Dive Brief:
- Dlorah, the subsidiary of National American University Holdings that runs the for-profit National American University, earlier this month received an $8.5 million loan from the Center for Excellence in Higher Education (CEHE), which runs a handful of college chains, according to SEC filings.
- The one-year loan will provide the cash needed to secure a letter of credit required by the U.S. Department of Education, as well as to discharge a judgment lien on Dlorah-owned real estate.
- National American said it received a letter in March from the Ed Department saying it didn’t meet the financial responsibility standards for Title IV eligibility and requiring the college to post a letter of credit for as much as 50% of its Title IV awards in order to remain eligible.
Dive Insight:
National American said it asked the Ed Department to reconsider the amount of Title IV awards it would need to back with a letter of credit. The department initially asked for a letter of credit for either 50% ($36.7 million) or 15% ($11 million) of its Title IV awards, with the latter securing only provisional certification.
The appeal to the department resulted in two more options: posting a letter of credit for 10% of its Title IV awards ($7.3 million) or going on Heightened Cash Monitoring 2, with the department withholding a percentage of each HCM2 Title IV payment until the amount reached $7.3 million.
National American chose the first option. It also paid a $250,000 nonrefundable loan origination fee and CEHE’s attorney’s fees.
The Ed Department plans to review National American’s fiscal year 2019 financials to determine if the additional 5% letter of credit amount — the originally minimum — is needed. It amounts to $3.7 million.
NAU CEO Ronald Shape responded to an email request from Education Dive but said he could not comment on the news…. (continue reading)