1201792--3/28/2008--AMERICAN_PUBLIC_EDUCATION

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{regulation, government, change}

{product, market, service}

{personnel, key, retain}

{stock, price, operating}

{system, service, information}

{stock, price, share}

{control, financial, internal}

{regulation, change, law}

{provision, law, control}

{capital, credit, financial}

{operation, natural, condition}

{property, intellectual, protect}

{financial, litigation, operation}

{cost, regulation, environmental}

Our growth may place a strain on our resources that could adversely affect our systems, controls and operating efficiency. Tuition assistance programs offered to United States Armed Forces personnel constituted 66% of our revenues for 2007, and our revenues and number of students would decrease if we are no longer able to receive funds under these tuition assistance programs or tuition assistance is reduced or eliminated. Strong competition in the postsecondary education market, especially in the online education market, could decrease our market share and increase our cost of acquiring students. If we are unable to update and expand the content of existing programs and develop new programs and specializations on a timely basis and in a cost-effective manner, our future growth may be impaired. If we do not have adequate continued personal referrals and marketing and advertising programs that are effective in developing awareness among, attracting and retaining new students, our financial performance in the future would suffer. System disruptions and security breaches to our online computer networks could negatively impact our ability to generate revenue and damage our reputation, limiting our ability to attract and retain students. We use third party software for our online classroom, and if the provider of that software were to cease to do business or was acquired by a competitor, we may have difficulty maintaining the software required for our online classroom or updating it for future technological changes, which could adversely affect our performance. Future growth or increased technology demands will require continued investment of capital, time and resources to develop and update our technology and if we are unable to increase the capacity of our resources appropriately, our ability to handle growth, our ability to attract or retain students and our financial condition and results of operations could be adversely affected. The loss of any key member of our management team may impair our ability to operate effectively and may harm our business. If we are unable to attract and retain faculty, administrators, management and skilled personnel, our business and growth prospects could be severely harmed. The protection of our operations through exclusive proprietary rights and intellectual property is limited, and we encounter disputes from time to time relating to our use of intellectual property of third parties, any of which could harm our operations and prospects. We may incur liability for the unauthorized duplication or distribution of class materials posted online for class discussions. Because we are an exclusively online provider of education, we are entirely dependent on continued growth and acceptance of exclusively online education and, if the recognition by students and employers of the value of online education does not continue to grow, our ability to grow our business could be adversely impacted. If we do not maintain continued strong relationships with various military bases and educational service officers, and if we are unable to expand our use of articulation agreements, our future growth may be impaired. Government regulations relating to the Internet could increase our cost of doing business, affect our ability to grow or otherwise have a material adverse effect on our business. Risks Related to the Regulation of Our Industry If we fail to comply with the extensive regulatory requirements for our business, we could face penalties and significant restrictions on our operations, including loss of access to federal tuition assistance programs for members of the United States Armed Forces and federal loans and grants for our students. If we fail to maintain our institutional accreditation, we would lose our ability to participate in the tuition assistance programs of the United States Armed Forces and also to participate in Title IV programs. We have only recently begun to participate in Title IV programs, and our failure to comply with the complex regulations associated with Title IV programs would have a significant adverse effect on our operations and prospects for growth. If American Public University System does not maintain its authorization in West Virginia, our operations would be curtailed and we may not grant degrees. Our failure to comply with regulations of various states could have a material adverse effect on our enrollments, revenues and results of operations. We must periodically seek recertification to participate in Title IV programs, and may, in certain circumstances, be subject to review by the Department of Education prior to seeking recertification, and our future success may be adversely affected if we are unable to successfully maintain certification or obtain recertification. If regulators do not approve or delay their approval of transactions involving a change of control of our company, our ability to operate could be impaired. Government and regulatory agencies and third parties may conduct compliance reviews, bring claims or initiate litigation against us, any of which could disrupt our operations and adversely affect our performance. Our regulatory environment and our reputation may be negatively influenced by the actions of other for-profit institutions. Congress may change the law or reduce funding for Title IV programs, which could reduce our student population, revenues and profit margin. Investigations by state attorneys general, Congress and governmental agencies regarding relationships between loan providers and educational institutions and their financial aid officers may result in increased regulatory burdens and costs. We are subject to sanctions that could be material to our results and damage our reputation if we fail to calculate correctly and return timely Title IV program funds for students who withdraw before completing their educational program. A failure to demonstrate financial responsibility may result in the loss of eligibility by American Public University System to participate in Title IV programs or require the posting of a letter of credit in order to maintain eligibility to participate in Title IV programs. A failure to demonstrate administrative capability may result in the loss of American Public University System s eligibility to participate in Title IV programs. We rely on a third party to administer our participation in Title IV programs and its failure to comply with applicable regulations could cause us to lose our eligibility to participate in Title IV programs. We are subject to sanctions if we pay impermissible commissions, bonuses or other incentive payments to individuals involved in recruiting, admissions or financial aid activities. We may lose eligibility to participate in Title IV programs if our student loan default rates are too high, and if we lose that eligibility our future growth could be impaired. Risks Related to Owning our Common Stock A significant portion of our outstanding common stock will soon be released from restrictions on resale and may be sold in the public market in the near future. Future sales of shares by existing stockholders, could cause our stock price to decline. The price of our common stock may be volatile, and as a result returns on an investment in our common stock may be volatile. We are incurring significant costs as a result of operating as a public company that we have not previously incurred, and our management and key employees are, and will continue to be, required to devote substantial time to compliance initiatives. Our principal stockholders may be able to exercise significant influence over matters requiring stockholder approval. Seasonal and other fluctuations in our results of operations could adversely affect the trading price of our common stock. If we fail to maintain proper and effective disclosure controls and procedures and internal controls over financial reporting, our ability to produce accurate financial statements could be impaired, which could adversely affect our stock price, our ability to operate our business and investors views of us. If securities analysts do not publish research or reports about our business or if they downgrade their evaluations of our stock, the price of our stock could decline. Provisions in our organizational documents and in the Delaware General Corporation Law may prevent takeover attempts that could be beneficial to our stockholders.

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1201792--3/28/2008--AMERICAN_PUBLIC_EDUCATION_INC