5.	Fair Value and Credit Risk of Financial Instruments

Fair value for financial reporting is defined as the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value measurement of our financial assets utilized assumptions categorized as observable inputs under the accounting guidance. Observable inputs are assumptions based on independent market data sources.

The following table sets forth information regarding the recurring fair value measurement of our financial assets as reflected on our Condensed Consolidated Balance Sheet as of September 30, 2015:


			Fair Value Measurements at Reporting Date Using
Description	As of September 30, 2015		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
Cash equivalents:
Money market fund	$	131,394	$	131,394	$	0	$	0
Restricted cash:
Money market fund		1,236		1,236		0		0
Collateral deposits:
Money market fund		8,630		8,630		0		0

	$	141,260	$	141,260	$	0	$	0

The following table sets forth information regarding the recurring fair value measurement of our financial assets as reflected on our Condensed Consolidated Balance Sheet as of September 30, 2014:


			Fair Value Measurements at Reporting Date Using
Description	As of September 30, 2014		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
Cash equivalents:
Money market fund	$	196,171	$	196,171	$	0	$	0
Restricted cash:
Money market fund		1,786		1,786		0		0
Collateral deposits:
Money market fund		8,627		8,627		0		0

	$	206,584	$	206,584	$	0	$	0

We used quoted prices in active markets for identical assets as of the measurement dates to value our financial assets that were categorized as Level 1.

The carrying value for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and other current liabilities approximate fair value, because of the immediate or short-term maturity of these financial instruments. We did not have any financial assets or liabilities recorded at estimated fair value on a non-recurring basis on our Condensed Consolidated Balance Sheets as of September 30, 2015 or December 31, 2014. In accordance with ASC 810, the consolidation of a variable interest entity (the “CUSO”) in our consolidated financial statements beginning on September 30, 2014 was treated as an acquisition of assets and liabilities and, therefore, the assets and liabilities of the CUSO were included on our Condensed Consolidated Balance Sheet as of September 30, 2014 at their estimated fair value. See Note 7 – Variable Interest Entities for a further discussion of the estimated fair value of the assets and liabilities recorded.

As of September 30, 2015, the aggregate carrying value of the private education loans (“PEAKS Trust Student Loans”) owned by a trust (the “PEAKS Trust”) that purchased, owns and collects private education loans made under the PEAKS Private Student Loan Program (the “PEAKS Program”) and the private education loans (“CUSO Student Loans”) owned by the CUSO that purchased, owns and collects private education loans made under a private education loan program for our students (the “CUSO Program”) was $74,922 and the estimated fair value was approximately $84,185. As of December 31, 2014, the carrying value of the PEAKS Trust Student Loans and the CUSO Student Loans (collectively, the “Private Education Loans”) was $90,876 and the estimated fair value was approximately $101,623. As of September 30, 2014, the carrying value of the Private Education Loans was $94,611 and the estimated fair value was approximately $106,611. The fair value of the Private Education Loans was estimated using the income approach with estimated discounted expected cash flows. We utilized inputs that were unobservable in determining the estimated fair value of the Private Education Loans. The significant inputs used in determining the estimated fair value included the default rate, repayment rate and discount rate. Fair value measurements that utilize significant unobservable inputs are categorized as Level 3 measurements under the accounting guidance.

As of September 30, 2015, the carrying value of our debt under our Financing Agreement (as defined in Note 10 – Debt) was $89,011 and the estimated fair value was approximately $87,000. As of December 31, 2014, each of the carrying value and the estimated fair value of our debt under our Financing Agreement was approximately $96,300. The fair value of our debt under our Financing Agreement was estimated by discounting the future cash flows (assuming only scheduled principal payments) using current rates for similar loans with similar characteristics and remaining maturities. We utilized inputs that were unobservable in determining the estimated fair value of the debt under the Financing Agreement. The significant input used in determining the estimated fair value was the discount rate utilized for both credit and liquidity purposes. Fair value measurements that utilize significant unobservable inputs are categorized as Level 3 measurements under the accounting guidance.

As of September 30, 2015, the carrying value of the senior debt issued by the PEAKS Trust in the initial aggregate principal amount of $300,000 (the “PEAKS Senior Debt”) was $57,464 and the estimated fair value was approximately $52,057. As of December 31, 2014, the carrying value of the PEAKS Senior Debt was $85,711 and the estimated fair value was approximately $85,248. As of September 30, 2014, the carrying value of the PEAKS Senior Debt was $149,836 and the estimated fair value was approximately $149,583. The fair value of the PEAKS Senior Debt was estimated using the income approach with estimated discounted cash flows. We utilized inputs that were unobservable in determining the estimated fair value of the PEAKS Senior Debt. The significant input used in determining the estimated fair value was the discount rate utilized for both credit and liquidity purposes. Fair value measurements that utilize significant unobservable inputs are categorized as Level 3 measurements under the accounting guidance.

As of September 30, 2015, the carrying value of the liability that the CUSO was required to record (the “CUSO Secured Borrowing Obligation”) on its balance sheet for the cash received from the owners of the CUSO (the “CUSO Participants”), which liability we now consolidate, was $111,571 and the estimated fair value was approximately $98,065. As of December 31, 2014, the carrying value of the CUSO Secured Borrowing Obligation was $121,007 and the estimated fair value was approximately $116,933. As of September 30, 2014, the carrying value and estimated fair value of the CUSO Secured Borrowing Obligation was $122,542. The fair value of the CUSO Secured Borrowing Obligation was estimated using the income approach with estimated discounted cash

flows. We utilized inputs that were unobservable in determining the estimated fair value of the CUSO Secured Borrowing Obligation. The significant input used in determining the estimated fair value was the discount rate utilized for both credit and liquidity purposes. Fair value measurements that utilize significant unobservable inputs are categorized as Level 3 measurements under the accounting guidance.

Financial instruments that potentially subject us to credit risk consist primarily of accounts receivable, cash equivalents and the Private Education Loans. There is no concentration of credit risk of our accounts receivable, as the total is comprised of a large number of individual balances owed by students whose credit profiles vary and who are located throughout the United States. Our cash equivalents generally consist of money market funds which invest in high-quality securities issued by various entities. The Private Education Loans consist of a large number of individual loans owed by borrowers, whose credit profiles vary and who are located throughout the United States.