- 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.
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)