Company: LGCY
Filing Date: 2025-09-25
Form Type: 10-K
Source: 0001493152-25-014945
Chunk: 88

Company: Legacy Education Inc.
Filing Date: 2025-09-25
Form: 10-K
Item: Item 1
Chunk 88
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 affected students can apply for a discharge of the Title IV loans
incurred for the program of study the student did not complete due to the closure, and ED grants the discharge if the student meets certain
requirements. ED also may seek to recover the cost of the discharge from the institution. If any of our locations or institutions close,
our institutions could be subject to liabilities for closed school loan discharges. In conjunction with the 2022 revisions to the BDR
rule, ED also revised the closed school loan discharge provisions. However, these revisions are also enjoined as well as delayed under
the OBBBA. We cannot predict the outcome of any future revisions to the closed school loan discharge provisions that ED may initiate.

A
failure to maintain compliance with ED’s “financial responsibility” requirements would have negative impacts on our
operations.

All
institutions participating in the Title IV Programs must satisfy specific standards of financial responsibility. ED evaluates institutions
for compliance with these standards each year, based on the institution’s annual audited financial statements, as well as following
a change in ownership resulting in a change of control of the institution. The most significant financial responsibility measurement
is the institution’s composite score, which is calculated by ED based on three ratios:

    ●
    the
    equity ratio, which measures the institution’s capital resources, ability to borrow and financial viability;

    ●
    the
    primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and

    ●
    the
    net income ratio, which measures the institution’s ability to operate at a profit.

54

ED
assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting
financial weakness and positive 3.0 reflecting financial strength. ED then assigns a weighting percentage to each ratio and adds the
weighted scores for the three ratios together to produce a composite score for the institution. The composite score must be at least
1.5 for the institution to be deemed financially responsible without the need for further oversight. If an institution’s composite
score is below 1.5, but is at least 1.0, it is in a category denominated by ED as “the zone.” Under ED regulations, institutions
that are in the zone typically may be permitted by ED to continue to participate in the Title IV Programs by choosing one of two alternatives:
1) the “Zone