Regulatory Matters

Student Financial Aid

In fiscal year 2011, University of Phoenix generated 91% of our total consolidated net revenue and more than 100% of our operating income, and 86% of its cash basis revenue for eligible tuition and fees was derived from Title IV financial aid program funds, as calculated under the 90/10 Rule.

All U.S. federal financial aid programs are established by Title IV of the Higher Education Act and regulations promulgated thereunder. In August 2008, the Higher Education Act was reauthorized through September 30, 2013 by the Higher Education Opportunity Act. The U.S. Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program. Changes to the Higher Education Act are likely to result from subsequent reauthorizations, and the scope and substance of any such changes cannot be predicted.

The Higher Education Opportunity Act specifies the manner in which the U.S. Department of Education reviews institutions for eligibility and certification to participate in Title IV programs. Every educational institution involved in Title IV programs must be certified to participate and is required to periodically renew this certification.

University of Phoenix was recertified in November 2009 and entered into a new Title IV Program Participation Agreement which expires December 31, 2012.

Western International University was recertified in May 2010 and entered into a new Title IV Program Participation Agreement which expires September 30, 2014.

Accreditation

University of Phoenix and Western International University are accredited by The Higher Learning Commission of the North Central Association of Colleges and Schools (“HLC”). This accreditation provides the following:


•	recognition and acceptance by employers, other higher education institutions and governmental entities of the degrees and credits earned by students;


•	qualification to participate in Title IV programs (in combination with state higher education operating and degree granting authority); and


•	qualification for authority to operate in certain states.

The HLC began its previously scheduled comprehensive evaluation visits of University of Phoenix in March 2012, and Western International University in May 2012.

UNIACC

As discussed in Note 7, Goodwill and Intangible Assets, UNIACC was advised by the National Accreditation Commission of Chile that its institutional accreditation would not be renewed and therefore had lapsed. UNIACC has appealed the decision. In addition, in June 2012, UNIACC received a letter from a local prosecutor’s office in Santiago, Chile requesting that UNIACC voluntarily provide documents relating to UNIACC’s relationship with a former UNIACC employee who served as a member of the National Accreditation Commission until March 2012, as well as documents relating to UNIACC’s relationship with that individual’s consulting firm and spouse. We are evaluating the request and we intend to cooperate fully. At this time, we cannot predict the eventual scope or course of the inquiry or whether it will impact our pending appeal of the Commission’s decision not to renew UNIACC’s accreditation.