COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2023

COMMITMENTS AND CONTINGENCIES [Abstract]

17.	COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Matters— On June 22, 2022, the plaintiff student loan borrowers in a class action against the DOE in federal court in California (Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.)) and the DOE announced a proposed settlement agreement to resolve claims that the DOE has failed to timely decide Borrower Defense to Repayment applications submitted to the DOE. The proposed settlement included three categories of relief for student loan borrowers. First, it set forth a list of approximately 150 institutions, including Lincoln Technical Institute and Lincoln College of Technology, and, under the settlement, the DOE would agree to discharge loans and refund prior loan payments to class members with loan debt associated with an institution on the list (which includes Lincoln institutions). The class action plaintiffs and the DOE stated that the DOE had determined that attendance at one of the listed institutions justifies presumptive relief allegedly based on strong indicia regarding substantial misconduct by the institutions, whether credibly alleged or in some instances proven, and the purportedly high rate of class members with applications related to the listed schools. Second, the proposed settlement included new procedures for DOE to resolve pending borrower defense claims associated with other schools not on the list. Third, for any student loan borrower who submitted a borrower defense application after June 22, 2022 and before the final approval of the settlement, the proposed settlement would require the DOE to review the applications under the DOE’s 2016 regulatory standards and issue decisions within 36 months, or else the applications would be discharged in full.

At the time the plaintiffs and DOE announced the proposed settlement, Lincoln was not a party to the lawsuit and none of the named plaintiffs had attended a Lincoln institution. In August 2022, Lincoln and three other schools were granted permission to intervene in the lawsuit to protect their interests in the finalization and implementation of any settlement agreement the court might approve. In October 2022, the four intervening schools, including Lincoln, filed objections to the final approval of the settlement, asserting reputational harms from the schools’ inclusion on the settlement’s list of schools and denial of schools’ due process rights under the DOE’s borrower defense regulations.

On November 16, 2022, the federal district court overruled the four schools’ objections and approved the settlement as proposed. As a result of this final approval, the DOE has estimated that approximately 196,000 student loan borrowers who attended one of the listed schools (including Lincoln institutions) will receive automatic student loan discharges; that another approximately 100,000 student loan borrowers who attended other schools not on the list would receive decisions under new procedures; and that approximately 250,000 student loan borrowers who submitted borrower defense applications between June 22, 2022 and November 16, 2022 would receive decisions under the DOE’s 2016 regulatory standards within 36 months or else receive automatic student loan discharges.

On January 13, 2023, Lincoln appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit. Two of the three other intervenor schools also appealed on the same date. The three appealing schools also sought to stay the implementation of the settlement while their appeals were being decided, but the requested stay was denied by the district court, the Ninth Circuit, and the U.S. Supreme Court. As a result, the DOE is implementing the settlement relief while the three schools appeal the settlement’s final approval.

Lincoln and the two other appealing schools filed their opening appellate brief in the Ninth Circuit on May 3, 2023. The plaintiffs and the DOE filed their opposition appellate briefs on August 2, 2023. Lincoln and the two other appealing schools filed their reply appellate brief on September 22, 2023. The Ninth Circuit heard oral argument on December 5, 2023, and is currently considering the appeal.

It is not possible at this time to predict whether the settlement will be upheld on appeal, what actions the DOE might take if the settlement is upheld on appeal, or whether the DOE or other agencies might take actions against Lincoln institutions before the appeal is decided. Such actions could have a material adverse effect on our business and results of operations. Even if the Ninth Circuit rules in our favor and if the approval of the settlement is overturned, the DOE already may have discharged by that time the loans associated with some or all of the pending applications. We have seen evidence that the DOE already may have discharged some of the loans associated with some of the pending applications, but the DOE has not furnished definitive data to us necessary to determine the extent to which applications have been granted. The DOE may or may not attempt to seek recoupment from applicable schools relating to approval of borrower defense applications. The settlement also requires the DOE to review and decide borrower defense applications submitted after June 22, 2022 and before November 16, 2022 within 36 months of the final settlement date. If the DOE grants some or all of these applications, the DOE also could attempt to recoup from us the loan amounts relating to these applications. If the DOE approves borrower defense applications concerning us and attempts to recoup from us the loan amounts in the approved applications, we would consider our options for challenging the legal and factual bases for such actions.

We cannot predict what other actions the DOE might take if the settlement is fully implemented, including the amount of borrower defense applications that the DOE might grant or the amount of any recoupment that the DOE might seek from us, if any. We also cannot predict the outcome of any challenges we might make to such actions .

In addition to the foregoing, in the ordinary conduct of our business, we are subject to additional periodic lawsuits, investigations, regulatory proceedings and other claims, including, but not limited to, claims involving students or graduates, routine employment matters and business disputes. We cannot predict the ultimate resolution of these lawsuits, investigations, regulatory proceedings and other claims asserted against us, but we do not believe that any of these matters will have a material adverse effect on our business, financial condition, results of operations or cash flows.

Student Financing Plans—At December 31, 2023, the Company had outstanding net financing commitments to its students to assist them in financing their education of approximately $33.6 million, net of interest.

Executive Employment Agreements—The Company entered into employment contracts with key executives that provide for continued salary payments if the executives are terminated for reasons other than cause, as defined in the agreements. The future employment contract commitments for such employees were approximately $10.6 million at December 31, 2023.

Surety Bonds—Each of the Company’s campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant degrees, diplomas or certificates to its students. The campuses are subject to extensive, ongoing regulation by each of these states. In addition, the Company’s campuses are required to be authorized by the applicable state education agencies of certain other states in which the campuses recruit students. The Company is required to post surety bonds on behalf of its campuses and education representatives with multiple states to maintain authorization to conduct its business. At December 31, 2023, the Company has posted surety bonds in the total amount of approximately $16.0 million.