The buyout deal Apollo Education Group Inc (NASDAQ:APOL) inked with a group of investors led by Apollo Global Management LLC (NYSE:APO) has run into obstacles. The Obama administration has placed tough conditions on the deal that could cause the prospective buyers to walk away, dealing a massive blow on Apollo Education’s attempt to transform its operations.

One of the conditions requires the buyers to place a $385 million letter of credit letter with the government. The letter of credit requirement is seen as a safeguard in case of regulatory troubles that could lead to the closure of Apollo Education’s colleges. Apollo Education is the owner of Phoenix University, and it also operates several education centers abroad.

On top of the letter of credit, the Department of Education further requires the buyers of Apollo Education to regularly furnish it with updated, detailed reports covering student rosters and financial statements.

Besides Apollo Global, the consortium of buyers includes Vistria Group and Najafi. The group initially offered to take Apollo Education private for $1.1 billion, suggesting an offer of $9.50 a share. But they agreed to boost their offer to $10 a share, pushing up the value of the deal to $1.14 billion. Apollo Education’s shareholders have approved the deal.

$2.4 billion in government loans

The $385 million in letter of credit demanded by the government is equivalent to 25% of the revenue Apollo Education received from federal student fund. Apollo Education received more than $2.4 billion in the last two academic years in federal student loans.

Heighted scrutiny of for-profit educators

The government has stepped up scrutiny of private sector education providers in the recent times, leading to the closure of several private sector colleges such as ITT Technical Institute and Corinthian Colleges.

Private sector colleges have faced multiple accusations lately, ranging from burdening students with federal loans they can’t repay to applying misleading marketing tactics to boost student enrollment.

Ray of hope as Trump moves to Washington

But as the Obama administration, which has been tough on for-profit educators, leaves the stage, investors in the sector see a glimmer of hope under a Trump administration. Republicans have largely supported for-profit education industry, and they have the majority in Congress.

Apollo Education stock declined 1.8% to close at $9.35 in the last session.