Education and EdTech M&A: Title IV, State Authorization, and Accreditation

1. 2026 Education and EdTech M&A Landscape

The education sector spans an unusually wide range of transaction types, and the regulatory obligations attached to each vary significantly. Proprietary postsecondary schools, sometimes called for-profit colleges or career schools, sit at the most heavily regulated end of the spectrum. They participate in Title IV federal student aid programs administered by the U.S. Department of Education, carry accreditation from recognized accrediting bodies, and operate under state licensing requirements that run independently of the federal framework. A change in ownership of a Title IV-participating institution is not simply a business transaction: it is a regulatory event that requires simultaneous engagement with ED, the institution's accreditor, and state authorization agencies in every state where the institution enrolls students.

K-12 private schools and preschool programs present a different regulatory profile. They do not typically participate in Title IV programs, which removes the most complex layer of federal oversight. However, they are licensed by state education departments under frameworks that vary dramatically by state. Some states treat private K-12 schools as exempt from state oversight if they operate under a religious mission. Others require detailed annual reporting, teacher certification compliance, and facility inspections. A buyer acquiring a chain of private K-12 schools across multiple states must map the licensing status in each jurisdiction and understand whether the change in ownership triggers re-licensure.

EdTech SaaS businesses occupy a third category. Companies that sell software or platform services to schools, districts, and universities are generally not themselves educational institutions and do not hold Title IV eligibility. Their regulatory exposure is primarily in data privacy: FERPA applies to the extent they operate as school officials or under agreements with covered institutions, COPPA applies if their products are used with students under 13, and GLBA and the FTC Safeguards Rule apply if they handle financial data in connection with student aid or tuition management. An EdTech acquisition requires careful mapping of these contractual and regulatory relationships because the target's obligations under data processing agreements with school customers survive the change in ownership.

Tutoring and test preparation businesses range from small private operators with no regulatory footprint beyond general business licensing to large national brands that may operate under state-specific tutoring center licensing requirements or contract with public school districts under agreements that impose FERPA obligations. Online program managers, known as OPMs, are a specialized segment that contracts with accredited universities to develop and deliver online degree programs in exchange for a share of tuition revenue. OPMs have come under increasing regulatory scrutiny from ED related to incentive compensation rules and the bundled services exception to the third-party servicer definition, and that regulatory exposure is now a material factor in OPM acquisitions.

Across all of these segments, 2026 deal activity reflects continued consolidation pressure from private equity, strategic buyers building national platforms, and international acquirers seeking U.S. market entry. The regulatory complexity of education M&A means that transactions require longer timelines, deeper due diligence, and more specialized legal coordination than comparable deals in other sectors. Buyers who underestimate this complexity face the risk of closing a transaction only to discover that the institution's Title IV eligibility is suspended, state authorizations have lapsed, or accreditation is under review, at which point the operational and financial consequences can be severe.

2. Regulatory Framework Overview

Education M&A operates within an overlapping set of federal and state regulatory frameworks, each administered by a different agency with its own procedures, timelines, and enforcement authority. Understanding how these frameworks interact is the starting point for structuring any education transaction.

At the federal level, the U.S. Department of Education administers Title IV of the Higher Education Act, which governs federal student aid programs including Pell Grants, Subsidized and Unsubsidized Direct Loans, PLUS Loans, and campus-based aid programs. Institutions that participate in Title IV must execute a Program Participation Agreement with ED and maintain ongoing compliance with the conditions set out in 34 CFR Part 668, which covers student eligibility, satisfactory academic progress, institutional eligibility, and administrative capability. A change in ownership is addressed specifically under 34 CFR 600.20, which requires the new owner to establish institutional eligibility and execute a new PPA before Title IV funds can be disbursed under the new ownership structure.

Accreditation operates as the second pillar of the higher education regulatory triad alongside federal and state oversight. ED recognizes accrediting bodies as gatekeepers for Title IV eligibility, meaning that an institution must hold accreditation from an ED-recognized accreditor as a condition of Title IV participation. Accreditors are private organizations governed by their own standards and policies, and each accreditor has its own substantive change policy governing how ownership changes must be reported and reviewed. Some accreditors require advance approval before a change in ownership can be consummated. Others require notification within a defined period after closing. Failure to follow the accreditor's specific procedure can result in a show-cause order or loss of accreditation, with downstream consequences for Title IV eligibility.

State authorization is the third pillar. States license postsecondary institutions operating within their borders and, in most cases, require authorization for out-of-state institutions enrolling residents in online programs. State authorization agencies are typically housed within state education departments or higher education commissions, but in some states within the attorney general's office or a standalone licensing board. Authorization requirements, including the timing of change-in-ownership notifications and re-application obligations, are set by state statute and regulation and vary considerably.

Data privacy regulation adds another layer. FERPA governs student education records at institutions receiving federal financial assistance. GLBA and the FTC Safeguards Rule apply to financial institutions, a category that includes Title IV-participating schools to the extent they receive, maintain, process, or transfer nonpublic personal financial information. COPPA applies to online services directed to children under 13. These statutes impose independent compliance obligations that survive a change in ownership and must be addressed in due diligence and transaction documentation.

3. Title IV Eligibility and Change-in-Ownership

The change-in-ownership framework under Title IV is the single most consequential regulatory constraint in postsecondary education M&A. Under the Higher Education Opportunity Act and implementing regulations at 34 CFR 600.20 and 34 CFR 668.14, when a Title IV-participating institution undergoes a change in ownership that results in a change of control, the institution's existing PPA is automatically terminated and Title IV eligibility is suspended unless the parties have secured pre-acquisition review from ED or the new owner has submitted a timely emergency reinstatement application.

A change of control for Title IV purposes is broader than the typical M&A definition. Regulatory guidance and ED practice have historically treated the following as triggering events: acquisition of more than 50 percent of voting stock in a closely held corporation, a merger or consolidation, a change in the majority of the board of directors within a 12-month period without ED approval, and the sale or transfer of substantially all of the institution's assets. For LLC-structured institutions, a transfer of majority membership interest or management rights can trigger the same result. Counsel must analyze the specific ownership and governance structure of the target institution against ED's change-of-control criteria before the transaction is structured.

The statutory framework under 34 CFR 668.14 requires the new owner to demonstrate administrative capability and financial responsibility as conditions of PPA execution. Administrative capability encompasses the institution's ability to comply with Title IV program requirements, including recordkeeping, student eligibility determination, satisfactory academic progress monitoring, and return of Title IV funds calculations. Financial responsibility requires the new owner to demonstrate sufficient capital, a positive composite financial score, and in some cases the posting of a letter of credit as additional protection for ED.

The pre-acquisition review process, sometimes called a pre-acquisition review or PAR, allows a buyer to submit a complete change-in-ownership application to ED before the transaction closes. If ED approves the application and issues provisional certification before closing, the institution's Title IV eligibility continues uninterrupted through the closing date and into the post-acquisition period. This eliminates the disbursement gap that would otherwise occur if the change-in-ownership application were submitted only after closing. Most sophisticated buyers of Title IV schools elect pre-acquisition review precisely because the disbursement gap creates immediate cash flow pressure and can trigger student loan servicer complications that are difficult to unwind.

For institutions where pre-acquisition review is not completed before closing, ED regulations permit the new owner to submit a change-in-ownership application within 10 days of the change of control. ED then reviews the application and, if the institution meets the eligibility criteria, issues provisional certification. During the review period, the institution cannot disburse Title IV funds, and students may not be able to access financial aid. The length of this gap depends entirely on ED processing time, which is not guaranteed. Counsel coordinates the submission to maximize completeness and minimize processing delays, but the timeline risk cannot be fully eliminated once the transaction closes without a completed PAR.

4. Program Participation Agreement Reinstatement

The Program Participation Agreement is the contract between the institution and the Department of Education that governs the terms under which the institution may participate in Title IV programs. When a change in ownership occurs, the existing PPA is terminated, and the new owner must execute a new PPA as part of the change-in-ownership approval process. The new PPA is typically issued on a provisional basis for an initial certification period, after which the institution may apply for full certification upon demonstrating a track record of compliance under the new ownership.

Provisional certification carries additional compliance obligations beyond those applicable to fully certified institutions. Provisionally certified institutions are subject to heightened ED monitoring and may be required to submit more frequent financial and compliance reports. They may also be subject to the 90-day delay rule, which requires that funds credited to student accounts be held for 90 days before disbursement to students, effectively creating a working capital requirement that buyers must plan for in their post-acquisition financial projections.

Bond requirements are a significant financial consideration in the PPA reinstatement process. ED has authority to require an institution to post a letter of credit as a condition of provisional certification. The required amount is based on the institution's Title IV volume and the risk factors ED identifies in its review of the new owner's financial responsibility. For large institutions with significant Title IV revenue, bond requirements can represent a material cash commitment. Buyers must account for this in deal financing and liquidity planning. Some transactions have been restructured or delayed because the buyer had not anticipated the bond requirement and lacked readily available capital to satisfy it.

The reinstatement process also requires the new owner to submit updated student information necessary to verify eligibility for Title IV aid. This includes updating the institution's entries in the National Student Loan Data System, verifying enrollment reporting procedures with the National Student Clearinghouse, and ensuring that the institution's Title IV servicer has received updated authorization to process disbursements under the new ownership structure. Counsel coordinates with the institution's financial aid office and Title IV servicer throughout this process to prevent disbursement errors that could create return-of-funds liability.

Once the PPA is reinstated and Title IV operations resume, the institution enters a post-acquisition compliance monitoring period. ED may conduct a program review, which is an audit of the institution's Title IV administration, during this period. Buyers should budget for the cost of responding to a program review and ensure that the institution's financial aid staff is experienced and adequately resourced. A program review that results in findings of non-compliance can lead to fine assessments, required repayments to ED, or further conditions on provisional certification. These outcomes are manageable if the institution has strong compliance infrastructure, but they can be destabilizing if the acquisition was premised on aggressive cost reduction in administrative functions.

5. State Authorization and SARA Reciprocity

Every state in which a postsecondary institution operates or enrolls students maintains its own authorization framework, and the requirements for how a change in ownership affects authorization status vary materially by state. In some states, the existing authorization transfers automatically to the new owner upon notification and submission of updated ownership disclosures. In other states, the change in ownership triggers a full re-application requirement, during which the institution may be prohibited from enrolling new students from that state until re-authorization is granted.

For institutions with physical campuses, state authorization in the campus state is typically the primary authorization concern. But for institutions offering online programs to students nationwide, the authorization matrix is far more complex. Prior to the widespread adoption of SARA, institutions were required to obtain separate authorization in each state where they enrolled online students, a process that required maintaining dozens of individual state licenses with different renewal cycles, fee structures, and compliance requirements.

NC-SARA has significantly streamlined this process for member institutions. Under SARA, a postsecondary institution headquartered in a SARA-member state that has been approved by its home state SARA portal agency may enroll students from other SARA-member states in online programs without obtaining separate authorization from each of those states. As of 2026, 49 states and the District of Columbia participate in SARA. California, which is not a SARA member, requires its own separate authorization for out-of-state online programs enrolling California residents.

SARA membership is institutional and must be maintained through annual renewal with the home state portal agency. A change in ownership does not automatically terminate SARA membership, but the acquiring entity must notify the home state portal agency of the change and provide updated information about the new owner. The portal agency will review whether the institution continues to meet SARA eligibility standards, which include holding recognized accreditation and being in good standing with ED. If the change in ownership creates a gap in accreditation status, SARA membership may be suspended until accreditor approval is obtained, at which point the institution would need to re-establish state authorization in each SARA-member state independently, or apply for re-admission to SARA.

For transactions involving institutions with significant online enrollment, counsel maps the full SARA notification timeline against the accreditor approval timeline to identify any periods during which the institution would lack SARA coverage and could not lawfully enroll new students from SARA states. Enrollment holds during a SARA gap can translate directly into revenue loss. Deal timelines must be structured to minimize or eliminate these gaps, and representations and warranties in the purchase agreement should address the accuracy of the institution's SARA membership status and the completeness of prior change notifications to portal agencies.

6. Accreditor Change-in-Ownership Approvals

Accreditors are the middle layer in the education regulatory triad, and their role in education M&A is often underestimated by buyers who are more familiar with federal and state regulatory processes. Every ED-recognized accreditor publishes a substantive change policy that governs how changes of ownership, governance, and mission must be reported and reviewed. Compliance with this policy is a condition of maintaining accreditation, and loss of accreditation has immediate downstream consequences for Title IV eligibility and SARA membership.

The regional accreditors, which include organizations such as HLC, SACSCOC, NECHE, MSCHE, WSCUC, NWCCU, and ACCJC, accredit most traditional colleges and universities. These accreditors typically require institutions to notify them of a prospective change in ownership at least six months before the planned transaction date, and most require some form of approval before the change in ownership can be consummated without risk to accreditation status. The specific requirement varies by accreditor, but most regional accreditors conduct a focused evaluation of the new owner's financial capacity, educational mission, and governance structure before issuing an approval decision.

National accreditors, which tend to serve career schools, vocational programs, and specialized institutions, operate under different standards. ACCSC, ACCET, COE, and similar bodies have their own substantive change policies that may require pre-approval, post-closing notification within a defined period, or both. Some national accreditors also impose conditions on continued accreditation following a change in ownership, such as requiring additional reporting, a site visit, or a teach-out plan if the new owner intends to discontinue any programs.

The timing mismatch between accreditor approval requirements and typical M&A timelines is a recurring challenge. Buyers who have signed a letter of intent and begun due diligence may be reluctant to notify the accreditor before they are confident the transaction will proceed, because accreditor notifications can become public and affect student and staff confidence. But accreditors require advance notice, and waiting too long creates the risk of closing without accreditor approval in place, which constitutes a violation of the substantive change policy and can trigger a show-cause order.

Counsel experienced in education M&A navigates this tension by establishing communication protocols with the accreditor as early as practical, often framing initial outreach as a preliminary inquiry rather than a formal substantive change notification. This allows the parties to understand the accreditor's specific requirements and timeline expectations before committing to a closing date. The purchase agreement should contain conditions precedent to closing that include receipt of accreditor approval or non-objection, with appropriate walk rights if approval is not obtained within a specified period.

7. FERPA Data Transfer and Student Record Custody

The Family Educational Rights and Privacy Act of 1974 establishes federal privacy protections for student education records at institutions that receive federal financial assistance. FERPA prohibits the disclosure of personally identifiable information from student education records without prior written consent of the student, subject to a defined set of exceptions. In the M&A context, the treatment of student education records is a compliance issue that must be addressed in both due diligence and transaction documentation.

When a postsecondary institution is acquired by another postsecondary institution that will continue serving the same student population, FERPA permits the transfer of student education records as part of the institutional acquisition without separate student consent, provided that the transferee institution maintains the records subject to FERPA and provides students with notice of the records transfer. This is the most straightforward scenario and applies in most traditional school-to-school acquisitions.

The analysis becomes more complex when an EdTech company or OPM that holds student data is acquired by a non-institutional entity. The acquiring company may not itself be a FERPA-covered institution, and the basis for the data transfer must be analyzed under FERPA's exception framework. FERPA permits disclosure to school officials with legitimate educational interest and to organizations conducting studies on behalf of educational institutions, but these exceptions have specific requirements that may not be satisfied in a pure commercial acquisition of a data-holding EdTech company.

Due diligence should inventory all categories of student records held by the target, map the legal basis under which those records were collected and are being maintained, review third-party data sharing agreements for FERPA compliance, and assess the target's annual FERPA notification practices. Weaknesses in FERPA compliance are material to the transaction because they can create liability with ED, which has authority to terminate federal financial assistance as a remedy for FERPA violations, though this remedy has historically been used sparingly.

Student record retention and destruction obligations also attach to the institution and survive the change in ownership. Federal regulations under 34 CFR 668.24 require Title IV-participating institutions to retain records supporting Title IV determinations for specified periods. The acquiring entity becomes the custodian of these records at closing and is responsible for complying with retention requirements. Transaction documents should address records custody, storage costs, and the obligation to maintain access for ED program reviews and audits during the retention period.

8. GLBA and FTC Safeguards Rule in Education Data Handling

The Gramm-Leach-Bliley Act and the FTC's implementing Safeguards Rule impose data security and privacy obligations on financial institutions, a category that includes postsecondary educational institutions to the extent they are engaged in financial activities such as making, administering, or servicing student loans or providing financial advisory services. The FTC substantially amended the Safeguards Rule in 2021, with revised requirements phased in through 2023, and those revised requirements now govern education institutions' information security programs.

Under the revised Safeguards Rule, covered institutions must maintain a written information security program that includes a designated qualified information security professional responsible for overseeing the program, a risk assessment conducted at least annually, implementation of specific safeguards including encryption of customer information in transit and at rest, multi-factor authentication for access to customer information systems, and periodic penetration testing and vulnerability assessments. These are substantive technical and organizational requirements, not merely documentation obligations.

In the education M&A context, GLBA and Safeguards Rule compliance is a due diligence matter with two distinct dimensions. First, buyers must assess whether the target institution has a compliant information security program in place. An institution that has not updated its program to reflect the 2021 Safeguards Rule amendments is out of compliance, and that non-compliance represents a regulatory exposure that transfers to the buyer at closing. Second, the buyer must ensure that its own information security program will be extended to cover the acquired institution promptly after closing, and that the integration of the acquired institution's systems does not create gaps or vulnerabilities that would expose the combined entity to FTC enforcement.

OPM companies present a specific GLBA analysis because they typically receive nonpublic personal financial information from their university partners in connection with administering financial aid processing, tuition management, or enrollment services. An OPM operating as a service provider to a GLBA-covered institution must contractually commit to implementing and maintaining appropriate safeguards for customer information. Due diligence of an OPM acquisition should review all data processing agreements with university clients to confirm that GLBA service provider obligations are properly documented and that the OPM's actual security practices meet its contractual commitments.

9. COPPA Treatment of K-12 EdTech Products

The Children's Online Privacy Protection Act applies to operators of websites and online services directed to children under 13 and to general audience platforms with actual knowledge that they are collecting personal information from children under 13. K-12 EdTech products are particularly exposed to COPPA because they are specifically designed for use by school-age children, many of whom are under 13, and because they typically collect categories of personal information, including name, age, grade level, school enrollment, and in some cases location and behavioral data, that fall squarely within COPPA's definition of personal information.

COPPA requires verifiable parental consent before an operator collects personal information from children under 13, subject to a school official exception. Under the school official exception, a school may consent on behalf of parents to the collection of student information by EdTech operators, provided the operator's use of the data is limited to educational purposes and consistent with the school's authorization. This exception is central to K-12 EdTech operations: most EdTech products could not practically obtain individual parental consent from the parents of every student in a school's enrollment, and the school consent mechanism allows them to operate lawfully.

The FTC has issued guidance clarifying the conditions under which the school consent mechanism is available and has enforced COPPA against EdTech operators that collected data beyond the scope of the school's authorization or shared student data with third parties for commercial purposes outside the educational context. In an M&A context, the acquiring entity must assess whether the target's COPPA compliance program satisfies FTC guidance, whether data sharing agreements with school customers accurately describe the scope of data collection and use, and whether any prior FTC investigations or state AG inquiries have identified compliance gaps.

Deal structuring considerations related to COPPA include the treatment of student data in the representations and warranties, the scope of indemnification for pre-closing COPPA violations, and the acquiring entity's plan for integrating the target's student data into its own systems without violating the terms of the school consent under which that data was originally collected. A change in the operator that controls student data may require updated notice to schools and, in some cases, re-authorization from school officials if the acquiring entity's intended use of the data differs materially from the target's prior practices.

State-level student privacy laws add a further layer of complexity for K-12 EdTech acquisitions. California, New York, and numerous other states have enacted student privacy statutes that impose obligations beyond COPPA, including restrictions on behavioral advertising targeting students, data retention and deletion requirements, and security breach notification obligations specific to student data. Counsel conducting due diligence of a K-12 EdTech target should map the target's exposure under state student privacy laws in addition to COPPA.

10. Department of Education Gainful Employment and Cohort Default Rate Metrics

Two regulatory metrics administered by the Department of Education are of particular importance in the acquisition of for-profit and career school institutions: the gainful employment framework and the cohort default rate. Both metrics are tied to an institution's ongoing Title IV eligibility, and adverse performance on either metric can limit the institution's ability to participate in Title IV programs or result in program-specific sanctions.

The gainful employment framework has been subject to significant regulatory change over the past decade. ED implemented a gainful employment rule under the Obama administration that required programs to meet debt-to-earnings ratio thresholds as a condition of Title IV eligibility. That rule was rescinded under the Trump administration's first term. The Biden administration re-implemented a revised gainful employment rule in 2023, which the Trump administration subsequently moved to rescind again in 2025. As of the date of this guide, the regulatory status of gainful employment metrics is in flux, and buyers must monitor ED rulemaking activity to understand whether gainful employment thresholds will apply to programs at the target institution.

The cohort default rate is a more stable metric that has remained operative throughout this period of regulatory change. CDR measures the percentage of students who entered repayment on federal student loans during a fiscal year and defaulted within the subsequent two or three years, depending on the applicable tracking period. Institutions with a CDR at or above 30 percent for three consecutive years lose Title IV eligibility. Institutions with a CDR of 40 percent or higher in a single year also face potential loss of eligibility. CDR sanctions apply at the program level as well as the institutional level for institutions with high default rates in specific programs.

In an acquisition, the CDR history of the institution follows the institution and is inherited by the acquiring entity. This means that a buyer acquiring an institution with two consecutive CDR years at or above 30 percent has one year of remaining runway before the institution triggers automatic loss of Title IV eligibility, regardless of any improvements the new owner implements in default management practices. Due diligence must include a comprehensive review of the target's CDR data, any appeals or adjustments filed with ED, and the composition of the borrower cohorts that are currently in repayment and will be incorporated into future CDR calculations.

CDR risk affects deal structure as well as due diligence. Transactions involving institutions with elevated CDRs may require the buyer to hold back a portion of the purchase price pending future CDR outcomes, or to obtain representations and warranties insurance coverage that addresses CDR-related Title IV sanctions. Buyers who are also acquiring the institution's loan servicing relationships should assess whether default management practices can be improved before the next CDR measurement period closes.

11. 90/10 Revenue Rule and Non-Title IV Revenue Streams

The 90/10 rule, codified in Section 487 of the Higher Education Act, prohibits for-profit institutions from deriving more than 90 percent of their revenues from Title IV federal student aid. Institutions that fail the 90/10 threshold for two consecutive fiscal years lose their Title IV eligibility for two years. The rule is designed to ensure that for-profit institutions have sufficient validation from non-federal revenue sources to demonstrate that their programs have market value beyond what federal student aid subsidizes.

The calculation of the 90/10 ratio is not straightforward. The numerator includes all Title IV aid disbursed to students at the institution, net of amounts returned under the Return of Title IV Funds calculation. The denominator prior to the FAFSA Simplification Act of 2020 included all revenues received from students, including those funded by Department of Defense Tuition Assistance and GI Bill benefits. The 2020 amendment moved DoD and VA education benefits into the numerator, treating them as federal revenue for 90/10 calculation purposes. This change meaningfully affected institutions that had relied on military and veteran student enrollment as a source of non-Title IV revenue.

Buyers acquiring for-profit institutions must stress-test the target's 90/10 ratios under both the pre-2020 and current calculation methods, assess whether military and veteran enrollment has been a meaningful component of the institution's revenue mix, and evaluate the sustainability of existing non-Title IV revenue streams. Corporate tuition reimbursement programs, employer partnerships, state workforce development grants, and self-pay students whose ability to pay without loan assistance gives them non-federal revenue status are all components of a diversified revenue mix that supports 90/10 compliance.

Institutions operating near the 90 percent threshold require active revenue management. Due diligence should examine the target's historical 90/10 ratios, any periods of close approach to the threshold, and the corrective actions taken to maintain compliance. Representations and warranties in the purchase agreement should address the accuracy of the target's 90/10 calculations and any pending audits or challenges from ED. Post-closing integration plans should include a review of enrollment practices and marketing to ensure that the combined entity's revenue mix supports continued 90/10 compliance.

12. Borrower Defense to Repayment and Successor Liability Exposure

Borrower defense to repayment is a federal student loan discharge mechanism under 20 U.S.C. 1087e(h) that permits student loan borrowers to seek cancellation of their federal Direct Loans based on institutional acts or omissions related to the loan or the educational services for which the loan was obtained. The legal standard for a successful borrower defense claim has changed several times as administrations have revised the implementing regulations, but the core concept of holding institutions accountable for misrepresentation and misconduct through loan discharge has remained operative.

Borrower defense claims create successor liability risk in education M&A because the claims run against the institution, not the prior owner. An acquiring entity that purchases a school with a history of misleading enrollment practices, misrepresented program outcomes, or other actionable institutional conduct inherits the exposure to borrower defense claims filed by students who attended under the prior ownership. The practical significance of this exposure depends on the volume of claims pending at the time of the transaction, the nature of the underlying conduct, and the current administration's posture toward approving or denying borrower defense applications.

Asset purchase structures can limit successor liability in some circumstances, but ED has pursued recovery claims against asset purchasers in high-profile cases involving for-profit college chains where the evidence suggested that the asset purchase was structured to avoid liability for prior misconduct. Buyers relying on an asset purchase structure to limit borrower defense exposure must ensure that the acquisition is structured as a genuine arm's-length transaction with appropriate consideration and that the purchase agreement does not contain provisions that suggest continuity of operations under a nominal change of entity.

Due diligence for borrower defense exposure should include a review of all student complaints filed with ED, state attorneys general, and the Consumer Financial Protection Bureau in the three to five years preceding the transaction; a review of any borrower defense applications filed with ED identifying the target institution; any prior program reviews or compliance agreements with ED relating to misrepresentation or deceptive practices; and any state AG investigative demands, civil investigative demands, or consent orders involving student recruitment or enrollment practices.

Representations and warranties insurance for education M&A transactions has become more common as the industry has matured, but insurers have become more sophisticated about excluding or pricing borrower defense exposure specifically. Buyers who rely on R&W insurance as a primary mechanism for managing borrower defense risk should review the policy exclusions carefully and consider whether a dedicated escrow arrangement is appropriate for this specific exposure category.

13. Proprietary School Signage, License Posting, and State Attorney General Actions

State licensing requirements for proprietary postsecondary schools extend beyond the authorization frameworks discussed in Section 5 to include operational compliance obligations that apply on an ongoing basis. Many states require licensed proprietary schools to display their license or certificate of approval in a conspicuous location at the institution's physical facilities, to include the licensing agency's contact information in student enrollment agreements, and to make certain disclosures to prospective students about the school's graduation rates, job placement rates, and other program outcome metrics.

These disclosure obligations are enforceable by state licensing agencies and, in many cases, also by state attorneys general under consumer protection statutes. Misrepresentation of job placement rates, graduate employment statistics, or program length in marketing materials is a frequent basis for state AG investigations of proprietary schools. Buyers of proprietary school chains must review all marketing materials, enrollment agreement disclosures, and website content for compliance with the disclosure requirements in each state of operation, because inherited non-compliance creates exposure to AG enforcement actions that may have begun before the closing date.

Several states have passed specific legislation targeting proprietary schools following high-profile closures and student harm, including requirements that proprietary schools maintain a teach-out fund or surety bond sufficient to cover the cost of assisting students in completing their education if the school closes. These requirements apply to the institution as licensed and follow a change in ownership. Buyers must verify that required bonds are in place, properly endorsed, and will remain in effect after closing under the new ownership structure.

State AG actions against a target institution are a significant due diligence finding. A pending AG investigation at the time of a transaction does not automatically preclude closing, but it must be disclosed in the purchase agreement, addressed in the representations and warranties, and considered in the pricing and escrow structure. Some AG investigations have resulted in consent orders that impose operational restrictions, require student refunds, or mandate changes to enrollment practices. Acquiring an institution subject to an active consent order means inheriting the compliance obligations imposed by that order, which can constrain operational decisions during the post-acquisition integration period.

14. K-12 Private School, Preschool, and Tutoring M&A Specifics

K-12 private schools, preschools, and tutoring businesses occupy a regulatory space that is meaningfully different from postsecondary education, primarily because they typically do not participate in Title IV federal student aid. The absence of Title IV removes the most complex and time-sensitive regulatory approval requirement from the transaction, but state licensing and regulatory compliance issues remain material and vary significantly by state and type of institution.

Private K-12 schools are licensed by state education departments under frameworks that differ in their scope and rigor. Some states impose substantive curriculum requirements on private schools, require teacher certification, conduct periodic facility inspections, and mandate annual reporting on enrollment and outcomes. Other states have minimal oversight of private schools, particularly those operating under religious exemptions, and the licensing framework is primarily administrative. A buyer acquiring a private K-12 school must understand the licensing framework in the applicable state, confirm that the school is in good standing with the relevant licensing agency, and determine whether a change in ownership triggers re-licensure or re-inspection requirements.

Preschool and early childhood programs are regulated primarily by state child care licensing agencies rather than education departments in most states. Licensing requirements address facility safety, staff-to-child ratios, staff background check requirements, health and nutrition standards, and in some states curriculum quality standards. The licensing framework treats the physical facility and the operator as the licensed entity, and a change in ownership typically requires a new license application, a facility inspection, and in some cases a temporary closure during the inspection period. Buyers of preschool chains must map the licensing requirements in each state and plan the closing timeline to minimize facility closure risk.

Tutoring businesses present the most varied regulatory profile of any education segment. Small private tutoring operators generally require only general business licensing and have no sector-specific regulatory obligations beyond those imposed on any retail service business. Larger tutoring companies that operate in school buildings under contracts with public school districts may be subject to FERPA obligations through their school district contracts, and may be required to conduct background checks on employees who interact with minors under state law. Online tutoring platforms serving students internationally add a further layer of data privacy complexity.

Employment law considerations are particularly significant in K-12 and preschool acquisitions. Many instructional and care staff in these segments are employed on teacher or childcare worker credentials that are issued by state licensing boards and are not automatically transferable to a new employer entity. A change in ownership that results in a technical termination and rehire of credentialed staff may trigger obligations to re-verify credentials, re-run background checks, or in some states re-register employees with the licensing board under the new employer entity. Buyers should assess the workforce credential portfolio during due diligence and confirm that post-closing HR transition plans comply with applicable state requirements.

15. Selecting Counsel for Education M&A

Education M&A is a specialized practice that requires counsel with substantive depth in both M&A transaction mechanics and the specific regulatory frameworks governing educational institutions. General commercial M&A counsel without education regulatory experience can manage the business and legal structure of a transaction but will miss the sector-specific compliance issues that create the most material risks in education deals. Conversely, education regulatory specialists without M&A experience may be well-positioned to advise on Title IV compliance but may lack the transaction management skills to coordinate a complex multi-party closing. The most effective approach combines both competencies in the same engagement.

Title IV fluency is a threshold requirement for counsel advising on the acquisition of any Title IV-participating institution. This means not just familiarity with the statutory framework but practical experience with ED's change-in-ownership application process, pre-acquisition review procedures, provisional certification conditions, and program review response protocols. Counsel with this experience can anticipate ED's information requests, structure the application package for completeness, and manage the ED relationship throughout the review period in a way that minimizes processing delays.

Accreditor relationships matter in a practical sense as well. Counsel who has navigated substantive change processes with specific accrediting bodies understands each accreditor's procedural preferences, the level of detail required in a substantive change notification, and the informal communication practices that can facilitate a faster review without compromising the formal process. This institutional knowledge is not reflected in any public resource and is only developed through direct prior experience with each accreditor.

State authorization experience requires either in-house expertise across multiple state frameworks or established relationships with state-level education regulatory counsel in the key states where the target operates. For an institution with a national online enrollment footprint, this may mean coordinating a multi-state authorization compliance effort across 30 or more jurisdictions simultaneously. Counsel leading this effort must be able to sequence the state-level filings, track the status of each, identify states where interim enrollment restrictions apply, and update the transaction team as each state's review progresses.

Data privacy expertise, covering FERPA, GLBA, COPPA, and applicable state student privacy laws, should be integrated into the due diligence team rather than addressed as a post-closing compliance exercise. Privacy compliance weaknesses discovered after closing are significantly more expensive to remediate than those identified and priced into the transaction during due diligence. Counsel should conduct a structured privacy audit of the target as part of the initial due diligence phase and provide the transaction team with a clear summary of compliance gaps, associated remediation costs, and regulatory exposure.

Acquisition Stars has represented buyers and sellers in education sector transactions including proprietary postsecondary schools, K-12 private school platforms, EdTech SaaS businesses, and OPM companies. Our engagement in education M&A integrates Title IV regulatory counsel, state authorization coordination, accreditor notification management, and data privacy due diligence within a single transaction team, eliminating the coordination gaps that arise when these competencies are divided among separate counsel. Each engagement is led by Alex Lubyansky, who maintains direct oversight of the regulatory strategy and transaction timeline from due diligence through closing.

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