925 146,656 \n\nCash, cash equivalents, and restricted cash — end of period$181,925 $146,656 $149,511 \n\nNon-cash transactions:\n\nNon-cash additions to property and equipment$3,066 $2,488 $2,741 \n\nThe accompanying notes are an integral part of these consolidated financial statements.\n\n80\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n1.    Nature of Operations\n\nStrategic Education, Inc. (“Strategic Education” or the “Company”), a Maryland corporation, 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. Strategic Education’s portfolio of companies is dedicated to closing the skills gap by placing adults on the most direct path between learning and employment.\n\nThe accompanying consolidated financial statements and footnotes include the results of the Company’s three reportable segments: (1) U.S. Higher Education (“USHE”), which is primarily comprised of Capella University and Strayer University and is focused on providing flexible and affordable certificate and degree programs to working adults; (2) Education Technology Services (“ETS”), which primarily develops and maintains relationships with employers to build education benefits programs that provide employees access to affordable and industry-relevant training, certificate, and degree programs, including through Workforce Edge, a full-service education benefits administration solution for employers, and Sophia Learning, which offers low-cost online general education-level courses; and (3) Australia/New Zealand (“ANZ”), which through Torrens University and associated assets, provides certificate and degree programs in Australia and New Zealand. The Company’s reportable segments are discussed further in Note 20.\n\n2.    Significant Accounting Policies\n\nFinancial Statement Presentation\n\nThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidated financial statements. Certain amounts in the prior periods have been reclassified to conform to the current period’s presentation.\n\nBelow is a description of the nature of the costs included in the Company’s operating expense categories.\n\nInstructional and support costs generally contain items of expense directly attributable to activities that support students. This expense category includes salaries and benefits of faculty and academic administrators, as well as admissions and administrative personnel who support and serve student interests. Instructional and support costs also include course development costs and costs associated with delivering course content, including educational supplies, facilities, 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 instructional and support costs.\n\nGeneral and administration expenses include salaries and benefits of management and employees engaged in finance, human resources, legal, regulatory compliance, marketing and other corporate functions. Also included are the costs of advertising and production of marketing materials. General and administration expense also includes the facilities occupancy and other related costs attributable to such functions.\n\nAmortization of intangible assets consists of amortization and depreciation expense related to intangible assets and software assets acquired through the Company’s acquisition of Torrens University and associated assets in Australia and New Zealand (“ANZ”).\n\nMerger and integration costs include integration expenses associated with the Company’s acquisition of ANZ.\n\nRestructuring costs include severance and other personnel-related expenses from voluntary and involuntary employee terminations, asset impairment charges, gains/losses on sale of real estate and early termination of leased facilities, and other costs associated with the Company’s restructuring activities. See Note 4 for additional information.\n\nForeign Currency Translation and Transaction Gains and Losses\n\nThe United States Dollar (“USD”) is the functional currency of the Company and its subsidiaries operating in the United States. The financial statements of its foreign subsidiaries are maintained in their functional currencies. The functional currency of each of the foreign subsidiaries is the currency of the economic environment in which the subsidiary primarily does business. Financial statements of foreign subsidiaries are translated into USD using the exchange rates applicable to the dates of the financial statements. Assets and liabilities are translated into USD using the period-end spot foreign exchange rates. Income and expenses are translated at the weighted-average exchange rates in effect during the period. Equity accounts are translated at historical exchange rates. The effects of these translation adjustments are reported as a component of accumulated other comprehensive income (loss) within stockholders’ equity.\n\n81\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nFor any transaction that is in a currency different from the entity’s functional currency, the Company records a net gain or loss based on the difference between the exchange rate at the transaction date and the exchange rate at the transaction settlement date (or rate at period end, if unsettled) in the consolidated statements of income.\n\nCash and Cash Equivalents\n\nCash and cash equivalents consist of cash maintained in mostly FDIC-insured bank accounts and cash invested in money market mutual funds, bank overnight deposits, and U.S. treasury bills. The Company places its cash and temporary cash investments with various financial institutions. The Company considers all highly liquid instruments purchased with a maturity of three months or less at the date of purchase to be cash equivalents.\n\nConcentration of Credit Risk\n\nMost cash and cash equivalent balances are in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash and cash equivalents.\n\nRestricted Cash\n\nIn the United States, a significant portion of the Company’s revenues are funded by various federal and state government programs. The Company generally does not receive funds from these programs prior to the start of the corresponding academic term. The Company may be required to return certain funds for students who withdraw from a U.S. higher education institution during the academic term. The Company had approximately $1.8 million and $0.3 million of these unpaid obligations as of December 31, 2024 and 2025, respectively. In Australia and New Zealand, advance tuition payments from international students are required to be restricted until a student commences his or her course. In addition, a portion of tuition prepayments from students enrolled in a vocational education and training program are held in trust by a third party law firm to adhere to tuition protection requirements. As of December 31, 2024 and 2025, the Company had approximately $7.3 million and $8.0 million, respectively, of restricted cash related to these requirements in Australia and New Zealand. These balances are recorded as restricted cash and included in other current assets in the consolidated balance sheets.\n\nAs part of conducting operations in Pennsylvania, the Company is required to maintain a “minimum protective endowment” of at least $0.5 million in an interest-bearing account as long as the Company operates its campuses in the state. The Company holds these funds in an interest-bearing account, which is included in other assets.\n\nThe following table illustrates the reconciliation of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows as of December 31, 2024 and 2025 (in thousands):\n\n As of December 31,\n\n 20242025\n\nCash and cash equivalents$137,074 $140,757 \n\nRestricted cash included in other current assets9,082 8,254 \n\nRestricted cash included in other assets500 500 \n\nTotal cash, cash equivalents, and restricted cash shown in the statement of cash flows$146,656 $149,511 \n\nMarketable Securities\n\nInvestments in marketable securities are carried at either amortized cost or fair value. Investments in marketable securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in marketable securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Management determines the appropriate designation of marketable securities at the time of purchase and re-evaluates such designation as of each balance sheet date. All of the Company’s marketable securities are designated as either held-to-maturity or available-for-sale.\n\nThe Company’s held-to-maturity marketable securities consist of term deposits, U.S. treasury securities, and corporate debt securities, which are carried at amortized cost. The Company’s available-for-sale marketable securities consisted of corporate debt securities, which were carried at fair value as determined by quoted market prices or other inputs either directly or indirectly observable in the marketplace for identical or similar assets, with unrealized gains and losses, net of tax, recognized as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Management reviews the fair value of the portfolio at least quarterly, and evaluates individual securities with fair value below amortized cost at the balance sheet date for impairment. In order to determine whether there is an impairment, management evaluates whether the Company\n\n82\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nintends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis.\n\nIf management intends to sell an impaired debt security, or it is more likely than not the Company will be required to sell the security prior to recovering its amortized cost basis, an impairment is deemed to have occurred. The amount of an impairment related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The amount of an impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of accumulated other comprehensive income (loss) within stockholders’ equity.\n\nThe cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income and realized gains and losses are included in other income. The contractual maturity date of available-for-sale securities is based on the days remaining to the effective maturity. The Company classifies marketable securities as either current or non-current assets based on management’s intent with regard to usage of those funds, which is dependent upon the security’s maturity date and liquidity considerations based on current market conditions. If management intends to hold the securities for longer than one year as of the balance sheet date, they are classified as non-current.\n\nTuition Receivable and Allowance for Credit Losses\n\nThe Company records tuition receivable and contract liabilities for its students upon the start of the academic term or program. Tuition receivables are not collateralized; however, credit risk is minimized as a result of the diverse nature of the Company’s student bases and through the participation of the majority of the students in federally funded financial aid programs. An allowance for credit losses is established based upon historical collection rates by age of receivable and adjusted for reasonable expectations of future collection performance, net of estimated recoveries. These collection rates incorporate historical performance based on a student’s current enrollment status, likelihood of future enrollment, degree mix trends and changes in the overall economic and regulatory environment. In the event that current collection trends differ from historical trends, an adjustment is made to the allowance for credit losses and bad debt expense.\n\nThe Company’s current tuition receivable and allowance for credit losses were as follows as of December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nTuition receivable$127,012 $127,634 \n\nAllowance for credit losses(50,885)(49,432)\n\nTuition receivable, net$76,127 $78,202 \n\nAn additional $7.0 million and $6.2 million of tuition receivable, net, are included in other assets as of December 31, 2024 and 2025, respectively, because these amounts are expected to be collected after 12 months.\n\nThe following table illustrates changes in the Company’s current and non-current allowance for credit losses for each of the three years ended December 31, 2025 (in thousands):\n\n 202320242025\n\nAllowance for credit losses, beginning of period$47,586 $47,605 $46,185 \n\nAdditions charged to expense48,444 53,491 52,671 \n\nWrite-offs, net of recoveries(48,425)(54,911)(53,391)\n\nAllowance for credit losses, end of period$47,605 $46,185 $45,465 \n\nProperty and Equipment\n\nProperty and equipment are stated at cost, less accumulated depreciation and amortization. In accordance with Accounting Standards Codification (“ASC”) 360 Property, Plant, and Equipment, the carrying values of the Company’s assets are re-evaluated when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on expected undiscounted future cash flows, then a loss is recognized using a fair value-based model. During the years ended December 31, 2023, 2024, and 2025, the Company recognized $0.4 million, $0.2 million and $2.6 million, respectively, of impairment charges related to property and equipment, which is included in Restructuring costs on the consolidated statements of income.\n\n83\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nDepreciation and amortization of property and equipment is calculated using the straight-line method over the estimated useful lives ranging from three years to 40 years. Depreciation and amortization expense of property and equipment was $48.4 million, $44.4 million and $48.4 million for the years ended December 31, 2023, 2024, and 2025, respectively. Included in the 2023 depreciation and amortization expense amount is $2.6 million of depreciation expense related to content acquired in the ANZ acquisition, which is included in Amortization of intangible assets on the consolidated statements of income. Repairs and maintenance costs are expensed as incurred.\n\nIn recent years, the Company has evaluated its owned and leased real estate portfolio to identify underutilized facilities to either downsize or exit. As a result of this evaluation, the Company sold one owned U.S. Higher Education campus in 2023 and one in 2025. The Company sold the related long-lived assets, consisting of land, buildings, and building improvements, and recognized a $2.1 million gain on sale during the year ended December 31, 2023 and a $0.3 million loss on sale during the year ended December 31, 2025. These amounts are included in Restructuring costs on the consolidated statements of income.\n\nProperty and equipment includes costs of computer software developed for internal use, which is accounted for in accordance with ASC 350-40, Internal-Use Software. Computer software development costs that are incurred in the preliminary project stage are expensed as incurred. During the development stage, direct consulting costs, payroll, and payroll-related costs for employees that are directly associated with the project are capitalized and amortized over the estimated useful life of the software once placed into operation.\n\nPurchases of property and equipment and changes in accounts payable for each of the three years in the period ended December 31, 2025 in the consolidated statements of cash flows have been adjusted to exclude non-cash purchases of property and equipment transactions during that period.\n\nDeferred Costs\n\nThe Company defers certain commissions earned by third party international agents that are considered incremental and recoverable costs of obtaining a contract with customers in the Australia/New Zealand segment. These costs are amortized over the period of benefit which ranges from one to two years. The Company also defers implementation costs incurred in cloud computing arrangements and amortizes these costs over the term of the arrangement.\n\nLeases\n\nThe Company determines if an arrangement is a lease at inception. The Company analyzes each lease agreement to determine whether it should be classified as a finance lease or operating lease. Leases with an initial term longer than 12 months are included in right-of-use (“ROU”) lease assets, lease liabilities, and lease liabilities, non-current on the Company’s consolidated balance sheets. The Company combines lease and non-lease components for all leases.\n\nROU lease assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU lease assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the implicit interest rate for most of the Company’s leases cannot be readily determined, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term for operating leases.\n\nLeases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company subleases certain building space to third parties and sublease income is recognized on a straight-line basis over the lease term. See Note 7 for additional information.\n\nFair Value\n\nASC 820-10, Fair Value Measurement, establishes a framework for measuring fair value, establishes a fair value hierarchy based upon the observability of inputs used to measure fair value, and expands disclosures about fair value measurements. Assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Under ASC 820-10, fair value of an investment is the price that would be received to sell an asset or to transfer a liability to an entity in an orderly transaction between market participants at the measurement date. The hierarchy gives the highest priority to assets and liabilities with readily available quoted prices in an active market and lowest priority to unobservable inputs, which require a higher degree of judgment when measuring fair value, as follows:\n\n•Level 1 assets or liabilities use quoted prices in active markets for identical assets or liabilities as of the measurement date;\n\n84\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n•Level 2 assets or liabilities use observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities; and\n\n•Level 3 assets or liabilities use unobservable inputs that are supported by little or no market activity.\n\nThe Company’s assets and liabilities that are subject to fair value measurement are categorized in one of the three levels above. Fair values are based on the inputs available at the measurement dates, and may rely on certain assumptions that may affect the valuation of fair value for certain assets or liabilities.\n\nGoodwill and Intangible Assets\n\nGoodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed in a business combination. Indefinite-lived intangible assets, which include trade names, are recorded at fair value on their acquisition date. An indefinite life was assigned to the trade names because they have the continued ability to generate cash flows indefinitely.\n\nGoodwill and the indefinite-lived intangible assets are assessed at least annually for impairment on the first day of the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit or indefinite-lived intangible asset below its carrying amount. The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available, and management regularly reviews the operating results of those components.\n\nThe Company’s goodwill impairment test includes an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on the qualitative assessment, or that a qualitative assessment should not be performed for a reporting unit, the Company proceeds with performing a quantitative goodwill impairment test. In performing the quantitative goodwill impairment test, the Company compares the fair value of the reporting unit to the carrying value of its net assets. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit, goodwill is not impaired and no further testing is required. If the carrying value of the net assets of the reporting unit exceeds the fair value of the reporting unit, an impairment loss is recognized to the extent the fair value of the reporting unit is less than the carrying value of the reporting unit’s net assets.\n\nFinite-lived intangible assets acquired in business combinations are recorded at fair value on their acquisition dates and are amortized on a straight-line basis over the estimated useful life of the asset. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amount of the assets exceeds the fair value of the assets. Finite-lived intangible assets consisted of student relationships, which were all fully amortized by the end of 2023.\n\nAuthorized Stock\n\nThe Company has authorized 32,000,000 shares of common stock, par value $0.01, of which 24,502,385 and 22,968,860 shares were issued and outstanding as of December 31, 2024 and 2025, respectively. The Company has authorized 8,000,000 shares of preferred stock, none of which is issued or outstanding. Before any preferred stock may be issued, the Board of Directors must establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and the terms or conditions of the redemption of the preferred stock.\n\nThe Board of Directors declared a quarterly cash dividend of $0.60 per common share for each quarter of 2025. The Company paid these quarterly cash dividends in March, June, September and December of 2025.\n\nAdvertising Costs\n\nThe Company expenses advertising costs in the quarter incurred. Advertising costs were $185.0 million, $186.3 million and $192.4 million for the years ended December 31, 2023, 2024, and 2025, respectively, and are included within General and administration expense on the consolidated statements of income.\n\nStock-Based Compensation\n\nIn accordance with ASC 718, Stock Compensation, the Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employee stock options, restricted stock, restricted stock units, performance stock units, and employee stock purchases related to the Company’s Employee Stock Purchase Plan,\n\n85\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nbased on estimated fair values. The fair value of restricted stock awards granted is measured using the fair value of the Company’s common stock on the date of grant or the most recent modification date, whichever is later. The Company records compensation expense for all share-based payment awards ratably over the vesting period. For awards with graded vesting, the Company measures fair value and records compensation expense separately for each vesting tranche. Stock-based compensation expense recognized in the consolidated statements of income for each of the three years in the period ended December 31, 2025 is based on awards ultimately expected to vest and, therefore, has been adjusted for estimated forfeitures. The Company estimates forfeitures at the time of grant and revises the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate used is based on historical experience. The Company also assesses the likelihood that performance criteria associated with performance-based awards will be met. If it is determined that it is more likely than not that performance criteria will not be achieved, the Company revises its estimate of the number of shares it believes will ultimately vest. Refer to Note 15 for additional information.\n\nNet Income Per Share\n\nBasic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options, restricted stock, and restricted stock units (“stock awards”). The dilutive effect of stock awards was determined using the treasury stock method. Under the treasury stock method, the following are assumed to be used to repurchase shares of the Company’s common stock: (1) the proceeds received from the exercise of stock options, and (2) the amount of compensation cost associated with the stock awards for future service not yet recognized by the Company. Stock awards are excluded from the computation of diluted earnings per share when their effect would be anti-dilutive.\n\nSet forth below is a reconciliation of shares used to calculate basic and diluted earnings per share for each of the three years ended December 31, 2025 (in thousands):\n\n 202320242025\n\nWeighted average shares outstanding used to compute basic earnings per share23,403 23,406 22,749 \n\nIncremental shares issuable upon the assumed exercise of stock options4 5 1 \n\nUnvested restricted stock and restricted stock units549 729 652 \n\nShares used to compute diluted earnings per share23,956 24,140 23,402 \n\nAnti-dilutive shares excluded from the diluted earnings per share calculation174 — 212 \n\nComprehensive Income\n\nComprehensive income includes net income and all changes in the Company’s equity during a period from non-owner sources, which for the Company consists of foreign currency translation adjustments and unrealized gains and losses on available-for-sale marketable securities, net of tax. As of December 31, 2023, 2024, and 2025, the balance of accumulated other comprehensive loss was $34.2 million, net of tax of $0.1 million, $88.6 million, net of tax of $0.1 million, and $46.1 million, respectively. There were no reclassifications out of accumulated other comprehensive income (loss) to net income for the years ended December 31, 2023 and 2024. During the year ended December 31, 2025, approximately $0.2 million, net of tax of $0.1 million, of unrealized gains (losses) on marketable securities was reclassified out of accumulated other comprehensive income (loss) to Other income on the consolidated statements of income.\n\nIncome Taxes\n\nThe Company provides for deferred income taxes based on temporary differences between financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized.\n\nASC 740, Income Taxes, requires the company to determine whether uncertain tax positions should be recognized within the Company’s financial statements. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. Uncertain tax positions are recognized when a tax position, based solely on its technical merits, is determined more likely than not to be sustained upon examination. Upon determination, uncertain tax positions are measured to determine the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority\n\n86\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nthat has full knowledge of all relevant information. A tax position is derecognized if it no longer meets the more likely than not threshold of being sustained.\n\nThe tax years since 2022 remain open for federal tax examination, the tax years since 2021 remain open to examination by certain states, and the tax years since 2020 remain open to examination by foreign taxing jurisdictions in which the Company is subject to taxation.\n\nIn December 2021, the Organization for Economic Cooperation and Development (“OECD”) introduced Pillar Two Model Rules to establish a global minimum tax rate of 15% on a per-country basis. Countries where the Company operates, such as Australia and New Zealand, have enacted domestic legislation to implement these global corporate minimum tax rules for fiscal years beginning after January 1, 2024, and January 1, 2025, respectively. The Company has evaluated the impact of the OECD’s Pillar Two framework on its financial statements and determined that Pillar Two did not have a material impact on its 2025 financial statements. We remain compliant with all relevant regulations and will continue to monitor any future developments that may affect our financial reporting.\n\nOther Investments\n\nThe Company holds investments in certain limited partnerships that invest in innovative companies in the health care and education-related technology fields. The Company accounts for the investments in limited partnerships under the equity method. The Company’s pro-rata share in the net income (loss) of the limited partnerships is included in Other income on the consolidated statements of income. The Company also holds investments accounted for at cost less impairment as these investments do not have readily determinable fair value.\n\nUse of Estimates\n\nThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the period reported. The most significant management estimates include allowances for credit losses, useful lives of property and equipment and intangible assets, incremental borrowing rates, potential sublease income and vacancy periods, accrued expenses, forfeiture rates and the likelihood of achieving performance criteria for stock-based awards, value of free courses earned by students that will be redeemed in the future, valuation of goodwill and intangible assets, and the provision for income taxes. Actual results could differ from those estimates.\n\nRecently Adopted Accounting Pronouncements\n\nIn December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of specific categories in the effective tax rate reconciliation. Further, the standard requires certain disclosures of state versus federal income tax expense and taxes paid. The Company adopted ASU 2023-09 for its annual reporting period ended on December 31, 2025 and applied the amendments prospectively. See Note 19 for the required income tax disclosures.\n\nRecently Issued Accounting Standards Not Yet Adopted\n\nIn November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires the disclosure of amounts related to purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion within each income statement expense line item that contains any of these expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted, and the amendments can be applied prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its consolidated financial statement disclosures.\n\nIn September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 eliminates the existing guidance that categorizes software development into distinct project stages and replaces it with a recognition threshold based on management’s authorization and commitment to fund the project, along with the probability of completion and intended use. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual periods. Early adoption is permitted, and the amendments can be applied prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2025-06 will have on its consolidated financial statements and related disclosures.\n\n87\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nOther ASUs recently issued by the FASB but not yet effective are not expected to have a material effect on the Company’s consolidated financial statements.\n\n3.    Revenue Recognition\n\nThe Company’s revenues primarily consist of tuition revenue arising from educational services provided in the form of classroom instruction and online courses. Tuition revenue is deferred and recognized ratably over the period of instruction, which varies depending on the course format and chosen program of study. Capella University’s GuidedPath classes and Strayer University’s educational programs typically are offered on a quarterly basis, and such periods coincide with the Company’s quarterly financial reporting periods, while Capella University’s FlexPath courses are delivered over a twelve-week subscription period. Torrens University offers the majority of its education programs on a trimester system having three primary academic terms, which all occur within the calendar year.\n\nThe following table presents the Company’s revenues from contracts with customers disaggregated by material revenue category for the years ended December 31, 2023, 2024, and 2025 (in thousands):\n\n 202320242025\n\nU.S. Higher Education Segment   \n\nTuition, net of discounts, grants and scholarships$784,066 $820,913 $830,061 \n\nOther(1)\n34,887 36,977 38,178 \n\nTotal U.S. Higher Education Segment818,953 857,890 868,239 \n\nAustralia/New Zealand Segment\n\nTuition, net of discounts, grants and scholarships226,393 249,336 245,513 \n\nOther(1)\n7,125 7,783 6,071 \n\nTotal Australia/New Zealand Segment233,518 257,119 251,584 \n\nEducation Technology Services Segment(2)\n80,453 104,921 148,397 \n\nConsolidated revenue$1,132,924 $1,219,930 $1,268,220 \n\n___________________________________________________________\n\n(1)Other revenue is primarily comprised of academic fees, sales of course materials, placement fees and other non-tuition revenue streams.\n\n(2)Education Technology Services revenue is primarily derived from tuition revenue and administrative fees.\n\nRevenues are recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods and services. The Company applies the five-step revenue model under ASC 606, Revenue Recognition (“ASC 606”) to determine when revenue is earned and recognized.\n\nArrangements with students may have multiple performance obligations. For such arrangements, the Company allocates net tuition revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers and observable market prices. The standalone selling price of material rights to receive free classes or scholarships in the future is estimated based on class tuition prices or amounts of scholarships, and likelihood of redemption based on historical student attendance and completion behavior.\n\nAt the start of each academic term or program, a contract liability is recorded for academic services to be provided, and a tuition receivable is recorded for the portion of the tuition not paid in advance. Any cash received prior to the start of an academic term or program is recorded as a contract liability. Some students may be eligible for scholarship awards, the estimated value of which will be realized in the future and is deducted from revenue when earned, based on historical student attendance and completion behavior. Contract liabilities are recorded as a current or long-term liability in the consolidated balance sheets based on when the benefits are expected to be realized. Substantially all of the contract liability balance classified as short term at the beginning of the year was recognized into revenue during the year ended December 31, 2025.\n\nCourse materials are available to enable students to access electronically all required materials for courses in which they enroll during the quarter. Revenue derived from course materials is recognized ratably over the duration of the course as the Company provides the student with continuous access to these materials during the term. For sales of certain other course materials, the Company is considered the agent in the transaction, and as such, the Company recognizes revenue net of amounts owed to the vendor at the time of sale. Revenues also include certain academic fees recognized within the quarter of instruction, and certificate revenue and licensing revenue, which are recognized as the services are provided.\n\n88\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nContract Liabilities – Learn and Earn Scholarship\n\nStrayer University offers the Learn and Earn Scholarship (formerly known as the Graduation Fund), which allows undergraduate students to earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program. Students registering in credit-bearing courses in any undergraduate degree program receive one free course for every three courses that the student successfully completes. To be eligible, students must meet all of Strayer University’s admission requirements, and must be enrolled in a bachelor’s degree program. Students who have more than one consecutive term of non-attendance lose any Learn and Earn Scholarship credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by Strayer University in the future.\n\nRevenue from students participating in the Learn and Earn Scholarship is recorded in accordance with ASC 606. The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs. Each quarter, the Company assesses its assumptions underlying these estimates, and to date, any adjustments to the estimates have not been material. The amount estimated to be redeemed in the next 12 months is $16.7 million and is included as a current contract liability in the consolidated balance sheets. The remainder is expected to be redeemed within two to four years.\n\nThe table below presents activity in the contract liability related to the Learn and Earn Scholarship for the years ended December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nBalance at beginning of period$44,480 $37,118 \n\nRevenue deferred20,300 20,186 \n\nBenefit redeemed(27,662)(19,179)\n\nBalance at end of period$37,118 $38,125 \n\nThe portion of the Learn and Earn Scholarship balance related to students enrolled in undergraduate degree programs was $35.3 million and $37.8 million as of December 31, 2024 and 2025, respectively. The remaining Learn and Earn Scholarship balance related to students enrolled in master’s degree programs.\n\nContract Liabilities – Tuition Cap\n\nStudents in certain programs at Capella University may be eligible for tuition cap pricing, wherein their tuition is waived once the student has reached the designated dollar cap threshold for their program. The Company defers the value of the related performance obligation associated with this tuition benefit estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student towards reaching the tuition cap. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within these programs or similar programs. Each quarter, the Company assesses its assumptions underlying these estimates. As of December 31, 2024 and 2025, the Company had $14.7 million and $18.5 million, respectively, of contract liabilities in the consolidated balance sheets related to tuition cap benefits that are estimated to be redeemed in the future. The amount estimated to be redeemed in the next 12 months is $7.4 million and is included as a current contract liability in the consolidated balance sheets.\n\nCosts to Obtain a Contract\n\nCertain commissions earned by third party international agents are considered incremental and recoverable costs of obtaining a contract with customers in the Australia/New Zealand segment. These costs are deferred and then amortized over the period of benefit which ranges from one year to two years.\n\n4.    Restructuring and Related Charges\n\nThe Company incurs severance and other employee separation costs related to employee terminations that are not tied to a formal restructuring plan. During the years ended December 31, 2023, 2024, and 2025, the Company incurred $12.0 million, $4.9 million and $13.3 million, respectively, of severance and other employee separation charges related to the elimination of certain positions. These severance and other employee separation charges are included in Restructuring costs on the consolidated statements of income.\n\n89\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nThe following details the changes in the Company’s severance and other employee separation costs restructuring liabilities for the years ended December 31, 2023, 2024, and 2025 (in thousands):\n\nSeverance Restructuring Liability\n\nBalance as of December 31, 2022$— \n\nRestructuring and other charges12,015 \n\nPayments(11,220)\n\nBalance as of December 31, 2023795 \n\nRestructuring and other charges4,902 \n\nPayments(5,163)\n\nBalance as of December 31, 2024(1)\n534 \n\nRestructuring and other charges13,326 \n\nPayments(13,000)\n\nBalance as of December 31, 2025(1)\n$860 \n\n_________________________________________________________\n\n(1)Restructuring liabilities are included in accounts payable and accrued expenses in the consolidated balance sheets.\n\nThe Company evaluates its owned and leased real estate portfolio on an ongoing basis, which has resulted in the consolidation and sale of underutilized facilities. During the years ended December 31, 2023, 2024, and 2025, the Company recorded right-of-use lease asset impairment charges of approximately $5.1 million, $0.7 million, and $4.7 million, respectively, related to facilities that were consolidated during the period. The Company also recorded fixed asset impairment charges of approximately $0.4 million, $0.2 million and $2.6 million during the years ended December 31, 2023, 2024, and 2025, respectively.\n\nThe Company recorded net benefits related to the early termination of leases of approximately $0.1 million, $6.2 million and $0.4 million during the years ended December 31, 2023, 2024, and 2025, respectively. These net benefits reflect the reduction of the lease liability for payments that will no longer be required and the corresponding adjustment to the related right‑of‑use asset, if any, net of cash payments made in connection with the early termination.\n\nDuring the year ended December 31, 2023, the Company recorded a $2.1 million gain from the sale of property and equipment at an owned campus, and during the year ended December 31, 2025, the Company recorded a $0.3 million loss related to the sale of property and equipment at its last remaining owned campus. These right-of-use lease asset impairments, fixed asset impairments, net benefits from early lease terminations, and gains and losses on the sale of property and equipment are included in Restructuring costs on the consolidated statements of income.\n\n5.    Marketable Securities\n\nThe following is a summary of available-for-sale securities, which are carried at fair value, as of December 31, 2024 (in thousands):\n\nAmortized CostGross Unrealized GainGross Unrealized (Losses)Estimated Fair Value\n\nBalance as of December 31, 2024\n\nCorporate debt securities$500 $— $(1)$499 \n\nTotal$500 $— $(1)$499 \n\nThe Company did not have any marketable securities classified as available-for-sale as of December 31, 2025.\n\n90\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nThe following is a summary of held-to-maturity securities, which are carried at amortized cost, as of December 31, 2024 and 2025 (in thousands):\n\nAmortized CostGross Unrealized GainGross Unrealized (Losses)Estimated Fair Value\n\nBalance as of December 31, 2024\n\nTerm deposits$21,653 $— $— $21,653 \n\nU.S. treasury securities19,778 18 — 19,796 \n\nCorporate debt securities20,000 — (26)19,974 \n\nTotal$61,431 $18 $(26)$61,423 \n\nBalance as of December 31, 2025\n\nTerm deposits$2,306 $— $— $2,306 \n\nU.S. treasury securities4,991 30 — 5,021 \n\nCorporate debt securities5,000 12 — 5,012 \n\nTotal$12,297 $42 $— $12,339 \n\nThe unrealized gains and losses on the Company’s investments in marketable securities as of December 31, 2024 and 2025 were caused by changes in market values primarily due to interest rate changes. As of December 31, 2025, there were no securities which were in an unrealized loss position for a period longer than twelve months. The Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell these securities prior to the recovery of their amortized cost basis, which may be at maturity. As such, no impairment charges were recorded during the years ended December 31, 2023, 2024, and 2025. The Company has no allowance for credit losses related to its marketable securities as all investments are in investment grade securities.\n\nThe following table summarizes the maturities of the Company’s marketable securities as of December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nAvailable-for-sale securitiesHeld-to-maturity securitiesAvailable-for-sale securitiesHeld-to-maturity securities\n\nDue within one year$499 $46,450 $— $7,297 \n\nDue after one year through five years— 14,981 — 5,000 \n\nTotal$499 $61,431 $— $12,297 \n\nThe following table summarizes the purchases of and proceeds from marketable securities for the years ended December 31, 2023, 2024, and 2025 (in thousands):\n\n December 31, 2023December 31, 2024December 31, 2025\n\nPurchases of marketable securities\n\nPurchases of held-to-maturity securities26,905 54,117 28,094 \n\nTotal purchases of marketable securities$26,905 $54,117 $28,094 \n\nProceeds from marketable securities\n\nMaturities of available-for-sale securities$9,800 $12,805 $500 \n\nMaturities of held-to-maturity securities— 18,220 78,578 \n\nTotal proceeds from marketable securities$9,800 $31,025 $79,078 \n\nThe Company did not sell any available-for-sale or held-to-maturity securities during the years ended December 31, 2023, 2024, and 2025. The Company did not record any gross realized gains or losses in net income during the years ended December 31, 2023, 2024, and 2025.\n\n91\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n6.    Property and Equipment\n\nThe composition of property and equipment as of December 31, 2024 and 2025 is as follows (in thousands):\n\n December 31, 2024December 31, 2025Estimated useful\nlife (years)\n\nLand$1,499 $— — \n\nBuildings and improvements6,186 — \n10-40\n\nFurniture and office equipment39,196 37,310 \n5-7\n\nComputer hardware13,142 14,862 \n3-7\n\nComputer software175,039 190,841 \n3-10\n\nLeasehold improvements67,858 65,292 \n3-15\n\nConstruction in progress8,006 8,238 — \n\n 310,926 316,543 \n\nAccumulated depreciation and amortization(199,679)(209,170)\n\n $111,247 $107,373 \n\nConstruction in progress includes costs associated with the construction and renovation of facilities and the development of information technology applications.\n\n7.    Leases\n\nThe Company has long-term, non-cancelable operating leases for campuses and other administrative facilities. These leases generally range from 3 years to 15 years and may include renewal options to extend the lease term. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. The Company subleases certain portions of unused building space to third parties.\n\nThe components of lease costs were as follows for the years ended December 31, 2023, 2024, and 2025 (in thousands)\n\n 202320242025\n\nLease Cost:\n\nOperating lease cost(1)\n$29,897 $19,012 $26,563 \n\nShort-term lease cost360 429 311 \n\nSublease income(906)(389)(303)\n\nTotal lease costs$29,351 $19,052 $26,571 \n\n___________________________________________________________\n\n(1)During the years ended December 31, 2023, 2024, and 2025, operating lease cost includes $5.1 million, $0.7 million, and $4.7 million of right-of-use lease asset impairment charges, respectively, related to redundant leased space that was vacated during the year. During the years ended December 31, 2023, 2024 and 2025, operating lease cost includes $0.1 million, $6.2 million, and $0.4 million, respectively, of net benefits related to the early termination of leases. These net benefits reflect the reduction of the lease liability for payments that will no longer be required and the corresponding adjustment to the related right-of-use asset, if any, net of cash payments made in connection with the early termination.\n\nThe following table provides a summary of the Company’s average lease term and discount rate as of December 31, 2024 and 2025:\n\nAs of December 31, 2024As of December 31, 2025\n\nWeighted average remaining lease term (years)6.86.7\n\nWeighted average discount rate4.88 %4.98 %\n\n92\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nSupplemental information related to the Company’s leases for the years ended December 31, 2023, 2024, and 2025 (in thousands):\n\nYear ended December 31, 2023Year ended December 31, 2024Year ended December 31, 2025\n\nCash paid for amounts included in the measurement of lease liabilities$30,742 $30,348 $28,523 \n\nRight-of-use assets obtained in exchange for operating lease liabilities$17,921 $10,299 $8,133 \n\nMaturities of lease liabilities (in thousands):\n\nYear Ending December 31,\n\n2026$17,892 \n\n202720,315 \n\n202819,220 \n\n202917,913 \n\n203014,525 \n\nThereafter41,215 \n\nTotal lease payments(1)\n131,080 \n\nLess: interest(21,959)\n\nPresent value of lease liabilities$109,121 \n\n___________________________________________________________\n\n(1)Excludes approximately $4.3 million of legally binding minimum lease payments for leases that were signed but had not yet commenced as of December 31, 2025.\n\n8.    Fair Value Measurement\n\nAssets measured at fair value on a recurring basis consist of the following as of December 31, 2024 (in thousands):\n\n  Fair Value Measurements at Reporting Date Using\n\n December 31, 2024Quoted Prices in\nActive Markets\nfor Identical\nAssets/Liabilities\n(Level 1)Significant\nOther\nObservable\nInputs\n(Level 2)Significant\nUnobservable\nInputs\n(Level 3)\n\nAssets:    \n\nMoney market funds$92,416 $92,416 $— $— \n\nAvailable-for-sale securities:\n\nCorporate debt securities499 — 499 — \n\nTotal assets at fair value on a recurring basis$92,915 $92,416 $499 $— \n\nAssets measured at fair value on a recurring basis consist of the following as of December 31, 2025 (in thousands):\n\n  Fair Value Measurements at Reporting Date Using\n\n December 31, 2025Quoted Prices in\nActive Markets\nfor Identical\nAssets/Liabilities\n(Level 1)Significant\nOther\nObservable\nInputs\n(Level 2)Significant\nUnobservable\nInputs\n(Level 3)\n\nAssets:    \n\nMoney market funds$88,239 $88,239 $— $— \n\nTotal assets at fair value on a recurring basis$88,239 $88,239 $— $— \n\nThe Company measures the above items on a recurring basis at fair value as follows:\n\n•Money market funds — Classified in Level 1 is excess cash the Company holds in money market funds, which are included in cash and cash equivalents in the accompanying consolidated balance sheets. The Company’s other cash and cash equivalents as of December 31, 2024 and 2025 approximate fair value and are not disclosed in the above tables because of the short-term nature of the financial instruments.\n\n93\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n•Available-for-sale securities – Classified in Level 2 and valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets. The Company does not hold securities in inactive markets. The Company records any net unrealized gains and losses for changes in fair value as a component of accumulated other comprehensive income (loss) in stockholders’ equity.\n\nThe Company’s held-to-maturity marketable securities, which consist of term deposits, U.S. treasury securities, and corporate debt securities, are not included in the tables above as they are carried at amortized cost and not measured at fair value on a recurring basis. The estimated fair value of the Company’s held-to-maturity marketable securities at December 31, 2024 and 2025 was $61.4 million and $12.3 million, respectively. These securities are valued using readily available pricing sources for comparable instruments utilizing observable inputs from active markets and are classified in Level 2 of the fair value hierarchy.\n\nThe Company did not change its valuation techniques associated with recurring fair value measurements from prior periods and did not transfer assets or liabilities between levels of the fair value hierarchy during the years ended December 31, 2024 or 2025.\n\n9.    Goodwill and Intangible Assets\n\nGoodwill\n\nThe following table presents changes in the carrying value of goodwill by segment for the years ended December 31, 2024 and 2025 (in thousands):\n\n U.S. Higher EducationAustralia / New ZealandEducation Technology ServicesTotal\n\nBalance as of December 31, 2023$632,075 $519,813 $100,000 $1,251,888 \n\nAdditions— — — — \n\nImpairments— — — — \n\nCurrency translation adjustments— (45,005)— (45,005)\n\nBalance as of December 31, 2024632,075 474,808 100,000 1,206,883 \n\nAdditions— — — — \n\nImpairments— — — — \n\nCurrency translation adjustments— 35,530 — 35,530 \n\nBalance as of December 31, 2025$632,075 $510,338 $100,000 $1,242,413 \n\nThe Company assesses goodwill at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective reporting unit below its carrying amount.\n\nIn 2025, the Company performed a qualitative impairment assessment of goodwill assigned to its reporting units using the first day of the fourth quarter of 2025 as the assessment date. The Company evaluated the likelihood of impairment by considering qualitative factors relevant to the reporting units, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that could have a significant bearing on fair value. Based on the results of this qualitative impairment analysis, the Company concluded that no impairment indicators existed for its reporting units as of the assessment date. There were no goodwill impairment charges recorded during the years ended December 31, 2023, 2024, and 2025.\n\nIntangible Assets\n\nThe Company’s finite-lived intangible assets were comprised of approximately $200.0 million of student relationships, which were amortized on a straight-line basis over a three-year useful life. Straight-line amortization expense for finite-lived intangible assets reflected the pattern in which the economic benefits of the assets were consumed over their estimated useful lives. All finite-lived intangible assets were fully amortized by the end of 2023. Amortization expense related to finite-lived intangible assets was $8.9 million for the year ended December 31, 2023.\n\n94\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nIndefinite-lived intangible assets not subject to amortization consist of trade names. The Company assigned an indefinite useful life to its trade name intangible assets, as it is believed these assets have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic, or other factors to limit the useful life of the trade name intangibles.\n\nThe following table presents changes in the carrying value of indefinite-lived intangible assets for the years ended December 31, 2024 and 2025 (in thousands):\n\n Indefinite-Lived Intangible Assets\n\nBalance as of December 31, 2023$251,623 \n\nAdditions— \n\nImpairments(800)\n\nCurrency translation adjustments(5,725)\n\nBalance as of December 31, 2024245,098 \n\nAdditions— \n\nImpairments(356)\n\nCurrency translation adjustments4,501 \n\nBalance as of December 31, 2025$249,243 \n\nThe Company assesses indefinite-lived intangible assets at least annually for impairment during the fourth quarter, or more frequently if events occur or circumstances change between annual tests that would more likely than not reduce the fair value of the respective indefinite-lived intangible asset below its carrying amount.\n\nIn 2025, the Company performed a qualitative impairment assessment of its indefinite-lived intangible assets using the first day of the fourth quarter of 2025 as the assessment date. The Company evaluated the likelihood of impairment by considering qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and any other factors that could have a significant bearing on fair value. Based on the results of this qualitative impairment analysis, the Company concluded that no impairment indicators existed for its indefinite-lived intangible assets as of the assessment date.\n\nThere were no impairment charges related to indefinite-lived intangible assets recorded during the year ended December 31, 2023. During the years ended December 31, 2024 and 2025, the Company recorded indefinite-lived intangible asset impairment charges of $0.8 million and $0.4 million, respectively, which are included in Restructuring costs on the consolidated statements of income.\n\n10.    Other Current Assets\n\nOther current assets consist of the following as of December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nPrepaid expenses$20,841 $22,970 \n\nCloud computing arrangements9,402 11,074 \n\nRestricted cash9,082 8,254 \n\nDeferred contract costs3,258 4,714 \n\nOther2,210 2,078 \n\nOther current assets$44,793 $49,090 \n\n95\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n11.    Other Assets\n\nOther assets consist of the following as of December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nCloud computing arrangements, net of current portion$18,328 $24,941 \n\nPrepaid expenses, net of current portion15,678 14,973 \n\nEquity method investments13,428 9,472 \n\nTuition receivable, net, non-current7,040 6,217 \n\nOther investments2,786 2,786 \n\nDeferred contract costs, net of current portion808 2,149 \n\nOther4,842 4,976 \n\nOther assets$62,910 $65,514 \n\nCloud Computing Arrangements\n\nThe Company defers implementation costs incurred in cloud computing arrangements and amortizes these costs over the term of the arrangement.\n\nPrepaid Expenses\n\nLong-term prepaid expenses primarily relate to payments that have been made for future services to be provided after one year. In 2020, pursuant to the terms of the perpetual license agreement associated with the Jack Welch Management Institute, the Company made a final one-time cash payment of approximately $25.3 million for the right to continue to use the Jack Welch name and likeness. As of December 31, 2024 and 2025, $14.7 million and $13.2 million, respectively, of this payment is included in the prepaid expenses, net of current portion balance, as the payment is being amortized over an estimated useful life of 15 years.\n\nEquity Method Investments\n\nThe Company holds investments in certain limited partnerships that invest in various innovative companies in the health care and education-related technology fields. The Company has commitments to invest up to an additional $1.7 million across these partnerships through 2031. The Company’s investments range from 3% to 5% of any partnership’s interest and are accounted for under the equity method.\n\nThe following table illustrates changes in the Company’s limited partnership investments for the years ended December 31, 2024 and 2025 (in thousands):\n\n20242025\n\nLimited partnership investments, beginning of period$16,068 $13,428 \n\nCapital contributions531 390 \n\nPro-rata share in the net income (loss) of limited partnerships(2,699)(4,346)\n\nDistributions(472)— \n\nLimited partnership investments, end of period$13,428 $9,472 \n\nTuition Receivable\n\nNon-current tuition receivable, net, represents tuition that the Company expects to collect, but not within the next 12 months.\n\nOther Investments\n\nThe Company holds investments in education technology start-ups focused on transformational technologies that improve student success. These investments are accounted for at cost less impairment as they do not have readily determinable fair value.\n\n96\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nDeferred Contract Costs\n\nThe Company defers certain commissions paid in the Australia/New Zealand segment to third-party international recruitment agents and amortizes these costs over the period of benefit.\n\nOther\n\nOther is comprised primarily of deferred financing costs associated with the Company’s credit facility, deferred accreditation costs associated with the Australia/New Zealand segment, and refundable security deposits associated with the Company’s leased campus and office space.\n\n12.    Accounts Payable and Accrued Expenses\n\nAccounts payable and accrued expenses consist of the following as of December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nTrade payables$55,733 $55,986 \n\nAccrued compensation and benefits38,843 42,083 \n\nAccrued student obligations and other7,173 7,722 \n\nAccounts payable and accrued expenses$101,749 $105,791 \n\n13.    Long-Term Debt\n\nOn October 18, 2024, the Company entered into an amended credit facility (the “Amended Credit Facility”), which provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $250 million. The Amended Credit Facility provides the Company with an option, subject to obtaining additional loan commitments and satisfaction of certain conditions, to increase the commitments under the Revolving Credit Facility or establish one or more incremental term loans (each, an “Incremental Facility”) in the future in an aggregate amount of up to the sum of (x) the greater of (A) $300 million and (B) 100% of the Company’s consolidated EBITDA (earnings before interest, taxes, depreciation, amortization, and noncash charges, such as stock-based compensation) calculated on a trailing four-quarter basis and on a pro forma basis, and (y) if such Incremental Facility is incurred in connection with a permitted acquisition or other permitted investment, any amounts so long as the Company’s leverage ratio (calculated on a trailing four-quarter basis) on a pro forma basis will be no greater than 1.75:1.00. In addition, the Amended Credit Facility provides for a subfacility for borrowings in certain foreign currencies in an amount equal to the U.S. dollar equivalent of $150 million. The maturity date of the Amended Credit Facility is October 18, 2029. The Company paid approximately $1.7 million in debt financing costs associated with the Amended Credit Facility, and these costs are being amortized on a straight-line basis over the five-year term of the Amended Credit Facility.\n\nBorrowings under the Revolving Credit Facility bear interest at a per annum rate equal to Term SOFR or a base rate, plus a margin ranging from 1.50% to 2.00% depending on the Company’s leverage ratio. The Company also is subject to a quarterly unused commitment fee ranging from 0.20% to 0.30% per annum depending on the Company’s leverage ratio, times the daily unused amount under the Revolving Credit Facility.\n\nThe Amended Credit Facility is guaranteed by all domestic subsidiaries, subject to certain exceptions, and secured by substantially all of the assets of the Company and its subsidiary guarantors. The Amended Credit Facility contains customary affirmative and negative covenants, representations, warranties, events of default, and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Amended Credit Facility. In addition, the Amended Credit Facility requires that the Company satisfy certain financial maintenance covenants, including:\n\n•A leverage ratio of not greater than 2.00 to 1.00. Leverage ratio is defined as the ratio of total debt (net of unrestricted cash in an amount not to exceed $150 million) to trailing four-quarter EBITDA.\n\n•A coverage ratio of not less than 1.75 to 1.00. Coverage ratio is defined as the ratio of trailing four-quarter EBITDA and rent expense to trailing four-quarter interest and rent expense.\n\nAs of December 31, 2024 and 2025, the Company was in compliance with all covenants of the Amended Credit Facility and had no borrowings outstanding under the Revolving Credit Facility.\n\nDuring the years ended December 31, 2023, 2024 and 2025, the Company paid $6.8 million, $3.2 million and $0.5 million, respectively, of interest and unused commitment fees related to its Revolving Credit Facility.\n\n97\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n14.    Other Long-Term Liabilities\n\nOther long-term liabilities consist of the following as of December 31, 2024 and 2025 (in thousands):\n\n December 31, 2024December 31, 2025\n\nContract liabilities, net of current portion$34,505 $35,577 \n\nAsset retirement obligations3,876 3,874 \n\nOther1,805 5,689 \n\nOther long-term liabilities$40,186 $45,140 \n\nContract Liabilities\n\nIn connection with its student tuition contracts, the Company has an obligation to provide free tuition in the future should certain eligibility conditions be maintained. Long-term contract liabilities represent the amount of revenue under these arrangements that the Company expects will be realized after one year.\n\nAsset Retirement Obligations\n\nCertain of the Company’s lease agreements require the leased premises to be returned in a predetermined condition.\n\n15.    Equity Awards\n\nIn connection with the merger with Capella Education Company on August 1, 2018, the Capella Education Company 2014 Equity Incentive Plan (the “2014 Capella Plan”) and the Capella Education Company 2005 Stock Incentive Plan (collectively, the “Capella Plans”) were assumed by the Company. Under the Capella Plans, shares of the Company’s common stock were permitted to be issued upon the exercise or settlement of equity awards that were granted prior to the merger date or pursuant to awards granted after the closing of the merger to legacy Capella Education Company employees under the 2014 Capella Plan.\n\nOn November 6, 2018, the Company’s shareholders approved the Strategic Education, Inc. 2018 Equity Compensation Plan (the “2018 Plan”), which replaced the Strayer Education, Inc. 2015 Equity Compensation Plan (the “2015 Plan”). The 2018 Plan provides for the granting of restricted stock, restricted stock units, stock options intended to qualify as incentive stock options, options that do not qualify as incentive stock options, and other forms of equity compensation and performance-based awards to employees, officers, and directors of the Company, or to a consultant or advisor to the Company, at the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of Directors. Options may be granted at option prices based at or above the fair market value of the shares at the date of grant. The maximum term of the awards granted under the 2018 Plan is ten years. The original number of shares of common stock authorized for issuance under the 2018 Plan was 700,000, plus the number of shares available for grant under the 2015 Plan at the time of stockholder approval of the 2018 Plan, plus the number of shares which may become available under the 2015 Plan due to forfeitures of outstanding awards.\n\nOn April 27, 2022, the Company’s shareholders approved the First Amendment to the 2018 Plan, which increased the total number of shares of common stock available for issuance under the 2018 Plan by the number of shares that were available for issuance under the 2014 Capella Plan as of the effective date of the First Amendment, plus the number of shares that may become available upon the future expiration, forfeiture or cancellation of outstanding awards under the Capella Plans. Subsequent to the shareholders approval of the First Amendment, all equity-based awards are granted under the 2018 Plan.\n\nOn April 23, 2025, the Company’s shareholders approved the Second Amendment to the 2018 Plan, which increased the total number of shares of common stock available for issuance under the 2018 Plan by 700,000 shares. As of December 31, 2025, 983,727 shares were available for issuance under the 2018 Plan.\n\nAs of December 31, 2025, the Company has issued and outstanding awards under the 2018 Plan and the 2014 Capella Plan.\n\nDividends paid on unvested restricted stock are reimbursed to the Company, and dividend equivalents accumulated on unvested restricted stock units are forfeited, if the recipient forfeits his or her shares as a result of termination of employment prior to vesting in the award, other than as a result of the recipient’s death, disability, or certain qualifying terminations in connection with a change in control of the Company, or unless waived by the Company.\n\n98\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nRestricted Stock and Restricted Stock Units\n\nThe table below sets forth the restricted stock and restricted stock units activity for each of the three years in the period ended December 31, 2025:\n\n Number of\nshares or unitsWeighted-\naverage\ngrant price\n\nBalance, December 31, 20221,071,561 $81.70 \n\nGrants271,576 93.93 \n\nVested shares(154,764)124.19 \n\nForfeitures(97,251)74.03 \n\nBalance, December 31, 20231,091,122 80.08 \n\nGrants273,533 95.34 \n\nVested shares(124,897)137.81 \n\nForfeitures(9,417)69.37 \n\nBalance, December 31, 20241,230,341 78.03 \n\nGrants268,430 96.78 \n\nVested shares(313,793)89.12 \n\nForfeitures(28,963)82.98 \n\nBalance, December 31, 20251,156,015 $79.25 \n\nStock Options\n\nThe table below sets forth the stock option activity and other stock option information for each of the three years in the period ended December 31, 2025:\n\n Number of\nsharesWeighted-\naverage\nexercise priceWeighted-\naverage\nremaining\ncontractual\nlife (years)\nAggregate\n\nintrinsic value(1)\n\n(in thousands)\n\nBalance, December 31, 202223,299 $65.76 3.0$352 \n\nGrants— — \n\nExercises(4,138)53.95 \n\nForfeitures/Expirations— — \n\nBalance, December 31, 202319,161 68.32 2.2461 \n\nGrants— — \n\nExercises(8,056)63.57 \n\nForfeitures/Expirations— — \n\nBalance, December 31, 202411,105 71.76 1.6241 \n\nGrants— — \n\nExercises(4,898)62.40 \n\nForfeitures/Expirations(749)74.75 \n\nBalance, December 31, 20255,458 $79.74 0.9$34 \n\nExercisable, December 31, 20255,458 $79.74 0.9$34 \n\n__________________________________________________________________________\n\n(1)The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the respective trading day and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holder had all options been exercised on the respective trading day. The amount of intrinsic value will change based on the fair market value of the Company’s common stock.\n\nThe Company received $0.2 million, $0.5 million, and $0.3 million of net cash proceeds related to stock options exercised during the years ended December 31, 2023, 2024, and 2025, respectively. The aggregate intrinsic value of the stock options exercised during the years ended December 31, 2023, 2024, and 2025 was $0.1 million, $0.3 million, and $0.1 million, respectively.\n\n99\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nValuation and Expense Information under ASC 718, Stock Compensation\n\nAt December 31, 2025, total stock-based compensation cost which has not yet been recognized was $39.4 million for unvested restricted stock and restricted stock units. This cost is expected to be recognized over the next 1.4 years on a weighted-average basis. Approximately 742,000 shares of restricted stock awards and restricted stock units are subject to performance conditions. The stock-based compensation expense for performance awards is based on the Company’s estimates that such performance criteria are probable of being achieved over the respective vesting periods. Such a determination involves judgment surrounding the Company’s ability to maintain regulatory compliance. If the performance targets are not reached during the respective vesting period, or it is determined it is more likely than not that the performance criteria will not be achieved, related compensation expense is adjusted.\n\nThe following table reflects the amount of stock-based compensation expense recorded in each of the expense line items for the years ended December 31, 2023, 2024, and 2025 (in thousands):\n\n 202320242025\n\nInstructional and support costs$5,804 $6,989 $8,365 \n\nGeneral and administration13,461 18,239 14,360 \n\nRestructuring costs507 343 229 \n\nStock-based compensation expense included in operating expense19,772 25,571 22,954 \n\nTax benefit5,156 6,824 6,012 \n\nStock-based compensation expense, net of tax$14,616 $18,747 $16,942 \n\nDuring the years ended December 31, 2023 and 2024, the Company recognized shortfall tax impacts of approximately $1.4 million and $1.2 million, respectively, related to share-based payment arrangements, which were adjustments to the provision for income taxes. During the year ended December 31, 2025, the Company recognized windfall tax benefits of approximately $0.4 million.\n\n16.    Other Employee Benefit Plans\n\nThe Company sponsors the Strategic Education, Inc. 401(k) Plan, which covers all eligible employees of the Company. The Company makes discretionary contributions to participants of the Strategic Education, Inc. 401(k) Plan through a Company match of 100% on the first 2%, and 50% on the next 2%, of the employee contributions, for a maximum company match of 3%. The Company’s contributions to these plans totaled $8.2 million, $8.6 million and $8.9 million for the years ended December 31, 2023, 2024, and 2025, respectively.\n\nPursuant to local laws, ANZ is required to make contributions on behalf of its employees for post-retirement superannuation benefits. In addition, ANZ has recorded a liability for long service leave, an entitlement for which employees meeting certain requirements are eligible for extended paid leave. The Company incurred $8.6 million, $9.3 million, and $10.9 million in expense related to these arrangements for the benefit of ANZ employees for the years ended December 31, 2023, 2024, and 2025, respectively.\n\nIn May 1998, the Company adopted the Strayer Education, Inc. Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees may purchase shares of the Company’s common stock, subject to certain limitations, at 90% of its market value at the date of purchase. Purchases are limited to 10% of an employee’s eligible compensation. The aggregate number of shares of common stock that may be made available for purchase by participating employees under the ESPP is 2,500,000 shares. Shares purchased in the open market for employees for the years ended December 31, 2023, 2024, and 2025 were as follows:\n\n Shares\npurchasedAverage price\nper share\n\n202313,934 $72.38 \n\n202412,507 $90.79 \n\n202516,374 $75.29 \n\n17.    Stock Repurchase Plan\n\nIn November 2003, the Company’s Board of Directors authorized the Company to repurchase up to an aggregate of $15 million in value of common stock in open market purchases from time to time at the discretion of the Company’s management depending on market conditions and other corporate considerations. The Company’s Board of Directors amended the program\n\n100\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\non various dates, increasing the repurchase amount authorized and extending the expiration date. At December 31, 2025, $213.5 million of the Company’s share repurchase authorization was remaining for repurchases through December 31, 2026. All of the Company’s share repurchases were effected in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. This stock repurchase plan may be modified, suspended, or terminated at any time by the Company without notice.\n\nRepurchases of common stock are recorded as a reduction to additional paid-in capital in an amount equal to the price at which the repurchased shares were originally sold, with any excess cash paid to repurchase the shares being recorded as a reduction to retained earnings.\n\nShares of common stock repurchased on the open market under the Company’s repurchase program for the years ended December 31, 2023, 2024, and 2025 were as follows:\n\n Shares\nrepurchasedAverage price\npaid per share\n\n2023129,073 $77.47 \n\n2024119,926 $95.97 \n\n20251,708,368 $81.30 \n\n18.    Commitments and Contingencies\n\nThe Company’s U.S. Higher Education institutions participate in various federal student financial assistance programs which are subject to audit by agencies, including the Department of Education, the Veterans Administration, and the Department of Defense. Management believes that the potential effects of audit adjustments, if any, for the periods currently under audit will not have a material adverse effect, individually or in the aggregate, on the Company’s consolidated financial position, results of operations, or cash flows.\n\n19.    Income Taxes\n\nThe income tax provision for the years ended December 31, 2023, 2024 and 2025 is summarized below (in thousands):\n\n 202320242025\n\nCurrent:   \n\nFederal$20,071 $25,896 $22,835 \n\nState6,228 8,844 8,391 \n\nForeign10,962 14,295 11,787 \n\nTotal current37,261 49,035 43,013 \n\nDeferred:\n\nFederal(2,437)(843)7,525 \n\nState(100)838 350 \n\nForeign(3,789)(282)(109)\n\nTotal deferred(6,326)(287)7,766 \n\nTotal provision for income taxes$30,935 $48,748 $50,779 \n\nThe U.S. and foreign components of income before income taxes for the years ended December 31, 2023, 2024 and 2025 are summarized below (in thousands):\n\n 202320242025\n\nUnited States$76,893 $118,785 $139,429 \n\nForeign23,833 42,647 37,964 \n\nTotal income before income taxes$100,726 $161,432 $177,393 \n\nThe Company intends to indefinitely reinvest its foreign earnings and cash unless such repatriation results in no or minimal tax costs. State income taxes associated with the foreign earnings that the Company intends to repatriate in the future are not material. As such, no deferred tax liabilities have been recorded in the United States with respect to foreign subsidiary earnings.\n\n101\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nThe tax effects of the principal temporary differences that give rise to the Company’s net deferred tax liability are as follows as of December 31, 2024 and 2025 (in thousands):\n\n 20242025\n\nLease liabilities$15,182 $13,264 \n\nAllowance for credit losses12,465 12,176 \n\nStock-based compensation9,758 10,085 \n\nContract liabilities8,972 9,201 \n\nLoss carryforward3,088 3,977 \n\nOther5,297 7,899 \n\nOther facility-related costs1,033 938 \n\nIntangible assets(69,712)(71,720)\n\nRight-of-use lease assets(9,397)(8,256)\n\nPrepaid expenses(1,108)(6,775)\n\nValuation allowance(2,991)(3,889)\n\nProperty and equipment(173)(2,735)\n\nNet deferred tax liability$(27,586)$(35,835)\n\nAs of December 31, 2025, Loss carryforward consists of net operating losses related to the states where the Company does not file a consolidated return. The company has state net operating loss carryforwards of $48.4 million which will expire from 2032 through 2042 and $42.8 million which have an indefinite carryover period. The change in the valuation allowance for deferred tax assets as of December 31, 2024 and 2025 was $0.3 million and $0.9 million, respectively, and is primarily related to net operating loss carryforwards in states where the Company does not file a consolidated tax return. The Company concluded that it was more likely than not that the deferred tax asset for the net operating loss carryforwards would not be realized due to negative evidence outweighing the positive evidence regarding the realization of the deferred tax assets. The Company will continue to evaluate its ability to realize its net deferred tax assets on a quarterly basis.\n\nAs of December 31, 2024 and 2025, the Company had no unrecognized tax benefits recorded on its consolidated balance sheets. Interest and penalties, including those related to uncertain tax positions, are included in the provision for income taxes in the consolidated statements of income. The Company had no interest and penalties included in the consolidated balance sheets as of December 31, 2024 and 2025.\n\nThe following table summarizes changes in unrecognized tax benefits, excluding interest and penalties, for the respective periods (in thousands):\n\n Year Ended December 31,\n\n 20242025\n\nBeginning unrecognized tax benefits$948 $— \n\nAdditions for tax positions taken in the prior year— — \n\nReductions for tax positions taken in prior years(948)— \n\nEnding unrecognized tax benefits$— $— \n\nDuring the years ended December 31, 2024 and 2025, the Company did not record any unrecognized tax benefits.\n\nAs stated in Note 2, the Company adopted ASU 2023-09 for its annual reporting period ended on December 31, 2025. The Company applied the standard prospectively. Accordingly, the comparative disclosures below for the years ended December 31, 2023 and 2024 continue to be presented under previous ASC 740 disclosure requirements, whereas the disclosures for the year ended December 31, 2025 reflect the enhanced disaggregation requirements under ASU 2023-09.\n\n102\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nA reconciliation between the Company’s statutory tax rate and the effective tax rate for the years ended December 31, 2023 and 2024, prior to the adoption of ASU 2023-09, is as follows:\n\n 20232024\n\nStatutory federal rate21.0 %21.0 %\n\nState income taxes, net of federal benefits3.7 3.8 \n\nImpact of foreign operations2.1 2.4 \n\nNondeductible compensation1.9 1.4 \n\nExcess tax benefit on share-based compensation1.1 0.6 \n\nChange in valuation allowance0.8 0.2 \n\nOther0.1 0.8 \n\nEffective tax rate30.7 %30.2 %\n\nA reconciliation between the Company’s statutory tax rate and the effective tax rate for the year ended December 31, 2025, after the adoption of ASU 2023-09, is as follows (amounts in thousands):\n\n2025\n\n AmountPercent\n\nStatutory federal rate37,252 21.0 %\n\nState income taxes, net of federal benefits(1)\n6,030 3.4 %\n\nChange in valuation allowance (state)761 0.4 %\n\nImpact of foreign operations\n\nStatutory tax rate difference between Australia and US3,302 1.9 %\n\nChange in valuation allowance136 0.1 %\n\nOther foreign jurisdictions81 — %\n\nNontaxable or nondeductible items\n\nNondeductible compensation3,084 1.7 %\n\nExcess tax benefit on share-based compensation(306)(0.2)%\n\nOther439 0.3 %\n\nEffective tax rate50,779 28.6 %\n\n___________________________________________________________\n\n(1)State taxes in Virginia, California, Pennsylvania, Georgia, New York, Florida, South Carolina, and Maryland made up the majority (greater than 50 percent) of the tax effect in this category\n\nCash payments for income taxes were $42.9 million and $49.2 million for the years ended December 31, 2023 and 2024, respectively.\n\nCash payments (net of refunds) for income taxes by jurisdiction for the year ended December 31, 2025 are summarized below (in thousands):\n\n 2025\n\nFederal$24,459 \n\nState7,827 \n\nForeign16,561 \n\nTotal cash payments (net of refunds) for income taxes$48,847 \n\nThe jurisdictions in which income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) for the year ended December 31, 2025 are as follows (in thousands):\n\n 2025\n\nForeign\n\nAustralia$15,817 \n\n103\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nOn July 4, 2025, President Trump signed the One Big Beautiful Bill Act (“OBBBA”), which includes significant tax-related provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The Company accounted for the impacts of OBBBA in 2025, which had no material impact on its annual effective tax rate in 2025.\n\n20.    Segment and Geographic Information\n\nStrategic Education is an educational 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. Strategic Education’s portfolio of companies is dedicated to closing the skills gap by placing adults on the most direct path between learning and employment. The Company’s organizational structure includes three operating and reportable segments: U.S. Higher Education, Education Technology Services, and Australia/New Zealand.\n\nThe USHE segment provides flexible and affordable certificate and degree programs to working adults primarily through Capella University and Strayer University, including the Jack Welch Management Institute MBA, which is an offering of Strayer University. USHE also operates non-degree web and mobile application development courses through Hackbright Academy and Devmountain, which are offerings of Strayer University.\n\nThe 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.\n\nThe ANZ segment is comprised of Torrens University, Think Education, and Media Design School at Strayer (“MDS”) in Australia and New Zealand, which collectively offer certificate and degree programs in business, design, education, hospitality, healthcare, and technology through campuses in Australia, New Zealand, and online. On September 8, 2025, MDS became a wholly owned subsidiary and international additional location of Strayer University and is included within Strayer University’s Middle States Commission on Higher Education accreditation. The New Zealand Qualification Authority approved the transaction and MDS continues to operate as a New Zealand private training establishment. MDS continues to be part of the ANZ reportable segment.\n\nThe Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer.\n\nRevenue and operating expenses are generally directly attributable to the segments. Inter-segment revenues are not presented separately, as these amounts are immaterial. The Company’s CODM does not evaluate operating segments using asset information. The Company’s CODM assesses the segments’ performance by using each segment’s income from operations, which includes certain enterprise shared services allocations attributable to each of the segments. The Company’s CODM uses income from operations for each segment in the annual budget and forecasting process. On a monthly basis, the CODM reviews budget-to-actual, latest forecast-to-actual, and year-over-year actual variances when reviewing segment performance and making decisions about the allocation of resources to each segment.\n\n104\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nA summary of financial information by reportable segment for the year ended December 31, 2023 is presented in the following table (in thousands):\n\n U.S. Higher EducationAustralia/New ZealandEducation Technology ServicesTotal\n\nRevenues$818,953 $233,518 $80,453 $1,132,924 \n\nSegment expenses\n\nDirect segment expenses703,035 178,922 47,283 929,240 \n\nEnterprise shared services allocation56,290 18,734 4,082 79,106 \n\nSegment income from operations$59,628 $35,862 $29,088 $124,578 \n\nUnallocated expenses\n\nAmortization of intangible assets(11,457)\n\nMerger and integration costs(1,544)\n\nRestructuring costs(16,256)\n\nConsolidated income from operations$95,321 \n\nOther income5,405 \n\nConsolidated income before income taxes$100,726 \n\nA summary of financial information by reportable segment for the year ended December 31, 2024 is presented in the following table (in thousands):\n\n U.S. Higher EducationAustralia/New ZealandEducation Technology ServicesTotal\n\nRevenues$857,890 $257,119 $104,921 $1,219,930 \n\nSegment expenses\n\nDirect segment expenses719,214 200,776 57,910 977,900 \n\nEnterprise shared services allocation61,511 18,949 4,294 84,754 \n\nSegment income from operations$77,165 $37,394 $42,717 $157,276 \n\nUnallocated expenses\n\nRestructuring costs(1,648)\n\nConsolidated income from operations$155,628 \n\nOther income5,804 \n\nConsolidated income before income taxes$161,432 \n\n105\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nA summary of financial information by reportable segment for the year ended December 31, 2025 is presented in the following table (in thousands):\n\n U.S. Higher EducationAustralia/New ZealandEducation Technology ServicesTotal\n\nRevenues$868,239 $251,584 $148,397 $1,268,220 \n\nSegment expenses\n\nDirect segment expenses707,373 194,212 81,148 982,733 \n\nEnterprise shared services allocation58,994 21,918 8,435 89,347 \n\nSegment income from operations$101,872 $35,454 $58,814 $196,140 \n\nUnallocated expenses\n\nRestructuring costs(21,909)\n\nConsolidated income from operations$174,231 \n\nOther income3,162 \n\nConsolidated income before income taxes$177,393 \n\nThe following table presents a schedule of significant non-cash items included in segment income from operations by reportable segment for the years ended December 31, 2023, 2024, and 2025 (in thousands):\n\n 202320242025\n\nDepreciation and amortization   \n\nU.S. Higher Education$33,655 $31,663 $30,730 \n\nAustralia/New Zealand8,954 9,065 9,628 \n\nEducation Technology Services2,526 3,468 5,169 \n\nAmortization of intangible assets11,457 — — \n\nMerger and integration costs336 — — \n\nRestructuring costs385 182 2,883 \n\nConsolidated depreciation and amortization$57,313 $44,378 $48,410 \n\nStock-based compensation\n\nU.S. Higher Education$17,653 $19,337 $18,395 \n\nAustralia/New Zealand(117)3,951 1,581 \n\nEducation Technology Services1,729 1,940 2,749 \n\nRestructuring costs507 343 229 \n\nConsolidated stock-based compensation$19,772 $25,571 $22,954 \n\nGeographic Information\n\nThe Company’s revenues by geographic area, which are primarily generated by students enrolled at institutions in those areas, for the years ended December 31, 2023, 2024, and 2025 were as follows (in thousands):\n\n 202320242025\n\nUnited States$899,406 $962,811 $1,016,636 \n\nAustralia/New Zealand233,518 257,119 251,584 \n\n106\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nThe Company’s long-lived assets are comprised of Property and equipment, net and Right-of-use lease assets. The Company’s long-lived assets by geographic area as of December 31, 2024 and 2025 were as follows (in thousands):\n\n December 31, 2024December 31, 2025\n\nUnited States$108,418 $100,774 \n\nAustralia/New Zealand106,502 97,739 \n\n21.    Litigation\n\nThe Company is involved in litigation and other legal proceedings arising out of the ordinary course of its business. Certain of these matters are discussed below. From time to time, certain matters may arise that are other than ordinary and routine. The outcome of such matters is uncertain, and the Company may incur costs in the future to defend, settle, or otherwise resolve them. The Company accrues for estimated costs related to existing lawsuits, claims and proceedings when it is probable that it will incur these costs in the future and the costs are reasonably estimable. The Company currently believes that the ultimate outcome of such matters will not, individually or in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or cash flows. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect future results of operations in a particular period.\n\nOn April 20, 2021, Capella University received a letter from the Department of Education referencing Wright, et al. v. Capella Education Co., et al. (subsequently captioned Ornelas, et al. v. Capella, et al.), United States District Court for the District of Minnesota, Case No. 18-cv-1062, and indicating that the Department would require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 1,000 borrower defense applications that have been submitted regarding Capella University. According to the Department, some of the applications allege similar claims as in the Wright matter concerning alleged misrepresentations of the length of time to complete doctoral programs. Capella University subsequently received approximately 500 applications for borrower defense to repayment. Capella University contested each claim for defense to repayment in individualized responses with supporting evidence, the last of which was sent to the Department in August 2021. Since that time, Capella University has not received any communication from the Department related to the set of borrower defense claims received in 2021, nor has Capella University received indication that any of these claims has been evaluated on the facts presented and adjudicated on the merits.\n\nOn June 22, 2022, in litigation in which Capella University is not a party, Sweet, et al. v. Miguel Cardona and the United States Department of Education, United States District Court for the Northern District of California, Case No. 3:19-cv-03674-WHA, the Department joined a proposed class settlement agreement that resulted in a blanket grant of automatic, presumptive relief for all borrower defense to repayment applications filed by students at any of approximately 150 different listed institutions, including Capella University, through June 22, 2022. The class settlement agreement also provided certain expedited review of borrower defense claims related to schools excluded from the automatic relief list, as well as for borrowers who applied during the period after execution of the settlement and before final approval (“Post-Class Applicants”). The district court granted final approval of the settlement on November 16, 2022. Intervenors, including multiple intervening higher education institutions and companies, appealed the district court’s order. Intervenors’ request to stay the district court’s final judgment approving the settlement pending resolution of the appeal has been denied.\n\nIt is unclear whether the Department might seek recovery for the amounts of loans discharged pursuant to the automatic relief provision in the Sweet settlement. In a July 25, 2022 filing in the same litigation, the Department stated that providing automatic relief to such borrowers “does not constitute the granting or adjudication of a borrower defense pursuant to the Borrower Defense Regulations, and therefore provides no basis to the Department for initiating a borrower defense recoupment proceeding against any institution identified” on the list. The Department has indicated that any recoupment against institutions “could be imposed only after the Department initiated a separate, future proceeding, in accordance with regulations that require the Department to prove a sufficient basis for liability and provide schools with notice and an opportunity to be heard.” If the Department were to seek recovery for the amounts of automatically discharged loans of Capella University students under the Sweet settlement, Capella University would dispute and defend against such efforts. At this time, the Company is unable to predict the ultimate outcome of Capella-related borrower defense applications. If the Department were to successfully seek recovery for the amounts of discharged loans from Capella University in future proceedings, any such recovery could have a material adverse effect on our business.\n\nAs a result of the Fifth Circuit’s August 7, 2023 nationwide injunction of the 2022 Borrower Defense to Repayment (“BDTR”) 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\n\n107\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nadjudicate 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 December 2025, the Department requested an 18-month extension of the January 28, 2026 deadline, which was denied; the Department requested reconsideration in January 2026 and is awaiting the court’s decision. In 2023, the Department informed institutions that: it would be notifying most schools of all applications received by the Department from June 23, 2022 to November 15, 2022 (constituting Sweet Post-Class Applicants) in a single send (and anticipated completing notification to all schools by approximately April 2024).\n\nOn January 25, 2024, Capella University received notice that the Department received approximately 6,700 borrower defense to repayment applications with claims for forgiveness of loans taken out at the university and filed between June 23, 2022 and November 15, 2022. On February 1, 2024, Strayer University received notice that the Department received approximately 1,900 borrower defense to repayment applications with claims for forgiveness of loans taken out at the university and filed between June 23, 2022 and November 15, 2022. In the notices received, the Department indicated that: (1) the notification was occurring prior to any substantive review of the applications as well as their adjudication; (2) it would send the applications to Capella University and Strayer University in batches of 500 per week; (3) it is optional for institutions to respond to the applications; and (4) not responding will result in no negative inference by the Department. The Department has also explained that it will separately decide whether to seek recoupment on any approved claim and that any recoupment actions the Department chooses to initiate will have their own notification and response processes, which include providing additional evidence to the institution. The Department has indicated that an institution will learn of the Department’s determination only if it approves a BDTR application and the Department seeks recoupment. In relation to the separate 2021 notice received by Capella University, the Department indicated there were more than 1,000 applications pending, but the Company only ever received approximately 500 actual claims, and after an exhaustive review and response process the Company believes that none properly stated a claim for loan forgiveness. Since the Department’s 2024 notices, Capella University has received approximately 6,770 applications, and Strayer University has received approximately 1,870 applications. Each university has provided a response to the applications it received within the time allowed by the Department. At this time, the Company is unable to predict whether the Department will grant BDTR relief for the claims noticed on January 25, 2024, February 1, 2024, or at any other time, or if so, whether it will seek recoupment from Capella University or Strayer University. If the Department were to seek recoupment, Capella University and Strayer University would dispute and defend against such efforts. However, if the Department were to successfully seek recovery for the amounts of discharged loans from Strayer University and Capella University in future proceedings, any such recovery could have a material adverse effect on our business.\n\n22.    Regulation\n\nUnited States Regulation\n\nAs institutionally accredited institutions of higher education operating in multiple jurisdictions, Capella University and Strayer University are subject to accreditation rules and varying state licensing and regulatory requirements. In addition, the Higher Education Act and the regulations promulgated thereunder require all higher education institutions that participate in the various Title IV programs, including Capella University and Strayer University, to comply with detailed substantive and reporting requirements and to undergo periodic regulatory scrutiny. The Higher Education Act mandates specific regulatory responsibility for each of the following components of the higher education regulatory triad: (1) the institutional accrediting agencies recognized by the U.S. Secretary of Education; (2) state education regulatory bodies; and (3) the federal government through the Department of Education. The Company’s business activities are planned and implemented to achieve compliance with the rules and regulations of the state, regional and federal agencies that regulate its activities. The regulations, standards, and policies of these regulatory agencies are subject to frequent change.\n\nOne Big Beautiful Bill Act\n\nOn July 4, 2025, President Trump signed OBBBA, which includes, among other things, amendments to portions of the Higher Education Act of 1965 and the Internal Revenue Code of 1986, as amended. OBBBA makes a variety of changes to federal student aid programs, including loan limits, accountability measures for programs based on low earning outcomes, loan repayment, Pell Grant eligibility, and regulatory changes.\n\nOBBBA 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. For graduate students, OBBBA maintains existing loan limits of $20,500 annually for unsubsidized loans in the Direct Loan Program; for professional students enrolled on or after July 1, 2026, OBBBA raises the annual limits to $50,000. For graduate students who are not and have not been professional students, the new aggregate graduate loan limit is $100,000, irrespective of any undergraduate borrowing. With respect to graduate\n\n108\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nstudents who are or have been professional students, the aggregate graduate loan limit is generally $200,000 minus the amounts borrowed for the professional degree program. With respect to professional students, the aggregate graduate loan limit is generally $200,000 minus certain other previously borrowed amounts, including certain subsidized loans and amounts borrowed as a graduate student, if applicable. 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 initially indicated in July 2025 that it planned to release a schedule of reductions for public comment later in 2025, which institutions would be required to use for students who enrolled less than full-time for academic years 2026-27 and beyond. However, in connection with negotiated rulemaking, consensus was reached in November 2025 on regulatory text that would establish loan eligibility at the time of disbursement using an agreed calculation for less than full-time students, and proposed regulations were released in January 2026.\n\nOBBBA 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: (i) working adults in the same field of study in the state where the institution is located, (ii) working adults in the same field of study in the United States, or (iii) all working adults in the state where the institution is located. If fewer than 50% of students at the institution reside in the institution’s state, then the median earnings will be calculated based on the lesser of the national average for (i) all working adults or (ii) working adults in the same field of study. Both the undergraduate and graduate/professional accountability provisions apply to the cohort of students who completed the program four years prior, are working, are not enrolled at any institution, and who received Federal Direct Loan funds for enrollment in the program. If a cohort is less than 30 students, the Secretary of Education may aggregate additional years of programmatic data. 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. 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.\n\nAmong 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. Current borrowers repaying loans under existing repayment options may, depending on the loan repayment type: (i) continue to repay under the selected plan or choose a new plan within a prescribed period; or (ii) be required to select from a limited set of plans as of a date certain. For example, borrowers currently on an Income-Contingent Repayment (“ICR”) plan must transition to a different plan by July 1, 2028. 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.\n\nEffective July 1, 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, 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. In addition, they must be approved by the state governor, aligned with high-demand, high-skill or high-wage jobs, have at least 70% completion and job placement rates, and tuition must be less than the value-added earnings of graduates who received the Workforce Pell Grant. Workforce Pell Grants may not be combined with a regular Pell grant.\n\n109\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nOBBBA amends the Higher Education Act to delay the effective date of the 2022 borrower defense to repayment rules, including the closed school discharge provisions, until July 1, 2035. The 2019 version of those rules, which took effect July 1, 2020, is instead reinstated.\n\nThe Department of Education convened two negotiated rulemaking committees to meet to consider regulations to implement provisions of OBBBA and related Trump administration priorities, as detailed in the “Negotiated Rulemaking” section below.\n\nTitle IV Programs\n\nStudents finance their education at Capella University and Strayer University in a variety of ways, and historically a majority of students have participated in one or more Title IV programs. Capella University and Strayer University maintain eligibility for their students to participate in the following Title IV programs:\n\n•Federal Grants. Grants under the Federal Pell Grant program are available to eligible students based on financial need and other factors.\n\n•Campus-Based Programs. The campus-based Title IV programs include the Federal Supplemental Educational Opportunity Grant program, the Federal Perkins Loan, and the Federal Work-Study Program. Neither Capella University nor Strayer University actively participates in the Federal Perkins Loan program, which expired on September 30, 2017. In addition, Strayer University does not actively participate in the Federal Work-Study Program.\n\n•Federal Direct Student Loans. Under the William D. Ford Federal Direct Loan Program, the Department of Education makes loans directly to students and their parents. Undergraduate students who demonstrate financial need may qualify for a subsidized loan. The federal government pays the interest on a subsidized loan while the student is in school and during any approved periods of deferment, after which the student’s obligation to repay the loan begins. Unsubsidized loans are available to undergraduate students who do not qualify for a subsidized loan or, in some cases, in addition to a subsidized loan, as well as graduate students (subject to certain limitations).\n\nFederal Financial Aid Regulation\n\nTo be eligible to participate in Title IV programs, Capella University and Strayer University must comply with specific standards and procedures set forth in the Higher Education Act and the regulations issued thereunder by the Department of Education. 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. The institutions must also follow extensive Department of Education rules regarding the awarding and processing of funds issued under Title IV programs. Some of the key provisions regarding institutional eligibility and processing federal financial aid are described below.\n\nFinancial Responsibility\n\nThe Higher Education Act and Department of Education regulations establish extensive standards of financial responsibility that institutions such as Capella University and Strayer University must satisfy in order to participate in Title IV programs. These standards generally require that an institution provide the services described in its official publications and statements, properly administer Title IV programs in which it participates, and meet all of its financial obligations, including required refunds and any repayments to the Department of Education for debts and liabilities incurred in programs administered by the Department of Education.\n\nDepartment of Education standards utilize a complex formula to assess financial responsibility. The standards focus on three financial ratios: (1) equity ratio (which measures the institution’s capital resources and ability to borrow); (2) primary reserve ratio (which measures the institution’s financial viability and liquidity); and (3) net income ratio (which measures the institution’s ability to operate at a profit or within its means). An institution’s financial ratios must yield a composite score of at least 1.5 for the institution to be deemed financially responsible without alternative measures and further federal oversight. For Capella University and Strayer University, the Department evaluates financial responsibility at the parent level, based on review of SEI’s financial statements. The Company has applied the financial responsibility standards to its financial statements as of and for the year ended December 31, 2025, and based on its calculated composite score and other relevant factors, it believes the Company met the Department of Education’s financial responsibility standards.\n\nOn 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. The Department of Education will automatically determine that an institution is not financially responsible if a “mandatory” triggering event occurs, which includes, among other things, the institution receives certain warnings from the SEC, fails to file required reports in a timely manner, or has a cohort default rate of 30% or greater\n\n110\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nfor each of the two most recent official calculations. The Department of Education will also determine that an institution is not financially responsible if certain triggering events, such as a lawsuit against the institution, an accrediting agency’s requirement that the institution submit a teach-out plan, or potential loss of Title IV eligibility for gainful employment programs, result in the institution’s recalculated composite score to be less than 1.0. The Department of Education may also invoke certain “discretionary” triggering events, such as citation by a state agency or accrediting agency for failure to satisfy the agency’s standards, to determine that an institution is not financially responsible. An institution determined not to be financially responsible because of one or more triggering events may be required to issue an irrevocable letter of credit for not less than 10% of the Title IV funds received by the school for the most recently completed fiscal year and/or will be issued a Provisional Program Participation Agreement.\n\nOn August 30, 2019, as part of the final BDTR regulations, the Department of Education made changes to the financial responsibility requirements, including establishing a more limited set, as compared to the 2016 rule, of mandatory and discretionary triggering events that have, or could have, a materially adverse impact on the institution’s financial condition and therefore warrant financial protection. The 2019 rule left intact the consequences of the triggering events under the 2016 rule. The 2019 rule further updates the definitions of terms used to calculate an institution’s composite score and otherwise amends the composite score methodology to reflect changes in FASB accounting standards pertaining to new leases. The financial responsibility changes became effective July 1, 2020.\n\nOn October 23, 2023, the Department released final rules on financial responsibility. Pursuant to new regulations effective July 1, 2024, the Department adopted new mandatory and discretionary triggers and new reporting requirements. New mandatory triggers include but are not limited to failing the 90/10 Rule; receiving at least 50% of Title IV funds from programs that fail gainful employment requirements; certain SEC or exchange actions; and certain actions that result in an institution’s recalculated composite score to fall below 1.0, including being subject to a Department action to recover losses from approved BDTR claims. All of the mandatory triggers constitute an automatic failure of the financial responsibility requirements and would enable the Department to seek financial protection. The rules also establish new discretionary triggers that permit the Department to conduct a case-by-case analysis to determine if additional financial protection is needed. Such discretionary triggers include accrediting agency and government agency actions; certain defaults or creditor events; high annual dropout rates; elimination of programs or locations that enroll more than 25% of the institution’s Title IV students; and pending BDTR claims, among other things. 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. The amount of financial protection can range from 10% up to 50% of Title IV funds per triggering event, and the Department may “stack” financial protection requirements if more than one mandatory or discretionary trigger is present.\n\nStudent Loan Defaults\n\nThe 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 Federal Family Education Loan Program loan during that fiscal year. The cohort default rate is the percentage of those 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, resulting in a three-year cohort default rate. Because of the need to collect data on defaults, the Department of Education publishes cohort default rates three years in arrears; for example, in the fall of 2025, the Department of Education issued cohort default rates for federal fiscal year 2022.\n\nThe Department of Education may take adverse action against an institution if it has excessive cohort default rates, including without limitation the following:\n\n•If an institution’s cohort default rate is 30% or more in a given fiscal year, the institution will be required to assemble a “default prevention task force” and submit to the Department of Education a default improvement plan.\n\n•If an institution’s cohort default rate exceeds 30% for two consecutive years, the institution will be required to review, revise, and resubmit its default improvement plan.\n\n•If an institution’s cohort default rate exceeds 30% for two out of three consecutive years, the Department of Education may subject the institution to provisional certification.\n\n•If an institution’s cohort default rate is equal to or greater than 30% for each of the three most recent federal fiscal years for which data are available, the institution will be ineligible to participate in the Direct Loan Program and Federal Pell Grant Program.\n\n111\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nAn institution generally loses eligibility to participate in Title IV programs if its most recent cohort default rate is greater than 40%. Institutions with a cohort default rate equal to or greater than 15% for any of the three most recent fiscal years for which data are available are subject to a 30-day delayed disbursement period for first-year, first-time undergraduate borrowers.\n\nNational and institutional cohort default rates for cohort years 2020, 2021, and 2022 have been impacted by the COVID-19 repayment pause. Capella University’s and Strayer University’s official three-year cohort default rates for 2020, 2021, and 2022, as well as the average official three-year cohort default rates for proprietary institutions nationally, were as follows:\n\nCohort YearCapella \nUniversityStrayer \nUniversityNational Average\nProprietary\n Institutions\n\n20200.0 %0.0 %0.0 %\n\n20210.0 %0.0 %0.0 %\n\n20220.0 %0.0 %0.0 %\n\nAs 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.\n\nOn 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. In June 2023, the Department of Education announced that student loan interest would begin to accrue on September 1, 2023, and student loan repayment resumed in October 2023.\n\nOn 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 ICR and Pay As You Earn (PAYE) repayment plans, designated for early implementation on December 16, 2024, through July 1, 2027. 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. On December 9, 2025, the Department announced a proposed joint settlement to resolve the legal challenges, resulting in termination of the SAVE Plan; the settlement is pending court approval.\n\nThe 90/10 Rule\n\nA requirement of the Higher Education Act, commonly referred to as the 90/10 Rule, applies only to proprietary institutions of higher education, which include Capella University and Strayer University. Under this rule, a proprietary institution is prohibited from deriving more than 90% of its revenues (as revenues are computed under the Department of Education’s methodology) from federal funds on a cash accounting basis (except for certain institutional loans) for any fiscal year. Historically, by statute, only Title IV funds have been considered within the 90% metric; however as described below, that changed for fiscal years beginning on or after January 1, 2023.\n\nA 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.\n\nOn 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. The Department of Education promulgated new regulations regarding, among other things, the 90/10 rule as part of the Institutional and Programmatic Eligibility negotiated rulemaking and the committee reached consensus on the topic in March 2022. The Department released final regulations on October 27, 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. The preamble to the final rule and subsequent sub-regulatory guidance\n\n112\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nprohibited the inclusion of non-Title IV eligible programs offered in part or in full through distance education or at unapproved locations in the 10% calculation, but this language was effectively rescinded by new interpretive guidance published by the Department on July 7, 2025. 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. DOD (military tuition assistance) and the VA (veterans education benefits). The Department indicated that it will publish periodic updates to the list as needed.\n\nIn addition, from time to time 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. The Company cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule.\n\nGainful Employment\n\nUnder 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. On October 31, 2014, the Department of Education published final regulations related to gainful employment. The regulation went into effect on July 1, 2015 (“2015 Regulations”), with the exception of new disclosure requirements, which generally went into effect January 1, 2017, although some portions of those requirements were delayed until July 1, 2019.\n\nThe 2015 Regulations included two debt-to-earnings measures, consisting of an annual income rate and a discretionary income rate. The annual income rate measured student debt in relation to earnings, and the discretionary income rate measured student debt in relation to discretionary income. A program passed if the program’s graduates:\n\n•have an annual income rate ratio that does not exceed 8%; or\n\n•have a discretionary income rate that does not exceed 20%.\n\nIn addition, a program that did not pass either of the debt-to-earnings metrics and had an annual income rate between 8% and 12% or a discretionary income rate between 20% and 30% was considered to be in a warning zone. A program failed if the program’s graduates had an annual income rate of 12% or greater and a discretionary income rate of 30% or greater. A program became Title IV-ineligible for three years if it failed both metrics for two out of three consecutive years or failed to pass at least one metric for four consecutive award years.\n\nOn January 8, 2017, Capella University and Strayer University received their final 2015 debt-to-earnings measures. None of their programs failed the debt-to-earnings metrics. One active Capella University program, the Masters of Science in Marriage and Family Counseling/Therapy, was “in the zone” and two active Strayer University programs, the Associate in Arts in Accounting and Associate in Arts in Business Administration, were “in the zone.” Each of those three programs remained fully eligible. The Department has not released any subsequent debt-to-earnings measures under the 2015 Regulations.\n\nOn July 1, 2019, the Department of Education released final gainful employment regulations, which contain a full repeal of the 2015 Regulations, including all debt measures, reporting, disclosure, and certification requirements, effective July 1, 2020.\n\nOn December 8, 2021, the Department of Education announced its intention to establish a negotiated rulemaking committee to prepare proposed regulations for, among other topics, gainful employment, via the Institutional and Programmatic Eligibility rulemaking. Meetings of the negotiated rulemaking committee occurred in spring 2022 with the committee failing to reach consensus. 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. 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. 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\n\n113\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\ndescribes 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 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 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, and in October 2025, the court granted summary judgment in favor of the Department, upholding the rule. Plaintiffs filed a notice of appeal in November 2025. Capella University and Strayer University are not parties to the lawsuit. The Company is unable to predict the ultimate outcome of the litigation.\n\nIn 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. 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 further announced that there would be no additional extensions of the reporting deadline beyond September 30, 2025, it did not plan to produce any FVT/GE metrics prior to the new deadline, and that it would take no enforcement or other punitive actions against institutions that had not completed reporting to date.\n\nOn January 9, 2026 the negotiated rulemaking committee reached consensus on changes to the current gainful employment regulation. The consensus language includes, among other things, elimination of the debt-to-earnings ratio as an accountability metric for gainful employment programs, changes to generally align the gainful employment earnings premium test with the accountability measure codified in OBBBA, and changes to the reporting requirements that currently exist under the gainful employment regulation. The Department’s proposed changes to gainful employment will be subject to public comment and are expected to be effective as early as July 1, 2027.\n\nMisrepresentation\n\nUnder the Higher Education Act, the Department of Education may impose various sanctions, including a fine or suspension or termination of an institution’s participation in Title IV programs, if it engages in substantial misrepresentation of the nature of its educational program, its financial charges, or the employability of its graduates. The Department’s related regulations, which took effect July 1, 2011, 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. The rule specifies the types of statements that can subject the institution to liability for misrepresentation, as well as the nature and form of misleading statements.\n\nAs part of the Department’s 2016 promulgation of the BDTR regulation, the Department changed the definition of misrepresentation for Title IV regulations to include any statement that “has the likelihood or tendency to mislead under the circumstances.” The expanded definition included “any statement that omits information in such a way as to make the statement false, erroneous, or misleading.” This regulation was published on November 1, 2016 and, after a series of delays, went into effect as of October 16, 2018.\n\nOn August 30, 2019, the Department released final BDTR regulations that included a new definition of “misrepresentation,” which became effective July 1, 2020. The final rule defines a “misrepresentation” as: 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\n\n114\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\n(1) enrollment or continuing enrollment at the institution, or (2) the provision of educational services for which the loan was made.\n\nOn October 31, 2022, the Department released final Borrower Defense to Repayment regulations, which include among other defenses to repayment substantial misrepresentation, with a significantly expanded definition of misrepresentation. The final rule’s definition of misrepresentation includes 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. A misrepresentation includes statements and omissions made in any medium, whether directly or indirectly, to a student, prospective student or any member of the public, or to an accrediting agency, to a State agency, or to the Secretary of Education. 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.\n\nOn 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.\n\nOn January 16, 2025, the Department issued a Federal Student Aid Notice of Interpretation (Dear Colleague Letter GEN-25-01) reminding institutions that misrepresentation requirements “apply with equal force to statements made by a third-party entity engaged by the eligible institution” and that “institutions may be responsible for the consequences of any misrepresentation committed by any external service provider that they engage.” The Department gave examples of statements that are “likely” to qualify as a misrepresentation, including inaccurately identifying an individual employed by an external servicer provider as being employed by the eligible institution; inaccurately presenting a sales representative or recruiter as an academic advisor, such as by referring to them as a “counselor”; and describing a program provided in substantial part by an external service provider as “the same as” a corollary residential- or campus-based program.\n\nBorrower Defenses to Repayment\n\nPursuant 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; (2) the institution failed to perform on a contract with the student; and/or (3) the institution committed a “substantial misrepresentation” on which the borrower reasonably relied to his or her detriment.\n\nThese defenses are asserted through claims submitted to the Department of Education, and the Department has the authority to issue a final decision. In addition, the regulation permits the Department to grant relief to an individual or group of individuals, including individuals who have not applied to the Department seeking relief. If a defense is successfully raised, the Department has discretion to initiate action to collect from an institution the amount of losses incurred based on the borrower defense. The 2016 BDTR Rule also amends the rules concerning discharge of federal student loans when a school or campus closes and prohibits pre-dispute arbitration agreements and class action waivers for borrower defense-type claims. On January 19, 2017, the Department of Education issued a final rule, updating the hearing procedures for actions to establish liability against an institution of higher education and establishing procedures for recovery proceedings under the borrower defense regulations. Several times between June 2017 and February 2018, the Department of Education announced delays until July 1, 2019 of implementation of certain portions of the 2016 BDTR Rule, including those portions of the regulations that establish a new federal standard and a process for determining whether a Direct Loan borrower has a defense to repayment of a Direct Loan based on an act or omission of an institution. However, in October 2018, a judge denied a request to delay implementation of portions of the regulations, and as a result the 2016 BDTR Rule went into effect as of October 16, 2018.\n\nOn September 23, 2019, the Department published final Borrower Defense to Repayment regulations (the “2019 BDTR Rule”), which governs borrower defense to repayment claims in connection with loans first disbursed on or after July 1, 2020. Under the 2019 BDTR Rule, an individual borrower can assert a defense to repayment and be eligible for relief if she or he establishes, by a preponderance of the evidence, that (1) the institution at which the borrower enrolled made a misrepresentation of material fact upon which the borrower reasonably relied in deciding to obtain a Direct Loan or a loan repaid by a Direct Consolidation Loan; (2) the misrepresentation directly and clearly related to the borrower’s enrollment or continuing enrollment\n\n115\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nat the institution or the institution’s provision of education services for which the loan was made; and (3) the borrower was financially harmed by the misrepresentation. The Department will grant forbearance on all loans related to a claim at the time the claim is made.\n\nThe 2019 BDTR Rule defines “financial harm” as the amount of monetary loss that a borrower incurs as a consequence of a misrepresentation. The Department will determine financial harm based upon individual earnings and circumstances, which must include consideration of the individual borrower’s career experience subsequent to enrollment and may include, among other factors, evidence of program-level median or mean earnings. “Financial harm” does not include damages for nonmonetary loss, and the act of taking out a Direct Loan, alone, does not constitute evidence of financial harm. Financial harm also cannot be predominantly due to intervening local, regional, national economic or labor market conditions, nor can it arise from the borrower’s voluntary change in occupation or decision to pursue less than full-time work or decision not to work. The 2019 BDTR Rule contains certain limitations and procedural protections. Among the most prominent of these restrictions, the regulation contains a three-year limitation period of claims, measured from the student’s separation from the institution, does not permit claims to be filed on behalf of groups, and requires that institutions receive access to any evidence in the Department’s possession to inform its response. The 2019 BDTR Rule permits the usage of pre-dispute arbitration agreements as a condition of enrollment, so long as the institution provides plain-language disclosures to students and the disclosure is placed on the institution’s website. The regulations also allow for a borrower to choose whether to apply for a closed school loan discharge or accept a teach-out opportunity. In addition, the closed school discharge window is expanded from 120 days to 180 days prior to the school’s closure, though the final rule does not allow for an automatic closed school loan discharge.\n\nInstitutions are required to accept responsibility for the repayment of amounts discharged by the Secretary pursuant to the borrower defense to repayment, closed school discharge (associated with closure of a school or an additional location or branch campus), false certification discharge, and unpaid refund discharge regulations. If the Secretary discharges a loan in whole or in part, the Department of Education may require the school to repay the amount of the discharged loan.\n\nOn October 31, 2022, the Department of Education published a final Borrower Defense to Repayment Rule (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 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 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 2022 BDTR Rule became effective July 1, 2023.\n\nOn August 7, 2023, in the matter of Career Colleges and Schs. of Tex. vs. U.S. Dep’t of Educ., et al. (No. 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. 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. 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. The case remains with the federal district court on remand.\n\nThe OBBBA, signed into law on July 4, 2025, amends the Higher Education Act to delay the effective date of the 2022 BDTR Rule, including their closed school discharge provisions, until July 1, 2035. The OBBBA reinstated the 2019 version of those rules, which took effect July 1, 2020. In connection with litigation challenging the 2022 BDTR Rule that resulted in an injunction delaying its effective date, the Department indicated it would not adjudicate BDTR applications under the 2022 BDTR Rule unless the rule was reinstated.\n\n116\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nState Authorization Reciprocity Agreement (SARA)\n\nCapella University and Strayer University participate in the State Authorization Reciprocity Agreement (“SARA”), enabling enrollment of distance education students in SARA member states. The universities apply separately to non-SARA states (e.g., California) for required authorization. Failure to comply with SARA requirements or state licensing for distance education in non-SARA states could result in loss of SARA participation or state authorization for distance education there.\n\nThe National Council for State Authorization Reciprocity Agreements (“NC-SARA”) considers potential policy changes each year. Past proposals, including more stringent standards for participation of for-profit institutions or exclusion of for-profit institutions from participation, were not adopted, but illustrate the risk that future changes could materially adversely affect Capella University, Strayer University, and the Company. For example, exclusion from SARA would require seeking authorization in each state, increasing costs and risking denials in some jurisdictions. NC-SARA began its 2025 policy modification process in January 2025 with a call for proposals. In September 2025, NC-SARA announced approval of nine policy changes by all four regional compacts, later adopted by the NC-SARA board. The next modification process is expected to begin in January 2026. Adoption of proposals affecting institutional participation could have a material adverse effect on Capella University, Strayer University, and the Company.\n\nNegotiated Rulemaking\n\nOn April 4, 2025, the Department announced its intention to host public hearings and convene one or more negotiated rulemaking committees to prepare proposed Title IV regulations. The Department hosted public hearings on April 29, 2025 and May 1, 2025 and accepted written comments through May 5, 2025. The Department held negotiated rulemaking on proposed changes to the Public Service Loan Forgiveness program June 30 through July 2, 2025. The negotiating committee did not reach consensus on changes. As a result the Department proposed its own regulatory language on August 18, 2025, and issued final regulations on October 31, 2025 which, among other things, amends the definition of a “qualifying employer” to exclude employers that engage in activities that have a “substantial illegal purpose” as described in the regulation.\n\nOn July 24, 2025, the Department of Education announced its intention to establish two negotiated rulemaking committees to prepare proposed regulations implementing OBBBA and related Trump administration priorities. One committee, the Reimagining and Improving Student Education (“RISE”) Committee, addressed federal student loan-related changes and met for two multi-day sessions between September 2025 and November 2025; the committee reached consensus on draft regulatory language, and the Department released proposed regulations on January 29, 2026 consistent with the consensus language. Specifically, the proposed regulations implement the statutory loan-related changes reflected in OBBBA (described in the OBBBA section above) which among other things includes, with limited grandfathering, new annual, aggregate and lifetime loan limits for graduate students and professional students, proportional adjustment of annual loan limits for students enrolled less than full time, and the phasing out of Federal Direct PLUS loans for graduate students and professional students. The proposed regulations define “graduate student” and “professional student” for purposes of such changes. “Graduate student” is defined as “[a] student enrolled in a program of study that is above the baccalaureate level and awards a graduate credential (other than a professional degree) upon completion of the program.” “Professional student” is defined as “[a] student enrolled in a program of study that awards a professional degree upon completion of the program,” and the proposed regulations clarify that a professional degree is a degree that: (1) signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor’s degree; (2) is generally at the doctoral level, and that requires at least six academic years of postsecondary education coursework for completion, including at least two years of post-baccalaureate level coursework; (3) generally requires professional licensure to begin practice; and (4) includes a four-digit program CIP code in certain specified fields (pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology, and clinical psychology). The Department is accepting public comment on the proposed rule through March 2, 2026.\n\nA second committee, the Accountability in Higher Education and Access through Demand-driven Workforce Pell (“AHEAD”) Committee, addressed Workforce Pell, institutional and programmatic accountability, and other issues, and met for two multi-day sessions between December 2025 and January 2026; the committee reached consensus on the Workforce Pell and accountability packages. Because the committees reached consensus, the Department must publish a notice of proposed rulemaking that generally aligns with the consensus language.\n\nNotwithstanding consensus on draft regulatory language, the Company is unable to predict the ultimate outcome of the rulemaking process or what guidance the Department may issue regarding how schools are to implement OBBBA’s legislative changes.\n\n117\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nOn January 26, 2026, the Department announced its intent to establish the Accreditation, Innovation, and Modernization negotiated rulemaking committee to develop proposed regulations on accreditation-related topics; the Department anticipates the committee will convene April-May 2026.\n\nTitle IX\n\nOn April 19, 2024, the U.S. Department of Education released its final rule regarding the implementation of Title IX, which prohibits discrimination on the basis of sex in education programs that receive funding from the federal government (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 final 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. Kansas v. U.S. Dep’t of Educ., No. 5:24-cv-4041 (D. Kan. 2024). 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 nationwide. On February 4, 2025, the Department’s Office for Civil Rights issued a Dear Colleague Letter (“DCL”) 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.\n\nOn January 20, 2025, President Trump issued Executive Order 14168 “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government” ordering, among other matters, all agencies to enforce laws governing sex-based rights, protections, opportunities, and accommodations consistent with definitions provided in the executive order. The executive order defines “sex” as a binary classification that does not include “gender identity” and requires agencies to take various actions consistent with that position.\n\nOn April 4, 2025, the Department and the U.S. Department of Justice jointly announced a “Title IX Special Investigations Team” (the “Title IX SIT”) in response to what the agencies describe as a “staggering” volume of Title IX complaints. The Title IX SIT is intended to streamline Title IX investigations conducted by the federal government by leveraging teams with personnel from both agencies to coordinate on investigation and enforcement.\n\nTitle VI\n\nUnder Title VI of the Civil Rights Act of 1964, institutions receiving federal financial assistance are prohibited from discriminating on the basis of race, color, or national origin. On January 21, 2025, President Trump issued Executive Order 14173 “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” ordering, among other matters, all agencies to enforce civil rights laws and combat illegal private sector Diversity, Equity, and Inclusion (“DEI”) preferences, mandates, policies, programs and activities. The executive order further directed the U.S. Attorney General and the Secretary of Education to issue guidance to all institutions of higher education that receive federal financial assistance regarding measures and practices required to comply with the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023) (“SFFA”), in which the Court significantly altered the existing legal framework relevant to race-conscious admissions to achieve student body diversity. On February 5, 2025, the U.S. Attorney General issued a memorandum to all Department of Justice employees stating that the Department of Justice’s Civil Rights Division will investigate, eliminate, and penalize illegal DEI as well as diversity, equity, inclusion and accessibility (“DEIA”) preferences, mandates, policies, programs and activities in the private sector and educational institutions that receive federal funds. The Attorney General further stated that by March 1, 2025, the Civil Rights Division and Office of Legal Policy would jointly prepare a report containing recommendations for enforcement and address: key sectors of concern within the Department of Justice’s jurisdiction; the most egregious illegal DEI/DEIA practitioners in each sector of concern; plans to deter the use of illegal DEI/DEIA, including proposals for criminal investigations and up to nine potential civil compliance investigations of publicly traded corporations and certain other organizations; potential litigation activities, regulatory actions, and sub-regulatory guidance; and other strategies to end illegal DEI and DEIA discrimination and preferences and ensure compliance with federal civil rights laws. On July 29, 2025, the Attorney General released “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination,” which describes “the significant legal risks of initiatives that involve discrimination based on protected characteristics” and provides “non-binding best practices to help entities avoid the risk of violations.” Various\n\n118\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nlitigation challenging Executive Order 14173 was brought in federal district court; after a preliminary injunction was granted by a Maryland district court enjoining portions of the executive order, the appeals court stayed the injunction pending appeal.\n\nOn February 14, 2025, the Department of Education issued a DCL setting forth the anti-discrimination obligations of institutions that receive federal financial assistance. The DCL asserts that the SFFA decision applies more broadly to prohibit using race in decisions related to admissions, hiring, promotion, compensation, financial aid, scholarships, prizes, administrative support, discipline, housing, graduation ceremonies, and all other aspects of student, academic, and campus life. The DCL further states that programs and activities that treat students differently on the basis of race to achieve “nebulous” diversity, racial balancing, social justice, or equity goals are illegal. The Department informed institutions that the Department intended to take appropriate measures to assess compliance with the applicable statutes and regulations beginning February 28, 2025. The DCL further noted that institutions that fail to comply with federal civil rights law may, consistent with applicable law, face potential loss of federal funding. On February 28, 2025, the Department issued additional guidance in a Frequently Asked Questions (“FAQs”) document clarifying aspects of the DCL. Multiple lawsuits have been filed seeking to enjoin and vacate the DCL and FAQs alleging that they are unconstitutional, violate the Administrative Procedure Act, and are vague and disrupt educational practices, including by limiting academic freedom. Capella University and Strayer University are not parties to the lawsuits. In August 2025, the U.S. District Court for the District of Maryland vacated the DCL, FAQs, and a related certification requirement. The Department subsequently confirmed it would not take any enforcement action or otherwise implement the guidance until further notice. On October 15, 2025, the Department filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit; and on January 21, 2026, the parties filed a joint motion to dismiss the appeal.\n\nOn March 14, 2025, the Department announced that its Office for Civil Rights has opened investigations into dozens of higher education institutions for alleged Title VI violations; the Department has continued to initiate additional Title VI investigations.\n\nAustralian and New Zealand Regulation\n\nThe Company operates two post-secondary educational institutions in Australia, Torrens University Australia Limited (“Torrens”) and Think: Colleges Pty Ltd (“Think”). In Australia, a distinction is made between higher education and vocational education organizations.\n\nHigher education providers consist of public and private universities, Australian branches of overseas universities and other higher education providers. Higher education qualifications consist of undergraduate awards (bachelor’s degrees, associate degrees and diplomas) and postgraduate awards (graduate certificates and diplomas, master’s degrees and doctoral degrees). The regulation of higher education providers is undertaken at a national level by the Tertiary Education Quality and Standards Agency (“TEQSA”). All organizations that offer higher education qualifications in or from Australia must be registered by TEQSA. Higher education providers that have not been granted self-accrediting status must also have their courses of study accredited by TEQSA. Registration as a higher education provider is for a fixed period of up to seven years. TEQSA regularly reviews the conduct and operation of accredited higher education providers.\n\nThe vocational education and training (“VET”) sector consists of technical and further education institutes, agricultural colleges, adult and community education providers, community organizations, industry skill centers and private providers. VET qualifications include certificates, diplomas and advanced diplomas. The regulation of VET providers is undertaken at a national level by the Australian Skills Quality Authority (“ASQA”). Organizations providing VET courses in Australia must be registered by ASQA as a Registered Training Organisation (“RTO”). Courses offered by RTOs need to be accredited by ASQA. Registration as an RTO is for a fixed period of up to seven years. ASQA regularly reviews the conduct and operations of RTOs.\n\nTorrens is one of 44 universities in Australia. It is a private, for-profit entity and is registered with TEQSA. As a self-accrediting university, it is not required to have its individual courses of study accredited by TEQSA. Torrens is also registered with ASQA as an RTO and is thus entitled to offer vocational and training courses. On September 3, 2025, Torrens completed its re-registration process with TEQSA and received a registration renewal from TEQSA for the maximum period of seven years, with two conditions.\n\nThink is one of approximately 5,000 RTOs in Australia and in that capacity is regulated by ASQA. It is also registered as a higher education provider with TEQSA. Its higher education courses require, and have received, accreditation by TEQSA.\n\nAustralia also maintains a Commonwealth Register of Institutions and Courses for Overseas Students (“CRICOS”) for Australian education providers that recruit, enroll and teach overseas students. Registration on CRICOS allows providers to offer courses to overseas students studying on Australian student visas. Both Torrens and Think are so registered.\n\n119\n\n[Table of Contents](#i8f80a9a4601c45bfaeb6727ac654564b_7)\n\nThe Commonwealth government has established income-contingent loan schemes that assist eligible fee-paying students to pay all or part of their tuition fees (separate but similar schemes exist for higher education and vocational courses). Under the schemes, the relevant fees are paid directly to the institutions by the Commonwealth government on behalf of the student. A corresponding obligation then exists from the participating student to the Commonwealth government, which is addressed by adding a levy to that student’s income tax until the loan amount has been repaid. Neither Torrens nor Think have any responsibility in connection with the repayment of these loans by students and, generally, this assistance is not available to international students. Both Torrens and Think are registered for the purposes of these plans (a precondition to their students being eligible to receive such loans).\n\nOn December 19, 2024, the Australian Federal Government introduced Ministerial Direction 111, which seeks to limit the number of international students, and is expected to draw student allocations determined by the Government on a prioritization approach. On August 4, 2025, the Australian Federal Government announced that the National Planning Level for international students for 2026 would be increased over 2025, contingent upon institutions fulfilling certain conditions, and that Ministerial Direction 111 would be replaced with an updated ministerial direction to reflect 2026 arrangements. On October 9, 2025, the Education Legislation Amendment (Integrity and Other Measures) Bill 2025 was introduced into the House of Representatives of the Australian Parliament, and passed both houses of Parliament on November 28, 2025. The legislation, which does not address numerical limits on international students, contains several measures to reform key legislative frameworks for education providers and aims to strengthen the integrity and regulation of the international education sector within Australia as well as transnational education and offshore delivery.\n\nThe Company operates a private training establishment in New Zealand, Media Design School at Strayer (“MDS”). 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."}