Trump Administration Cancels $37 Million Fine Levied Against Grand Canyon U For Deceiving Students (David Halperin)

The Donald J. Trump administration, which claims its DOGE-driven reshaping of the federal government is aimed at cutting waste, fraud, and abuse, quietly cancelled a $37 million fine that the Department of Education, under the Biden administration, imposed in 2023 on Grand Canyon University. The fine was levied after Department investigators documented extensive findings that GCU, which takes billions in taxpayer dollars, systematically deceived students about the costs of their educations.

Grand Canyon announced the cancellation of the fine on its website on Friday.

Grand Canyon had appealed the fine to a review panel inside the Department. Republic Report contacted Grand Canyon spokesperson Bob Romantic last Wednesday inquiring about the status of the appeal; he messaged me that he would get back in touch Thursday to respond, but he didn’t respond to my follow-up message that day. The Department of Education did not reply to my request last week for comment on the appeal.

In its announcement Friday, Grand Canyon stated that the Department, by means of “a Joint Stipulation of Dismissal order issued by ED’s Office of Hearings and Appeals” acted to “dismiss[ ] the case with no findings, fines, liabilities or penalties of any kind.”

Grand Canyon, which bills itself as a Christian school, had waged a public campaign claiming it was attacked by the Biden administration on the basis of politics and religious persecution.

In reality, the $37 million fine, indeed unusually large for the Department, was pegged to the gravity and scope of the abuses, as well as the size of the institution and the taxpayer funds it receives: Phoenix-based Grand Canyon, which in 2022-23 enrolled more than 100,000 students in-person and online, gets the largest amount of federal student aid of any college or university in the country. GCU received $862 million from taxpayers for Department of Education federal student grants and loans in 2022-23 out of $1.3 billion in revenue, and received additional federal funding for student aid from the departments of Defense and Veterans Affairs.

In a 34-page letter addressed to Grand Canyon president Brian Mueller in October 2023, the Department described in detail the deceptive conduct found by its investigators.


The Department concluded that Grand Canyon “lied to more than 7,500 former and current students about the cost of its doctoral programs over several years. GCU falsely advertised a lower cost than what 98% of students ended up paying to complete certain doctoral programs.”


The probe found that going back to 2017, GCU violated the prohibition in federal law against making “substantial misrepresentations” by failing to tell students enough about the cost of the school’s doctoral programs and stating on the school website and in other materials that the programs cost between $40,000 and $49,000. GCU’s own data, according to the Department, shows that less than 2 percent of graduates completed their students within the cost range that GCU advertised. Most students needed to enroll in and pay for “continuation courses” to complete the dissertation requirement in these doctoral programs. The school’s data also showed that 78 percent of doctoral program graduates had to pay between $10,000 and $12,000 more than GCU had advertised.

According to the Department, Grand Canyon “did not contest [the Department’s] determination that 98% of students enrolled in certain doctoral programs had to pay more than GCU’s advertised cost.”

Yet the Department under new Trump education secretary Linda McMahon has now let Grand Canyon off the hook.

GCU President Mueller said in a statement Friday, “The facts clearly support our contention that we were wrongly accused of misleading our Doctoral students and we appreciate the recognition that those accusations were without merit.”

Educator Mueller, who makes $661,000 as president of non-profit Grand Canyon University, and then another $2 million a year as CEO of the school’s for-profit servicing arm Grand Canyon Education, held a scare rally on the GCU campus in 2023 after his school was fined. There, he warned his audience, “There is a group of people in Washington DC who has the intention to harm us.” He also advanced the baseless and incendiary claim, subsequently echoed by conservative influencers, that Grand Canyon was targeted because it presents itself as a Christian school.

But the evidence developed by the Department’s investigation that GCU deceived doctoral students was echoed by many of those affected: The Department said last year that it had received more than 750 complaints by doctoral students against GCU since 2020.

As in the first Trump administration, people connected to for-profit colleges now have influence over higher education decisions at the Department. For example, Trump’s nominee for Under Secretary of Education, Nicholas Kent, currently a senior adviser at the Department, once was a senior staff member at the for-profit college lobbying group CECU. Prior to that, Kent was an executive at Education Affiliates, a Baltimore-based for-profit college operation that faced civil and criminal investigation and actions by the Justice Department for deceptive practices.

Another federal agency, the Federal Trade Commission, also has taken action against Grand Canyon, suing the school, for-profit arm Grand Canyon Education, and Mueller in Arizona federal court in December 2023 over the same deceptive claims to doctoral students about the costs and course requirements of programs — and claims about the school’s nonprofit status. The FTC also alleged that Grand Canyon engaged in deceptive and abusive telemarketing.

Grand Canyon has twice moved to throw out the FTC lawsuit, and the judge has dismissed some aspects of it, including removing GCU as a defendant, but the case is still pending, bogged down in disputes over discovery. (Mueller’s personal attorneys in the case include former U.S. solicitor general Paul Clement and Steven Gombos.)

Grand Canyon said on Friday that the FTC lawsuit continues “despite the fact the lawsuit essentially raises the same manufactured nonprofit and doctoral disclosure claims that have been refuted, rejected and dismissed.”

The Trump administration has cancelled numerous law enforcement investigations against entities that have shown fealty to or ideological kinship with President Trump, and has fired the two Democratic commissioners on the FTC. But the FTC case against GCU, at least for now, is proceeding.

While some in the career college industry donated big to Trump, federal records show only one political contribution by Brian Mueller in the last federal cycle: $1000 in 2023 to Mike Pence for President.

Part of Grand Canyon’s righteous anger toward the Department of Education during Biden’s term focused on the Department’s refusal to recognize Grand Canyon as a non-profit school for purposes of Department rules, even though, after Grand Canyon converted its school from for-profit to non-profit, the IRS granted the school that status for tax purposes. But the ties between supposed non-profit Grand Canyon University and for-profit Grand Canyon Education were so blatant — GCU sends most of its revenue to publicly-traded GCE, and Brian Mueller is the head of both operations — that GCU’s non-profit status was rejected not by Biden education secretary Miguel Cardona, but by his predecessor, deeply Christian and deeply for-profit college-loving Betsy DeVos. (Last November, a panel of the U.S. Court of Appeals for the 9th Circuit reversed a district court decision upholding the Department’s denial of non-profit status to GCU and remanded to the Department to revisit the decision under a different legal standard.)

Even if the Trump administration has cancelled the Biden education department’s effort to protect America’s students from Grand Canyon’s deceptive and predatory practices, Grand Canyon’s legal troubles are not over. Beyond the FTC case, in June 2024, students filed a class action lawsuit against Grand Canyon Education, alleging that the company “orchestrated a deceitful racketeering scheme by misleading prospective students about the true cost of doctoral degrees at Grand Canyon University….” On May 6, a federal judge in Arizona rejected all but one of the arguments raised by GCE in a motion to dismiss, meaning the case will move forward on most of the students’ claims.

[Editor's note: This article originally appeared on Republic Report.]  

HEI Resources 2025

[Editor's Note: Please let us know of any additions or corrections.]

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• Marti, Eduardo (2016). America's Broken Promise: Bridging the Community College Achievement Gap. Excelsior College Press. 
  
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• Rosen, A.S. (2011). Change.edu. Kaplan Publishing. 
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• Sinclair, U. (1923). The Goose-Step: A Study of American Education.
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Activists, Coalitions, Innovators, and Alternative Voices

• Academe Blog
• Adjunct Crisis
• Adjunct Nation
• American Federation of Teachers Adjunct-Contingent Faculty Caucus
• Bryan Alexander (Futurist)
• Campus News (New York)
• Clery Center
• Coalition of Contingent Academic Labor
• College Futures Foundation (California, K-20)
• College is a Risky Business (Thomas B. Walsh)
• College Promise (Free Community College)
• College Tuition Advisory Services (CTAS)
• College Viability App (Gary Stocker)
• Con Job: Stories of Adjunct and Contingent Faculty
• Confessions of a College Professor (Professor Doom)
• Debt Collective
• Deep Thoughts on Higher Education (Jeff Doyle) 
• Diane Ravitch (K-12)
• EdTrust
  
• Higher Ed Not Debt
• Higher Education Labor United  
  
• Higher Education Strategy Associates
• I Am Ai
• ITT Tech Warriors
• Jim Wolfston and the Social Mobility Index (CollegeNet)
  
• Jonathan Kozol (K-12)
• Kelchen on Education
  
• National Consumer Law Center
• New Faculty Majority (Adjuncts)
• New Laws For America (Bob Hertz)
• Outside the Law School Scam
• Presidents Alliance on Higher Education and Immigration 
• Project on Predatory Student Lending
  
• Randall Collins (Credentialism and Credential Inflation)
• Remaking the University
• Republic Report (David Halperin)
• Saving For College (Mark Kantrowtitz)
• SEIU Faculty Forward (Adjuncts)
• Steve Foerster (Technologist and Educator)
• Strike Debt Portland
• Student Borrower Protection Center
• Student Debt Crisis
• Student Loan Justice
• Terri Givens (Radical Empathy)
• The Best Classroom is the Struggle (Joshua Sooter) 
• TuitionFit (Mark Salisbury)
• Whistleblower Revolution (Heidi Weber)
• Workplace: A Journal for Academic Labor
• Wrench in the Gears: A Skeptical Parent's Thoughts on Digital Curriculum (K-12)

 College Choice and Career Planning Tools

• Modern States (free college credits)
  
• College Promise
• TuitionFit 
• College Viability App
• College Scorecard (NCES) 
• Washington Monthly College Rankings 
• Apprenticeship Finder (US Department of Labor)
• FinAid
• College Navigator (NCES)
• Best Value Colleges (PayScale)  
• Hechinger Report College Fitness Tracker
  
• NBC News Investigation: Certificate schools are leaving many students in debt and unable to find jobs
• 2/3s of US Employees Regret Their College Degrees (CBS News)
• The Future of Work Won't Be About College Degrees (CNBC, Stepane Kasriel)
• Student Loan Meltdown (Dave Ramsey)
• Permanent Underemployment for College Grads (Burning Glass Technologies)
• College Is A Risky Proposition For The Working Class (Jon Marcus, Hechinger Report)
• Apprenticeships are a trending alternative to college — but there’s a hitch (Jon Marcus, Hechinger Report) 
• 15 Things College Doesn't Teach You
• Best Colleges for Social Mobility (CollegeNet)
• The Case Against Higher Education (Bryan Caplan)
• College May Not Pay Off For Everyone (Liberty Street Economics/NY FED)
• Online Education Has Questionable Outcomes (IHE)
• Colleges Where Most Students Borrow and Few Repay (TICAS)
• Broke, Busted, and Disgusted Trailer (Student Loan Debt)
• The Confusing Information Colleges Provide Students About Financial Aid (The Atlantic)
• College Affordability and Transparency Center (ED)
• Public College Dropout Factories (Third Way)
• Outcomes By Major (NY FED)
• Third Way
• GI Bill Comparison Tool (VA)
• 8 Tips to Help Vets Pick the Right College (Military Times)
• Warrior Scholar (For Veterans)
• Service to School (For Veterans)
• Peer Advisors for Veteran Education (PAVE)

Innovation and Reform

• Faculty Focus
  
• Strategies for Improving Student Success (Inside Higher Education)
• CUNY ASAP 
  
• Gap Year Basics (NYU)
• Union Plus Free College 
  
• Maryland Student Loan Debt Relief Tax Credit
• Canceling Student Loan Debt Would Grow Economy and Add Jobs (Levy Institute)
• Beyond Tuition: Promises for Affordability, Quality, and Accountability in Higher Education (Center for American Progress)
• Georgia State Turnaround (CHE)
• Spelman Health Initiative (IHE)
• University of Kansas: BA In Three Years
• Shady Grove: Nine Campuses in One (WAPO)  
  

Higher Education Policy

• Veterans’ Education Advocates Celebrate Closure of the 90/10 Loophole
• College Transparency Act (Senate Bill 800)
• Dropping Gainful Employment Rules Gives Billions to Subprime Colleges (Inside Higher Education)
• ED Announces Steps to Hold Institutions Accountable for Taxpayer Losses
• FTC Head Says Supreme Court Ruling Puts More Than $2 Billion for Cheated Consumers at Risk (Brent Kendall, WSJ)
• GAO Report Regarding Online Program Managers
• How to Stop Sudden College Closures (Century Foundation)
• Improving Outcomes Data for Online Programs (Robert Kelchen, Inside Higher Education)
• Spelman College Replaces NCAA Sports with Wellness Programs
• Strengthening Rural Anchor Institutions: Federal Policy Solutions for Rural Public Colleges and the Communities They Serve (Alliance for Research on Regional Colleges)
• The Distributional Effects of Student Loan Forgiveness (BFI Working Paper, Sylvain Catherine and Constantine Yannelis)
• The for-profit college system is broken and the Biden administration needs to fix it (Brookings)
• The Impact of a National Program of Free Tuition at Public Community Colleges and Free Tuition for Most Students at Public Four-Year Colleges and Universities on College Enrollments, Graduations, and the Economy (Robert Shapiro and Isaac Yoder)
• Three Things Policymakers Can Do to Protect Online Students (Century Foundation)  
  

Data Sources

• American Association of Colleges and Universities  
  
• American Association of State Colleges and Universities
• American Indian Higher Education Consortium
• Academic Labor Force Trends (AAUP)
• Century Foundation 
  
• Closed Schools Report (US Department of Education)
• College Closing Projections (EY)
• College Costs Increasing Over Time (College Board)
• College Debt Inhibits Home Buying (CNBC)
• Complete College America
  
• Debt by Degrees (Pro Publica)
• Department of Defense
• Education Statistics by Institution
• Enrollment Numbers 
• Excelencia in Education
• Foundation for Research on Equal Opportunity
  
• Growing Inland Achievement 
• Hechinger Report
• Heightened Cash Monitoring
• Long-term Student Loan Default Rates
• Lumina Foundation 
  
• National Association of College and University Business Officers (NACUBO)
• National Assessment of Educational Progress
  
• National Association of Student Financial Aid Administrators (NASFAA)
• National Center for Education Statistics
• NCES Blog
  
• National Student Clearinghouse 
• Predicting College Closures and Financial Distress (Philadelphia Federal Reserve)
  
• School Counselor Numbers (ASCA)
• Scientists Leaving Academia in Droves
• Starving the Beast: The Battle to Disrupt and Reform America’s Public Universities
• State by State College Debt (TICAS)
• Student Loan Debt By State (Urban Institute)
• Student Loan Debt Clock
• Student Loan Debt Inhibits Home Buying (CNBC)
• Student Loan Default Projections (Brookings)
• Subprime Colleges (David Halperin)
• The 74: America's Education News Source
  
• Third Way Reports
• Tracking College Closures (Hechinger Report) 
  
• Transfer Credit Problems (GAO)
• United Negro College Fund
  
• University Business Officers Reports
• US Financial Aid (2024 Annual Report) 
  
• Veterans Affairs (GI Bill)

Trade publications

• Chronicle of Higher Education
• Diverse Issues in Higher Education 
• EdSurge
  
• Higher Ed Dive
• Inside Higher Ed
  

 

More Layoffs at 2U, the Online Program Manager for Elite Universities

2U, the parent company of edX, has announced more layoffs today. The layoffs were announced to staff and it's not known yet whether they will be publicly reported. It appears that many of the cuts will come from edX bootcamps which may be closing by June 2025. 

2U filed for bankruptcy earlier this year and the bankruptcy was approved by the U.S. Bankruptcy Court for the Southern District of New York on September 9th. Mudrick Capital Management is currently involved in the turnaround plan. 

According to David Halperin, the edtech company may also be the subject of investigations by the Federal Trade Commission and California Attorney General.

2U is the online program manager for a number of elite universities, including Harvard, Yale, MIT, and the University of California. Some of the programs have been the subject of public scorn by consumers who claim they were defrauded. HEI has been investigating 2U since 2019. The Wall Street Journal has also investigated 2U and written several critical stories. 

edX promises career support to people who sign up for bootcamps. But what happens when the bootcamps close?    

Related links:

FTC and California AG Have Been Investigating Online College Provider 2U (David Halperin) 

Workers at 2U expect more layoffs in 2024 

2U Collapse Puts Sallie Mae and SLABS Back on the Radar (Glen McGhee)

2U Suspended from NASDAQ. Help for USC and UNC Student Loan Debtors.

2U Declares Chapter 11 Bankruptcy. Will Anyone Else Name All The Elite Universities That Were Complicit?

HurricaneTWOU.com: Digital Protest Exposes Syracuse, USC, Pepperdine, and University of North Carolina in 2U edX Edugrift

2U-edX crash exposes the latest wave of edugrift

2U Virus Expands College Meltdown to Elite Universities

Buyer Beware: Servicemembers, Veterans, and Families Need to Be On Guard with College and Career Choices

EdTech Meltdown

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting

FTC and California AG Have Been Investigating Online College Provider 2U (David Halperin)

Struggling online program management operation 2U has this year been under investigation by both the Federal Trade Commission and California’s attorney general, filings in federal bankruptcy court reveal.

Maryland-based 2U, which has faced scrutiny and lawsuits over alleged deceptive practices and has struggled with heavy debt, filed for Chapter 11 bankruptcy in federal court in Manhattan in July. The company emerged from bankruptcy on September 13, after a federal court approved its restructuring plan, but not before at least two filings in the case indicated that the FTC and the California AG are probing the company.

The very last page of a 128-page filing that 2U’s lawyers submitted in the bankruptcy case on September 4 notes that the FTC and California’s AG requested language in the court’s proposed order “that explicitly preserves governmental claims.”  Since there are apparently no contractual or business ties between 2U and the FTC or the California AG, the governmental claims almost certainly relate to a law enforcement request or investigation that could potentially result in penalties or judgments against the company. The notation indicates that 2U reached agreement with the federal and state law enforcement agencies that their claims would not be voided by the proposed bankruptcy restructuring.

Similarly, a September 23 filing includes an extensive list of 2U’s creditors — entities that may be owed money by the company. One entity on that list is “UNITED STATES FEDERAL TRADE COMMISSION” and the contact listed is the email address for Kimberly Nelson, an attorney in the FTC’s enforcement division, the branch, within the FTC’s Bureau of Consumer Protection, that investigates and brings actions against companies for deceptive and unfair business practices. (The California attorney general’s office does not appear on that particular list of creditors.)

An FTC spokesperson declined to comment. A spokesperson for the California Department of Justice emailed a statement saying, “To protect its integrity, we’re unable to comment on, even to confirm or deny, a potential or ongoing investigation.”

2U did not respond to a request for comment. 

David Vladeck, a former director of the FTC’s Bureau of Consumer Protection, told me today that he “can’t imagine any other reason” that the FTC and the California AG would appear in these bankruptcy documents other than that those agencies were “looking at” 2U. “The FTC often gets involved when a company under investigation is in bankruptcy,” Vladeck said. “I think it is absolutely fair to say that the FTC and the California AG are investigating this company.” 

Vladeck also said that, at least when he was at the FTC (from 2009 to 2012), a vote of the FTC commissioners would have been required to authorize commission lawyers to submit a filing in a bankruptcy case that would disclose a potential investigation of a company. 

Until its reorganization became effective on September 23, 2U was a publicly-traded company, and therefore was required to report significant events, such as the existence of a federal or state law enforcement investigation, in public filings to the Securities and Exchange Commission. I can’t, however, find any reference to an FTC or California AG investigation in 2U’s SEC filings this year. Company practices regarding an SEC disclosure threshold vary, and I don’t know if the FTC and California AG communications with 2U were of sufficient magnitude that they should have triggered such a reporting obligation for 2U. 

2U has long been a leader in the OPM space, partnering with colleges and universities to offer programs online. As of earlier this year, more than 67,000 students were enrolled in 2U programs, including more than 43,000 pursuing degrees at programs branded by public and private colleges. But advocates and students charge that 2U has offered low-quality programs using deceptive marketing and recruiting, often misleading students into thinking they are interacting with personnel of a well-known school rather than 2U employees.

In February, 2U had warned in Securities and Exchange Commission filings that it may not be able to stay in business. Yet in March, the company approved nearly $5 million in bonuses for a handful of top executives, including $2.3 million for CEO Paul Lalljie.

[Editor's note: This article originally appeared on Republic Report.] 

New Data Show Nearly a Million University of Phoenix Debtors Owe $21.6 Billion Dollars

The Higher Education Inquirer has just received a Freedom of Information Act (FOIA) response from the US Department of Education, stating that about 971,000 current student loan debtors who have attended the University of Phoenix have accumulated an estimated $21.6B in debt. The FOIA is Department of Education FOIA 23-02912-F. These debt numbers are consistent with a previous HEI analysis. 

We have been unable to learn whether this accumulated debt includes the hundreds of millions in debt that has already been forgiven--and that its present and future owners may be liable for. In 2023, we reported that approximately 73,000 debtors from the University of Phoenix had filed borrower defense fraud claims, and that more than 19,000 cases were granted immediate relief in the Sweet v Cardona settlement.

Through another FOIA request, we also discovered 6,265 consumer complaints in the Federal Trade Commission database made after its current owners took over. In 2019, the FTC and the University of Phoenix settled a claim for $191M for deceptive employment claims. It would appear that Phoenix has not done enough to clean up its act.  

The Higher Education Inquirer has been working for more than six years to get data about the school's noncompliance with the Department of Defense Tuition Assistance (TA) program, where servicemembers have been systematically preyed upon--and where Trump officials and their surrogates worked to cover up malfeasance by subprime schools--including the University of Phoenix. We hope to report on this topic later.  

The University of Phoenix is presently owned by Apollo Global Management and Vistria Group, who have been unsuccessfully trying to sell the school for at least three years. Previous potential suitors, held to secrecy, have included Tuskegee University, UMass Global, and the University of Arkansas System. 

Apollo Global Management is currently negotiating with the State of Idaho, which would incur $685M in debt to acquire the school. State officials are wary of the deal, and those with strong principles are unlikely to approve. But it's possible that other politicians may change their minds: if they or their families are properly compensated, directly or indirectly, for taking the risks to their reputations and careers. 

Related links:

ED Completes Pre-Acquisition Review for University of Phoenix Deal. University of Idaho Continues Hiding Details of Transaction Fees, 43 Education "High-Risk" Bonds.

How University of Phoenix Failed. It's a Long Story. But It's Important for the Future of Higher Education.

Fraud Claims Against University of Phoenix Continue to Mount

University of Phoenix articles 

Borrower Defense articles

Education Department Needs Stronger Rules for Accreditors (David Halperin, Republic Report)

 [Editor's note: This article originally appeared on Republic Report.] 

I’m scheduled to offer a brief public comment at today’s session of the Department of Education’s negotiating rulemaking meetings, where representatives of various higher education constituencies have come together to debate new proposed regulations governing issues including distance education, state government authorization of schools, and standards for the private accrediting bodies that oversee schools.  My comment will address accreditation, and this is what I plan to say:

Many students say a school’s status as accredited, and resulting seal of approval and aid from the Department, are the reason they enrolled. Because accreditors are gatekeepers for federal aid, their oversight is critical to prevent students and taxpayers from getting ripped off by poor quality, overpriced schools.

So it’s good that the Department has started to incorporate concerns about bad behaving schools in its reviews of accreditors, starting with ACICS, which accredited some of the worst.

But ACCSC also has tolerated years of abuses – at CEHE, Vatterot, and elsewhere. Data shows many ACCSC schools have left students worse off than when they started.  

SACS has permitted blatant abuses at Keiser University. WASC has allowed misconduct at Ashford. COE at Florida Career College.

The Department has started to ask those accreditors questions. But, under current rules, it hasn’t taken firm action, and predatory behavior is ongoing.

The rules also have done little to address rampant abuses at schools overseen by Higher Learning Commission.

HLC has long tolerated predatory conduct at Walden, DeVry, EDMC, Kaplan, Ashford, Grand Canyon, University of Phoenix, and the Perdoceo schools. 

Perdoceo in recent years paid 500 million dollars to settle with 48 states and 30 million to settle with the FTC over deceptive practices. Numerous Perdoceo employees have told the Department that company recruiters continue to make misleading sales pitches. 

As to the University of Phoenix, in 2015 the Pentagon briefly banned it from recruiting service members based on evidence of violations. In 2019, Phoenix agreed to pay 191 million to resolve FTC charges it ran ads falsely suggesting ties to major employers. Last year Phoenix was again running deceptive ads, this time falsely implying it is a state school.

If Phoenix tells such brazen falsehoods in the open, imagine what its recruiters tell students one on one.  The school’s graduation rate is 14 percent. 

Many victims are low income. These schools should not be accredited. They should not get taxpayer dollars. But under current rules, the abuses continue. 

Last year HLC renewed accreditations of the University of Phoenix and Perdoceo’s Colorado Tech, each for a full 10 years.  

And the Department in turn renewed HLC for a full five years. 

The system isn’t working.

Accreditors have often failed as gatekeepers of integrity and quality. The proposed regulations are a start to fixing the problem.

Predatory Colleges, Converted To Non-Profit, Are Failing (David Halperin)

About a dozen years ago, owners of some of the biggest, worst-acting for-profit colleges began concocting, with their eager, high-paid lawyers, schemes to convert their schools into non-profits. The apparent aims were to evade the heightened government regulations applied uniquely to for-profit schools in order to guard against waste, fraud, and abuse — and to escape the growing stigma that the industry’s predatory behavior had placed on for-profits.

The clever schemes have come in various colors, yet most of them potentially allowed the sharp operators to keep making big money off the schools they no longer formally owned but, one way or another, still controlled. These dubious deals, mostly blessed by servile government departments and accrediting agencies, have made a mockery of non-profit rules, and, much worse, have helped sustain another decade of predatory college abuses against students and taxpayers, resulting in the waste of billions of dollars and the ruining of the financial futures of tens of thousands of people — veterans, single moms, and others — who sought better lives through higher education.

Yet, just as the private equity owners of the University of Phoenix, historically one of the biggest for-profit schools, are now trying to execute yet another dubious version of this scheme — getting a pile of cash by unloading the school on Scott Green, the hubristic president of the University of Idaho, and potentially allowing the current, high-paid executive team to stay employed — it seems, increasingly, that many of these non-profit conversions are not just harmful to the public but also ultimately unsustainable for the operators.

Here’s what’s been happening lately:

— Last week, the Federal Trade Commission sued Grand Canyon University and its CEO, asserting that the school deceived doctoral students about the costs and course requirements of programs — and about the school’s claimed nonprofit status. The FTC also alleges that Grand Canyon engaged in deceptive and abusive telemarketing.

The FTC lawsuit follows an October announcement by the U.S. Department of Education that it is imposing a $37 million fine on Grand Canyon based on similar allegations.

Grand Canyon CEO Brian Mueller has responded to the FTC and education department investigations with a remarkable series of pronouncements suggesting that the moves against his self-proclaimed Christian university are rooted in religious or ideological bias. But, in reality, Grand Canyon’s troubles with regulators began not in the Biden administration, which has cracked down on for-profit college abuses, but under Trump education secretary Betsy DeVos, a Christian conservative who staffed her office with former for-profit college executives and did almost nothing else over four years to hold predatory colleges accountable.

Grand Canyon in 2018 had restructured itself into two entities: a non-profit college, GCU, and a for-profit company, Grand Canyon Education (GCE), that gets paid to provide a range of services to the school. Even though the IRS already had declared GCU a legitimate non-profit, the DeVos Department of Education in 2019 rejected the school’s bid for preferred non-profit status under federal education rules, concluding that “the primary purpose” of the Grand Canyon conversion to non-profit was “to drive shareholder value for GCE with GCU as its captive client — potentially in perpetuity.” The DeVos team couldn’t help but notice that Brian Mueller is the well-paid head not only of the non-profit school but also of the for-profit company has been getting about 95 percent of the non-profit college’s revenue.

Together, the Department and FTC actions call into question not only the integrity of Grand Canyon’s recruiting and academic operations, but also its effort to be accepted as non-profit.

— Last month, the Department of Education took another step to hold accountable the non-profit Center for Excellence in Higher Education, whose schools, the largest of which was Independence University, shut down in 2021. The Department demanded $23 million from CEHE to pay for “closed-school discharges” — reimbursement for cancellation of federal student loan debts that former students had owed the government. The Department in July already had cancelled $130 million in federal loan debt from former CEHE students, citing school misconduct; the Department could potentially seek to recoup all those funds from CEHE.

The ultra-wealthy Ayn Rand disciple Carl Barney owned the schools until 2012, when he sold them at a hefty valuation to CEHE, a small non-profit that he controlled. Seemingly sleepy career officials at the Department of Education approved the transaction in the Obama years, but public scrutiny raised doubts about the appropriateness of the deal.

Like Grand Canyon, CEHE’s abuses were by no means limited to the terms of the non-profit conversion. In 2020, a Colorado court found the company had engaged in systematic deceptive practices. Barney’s schools, the court concluded after an extensive trial, used a detailed playbook to manipulate vulnerable students into enrolling in high-priced, low-quality programs; directed admissions representatives to “enroll every student,” regardless of whether the student would likely graduate; greatly overstated starting salaries that graduates could earn; and falsely inflated graduation rates. CEHE has been pursuing an appeal, but in 2021, the accrediting agency for the schools withdrew approval, citing performance failures, and the Department of Education soon after tightened the screws on federal aid, precipitating the schools’ closure.

CEHE is a mess. It no longer runs any schools or gets any federal aid; instead its functions seem to be limited to trying to get former students to pay back the sketchy, high-interest private loans the school peddled, and engaging in legal disputes with the federal government; these include a pending fraud lawsuit filed by a CEHE whistleblower and joined by the Justice Department, an investigation of CEHE’s private loans by the Consumer Financial Protection Bureau, and a lawsuit for $500 million brought by CEHE against the government alleging the schools were “a victim” of a campaign by the Department of Education “in coordination with ideological confederates… to cripple and close as many private career colleges as possible.” The Department also has suspended CEHE CEO Eric Juhlin from federal contracting.

— Another of the worst predatory for-profit schools is Ashford University, whose corporate owner Zovio pursued several different schemes for a non-profit conversion before finally selling the college to the University of Arizona, whose president, Robert Robbins, had been pressured by state regents to expand its online offerings.

Zovio’s scheme was to hide behind the prestige and political power of a big state university and yet keep getting for itself hundreds of millions off the school, now called University of Arizona Global Campus, through a long-term contract to provide recruiting, academic, and other services.

But that plan was thwarted after a California judge, in 2022, found Zovio liable for blatant deceptions of Ashford students and imposed $22 million in penalties. By law, the California judgment should compel the Department of Education to terminate federal aid to the school. Although Zovio pursued an appeal, it was discredited, bowed out of its contract to serve UAGC, transferred its infrastructure to the University of Arizona, and shut down.

But, with Zovio out of the picture, what was obvious to some even before the deal closed seems to have played out: Most of what Arizona had purchased, most of what made money, was not some supercharged high tech education platform but instead a predatory playbook and a staff trained to execute it. UAGC may not be able to pay its bills even if it keeps up with Ashford’s old predatory practices, but it almost certainly can’t do so if it tries to go straight. In November, President Robbins admitted that the University of Arizona’s overall financial situation is fragile, with cash reserves below minimum levels. Robbins said the school had “overinvested,” and school document revealed that one such exertion was the deal to buy Ashford, which “added $265.5 million in operating costs…”

Arizona’s financial woes from the Ashford deal may grow. Former Ashford students say they were ripped off and, as a result, have applied to have their federal student loans cancelled under a provision of law called borrower defense to repayment. In August, the U.S. Department of Education said it would cancel $72 million worth of loans because of Ashford’s deceptions. The Department also said it would use its legal powers to recoup those funds from Ashford’s owner, meaning the University of Arizona. UA says in response it had “absolutely no involvement in, and is not directly or indirectly responsible for, the actions of Ashford and its parent company” and will be “assessing its options.” But, reading the school’s agreement with Zovio, Arizona may be out of luck on that score.

— In contrast to Zovio’s fate, Graham Holdings has not been forced out of the 2017 deal in which it sold predatory for-profit Kaplan University to an Indiana state institution, Purdue University. Graham continues to hold a contract to provide a wide range of services to the school, now called Purdue University Global — a deal that Purdue is locked into for a 30-year term.

The Graham/Kaplan schools repeatedly faced law enforcement problems for predatory abuses against students before the sale. But the schools did better exercising political influence: The company’s head, Donald Graham, is a hyper-connected Washington insider; the business, long run by his family, was previously called The Washington Post Company, before it sold the newspaper to Jeff Bezos. Graham exploited his power and connections in DC to become the most effective lobbyist pressuring the Obama administration and Congress not to push too hard on for-profit college accountability; his protege Jeffrey Zients held key positions in the Obama White House, as did Anita Dunn, whom, once she left government, Graham hired to tell his schools’ supposedly compelling story to lawmakers. Dunn and Zients are now perhaps the two most powerful staffers in the Biden White House.

Having utilized his tight connections to key Democrats in the Obama years, Graham then took advantage of the lax regulatory environment under Republicans Trump and DeVos to do his troubling non-profit conversion deal with another top Republican politico, then-Purdue president Mitch Daniels, a former Indiana governor and White House official, who may have been dazzled by Graham’s big money ties, including his status as an ex-Facebook board member, and seen Kaplan as the road to a high-tech future.

But this effort to put state college lipstick on a for-profit pig may be failing as well. As Forbes noted last month, Graham Holdings‘ November filing with the SEC says Purdue Global owes the company $127.8 million — perhaps more than the school, structured as a non-profit associated with Purdue University, would be able to pay. Cutting costs at the school in order to pay Graham Holdings’ fees would likely mean lower-quality educational programs. Boosting enrollment for lower-quality programs would likely mean accelerating the deceptive recruiting practices, targeted at low-income Americans, that sullied Kaplan in the first place. Doing all of that at a time when the Biden administration, to its great credit, is working diligently to hold predatory schools accountable would be risky.

Don Graham’s best shot at continuing to make millions off Purdue Global may be for his long-time allies in the Biden administration to fail this year, and give way again to a president Trump, who once ran his own scam real estate school and likely would identify with Graham’s sense of victimhood about the persecutions of great for-profit educators.

— Finally, there is ultra-wealthy Arthur Keiser and his Keiser University, whose 2011 conversion from for-profit to non-profit was comparable to Carl Barney and CEHE: a sale of the for-profit school owned by Keiser, at a remarkably high valuation, to a non-profit controlled by Keiser. In addition to the inflated loan payments Keiser has since received from the non-profit, there are a range of businesses owned by Keiser that sell various services to the non-profit. Even worse, as we have documented, there is a highly questionable mingling of resources and personnel between the non-profit Keiser University and Southeastern College, another for-profit school owned by Arthur Keiser and his wife.

Keiser University seems to have come the closest to thriving after a shady non-profit conversion, but its troubles are now growing.

Arthur Keiser has gone all the way to the U.S. Supreme Court, with his expensive lawyers trying, but so far failing, to block a landmark court settlement aimed at cancelling the student loan debt of hundreds of thousands of ex-students who have filed borrower defense claims, saying they were deceived by their schools. His complaint is that Keiser University was, for purposes of the deal, unfairly placed by the U.S. Department of Education on a list of presumptively bad-acting colleges when, he insists, “There’s no evidence of misconduct.”

But Keiser’s claim of innocence is just another deception.

Like all the other schools with troubling conversions, Keiser University also has repeatedly gotten in trouble with law enforcement, and settled claims, including with then-Florida attorney general Pam Bondi and with the U.S. Justice Department, over allegations of deceptive and unlawful recruiting practices. And recent staff members have told us about predatory behavior still happening at the school, including recruiting of low-income people seemingly unprepared for college programs and of people with insufficient English language skills to understand the course work.

Keiser University also has been in trouble recently with three different accreditors of specific school programs, who have placed the school on warning, probation, or show cause status due to concerns about matters including program effectiveness and certification exam passage rates.

The non-profit conversion also has, finally, gotten Keiser University in trouble; the school admitted under congressional questioning in 2021 that the IRS imposed a penalty on the school for improperly steering profits to Arthur Keiser by entering into leases above fair market value with Keiser-related for-profit companies. Senior Democrats in Congress, including senators Dick Durbin (D-IL) and Elizabeth Warren (D-MA) have called on the U.S. Department of Education to investigate Keiser’s schools, which have received billions in taxpayer-funded student financial aid.

And, in November 2022, the Department determined that Keiser University’s accreditor, SACS, was out of compliance with numerous federal regulations and directed it to provide more information regarding its oversight of Keiser University and the school conversion to non-profit.

As part of the Department of Education’s regular oversight process for accreditors, I recently wrote to the Department, for a second time, urging it to hold SACS accountable unless it takes steps to address the conversion deal and predatory practices at Keiser’s schools. I hope that will happen, and that the Department itself will take steps to protect students by imposing conditions on Keiser’s future receipt of federal aid.

— Conversion from for-profit to non-profit has not prevented serious financial and / or legal problems at all of the schools we’ve discussed. In recent years, government regulators, accreditors, courts, and students have seen through the conversions, recognizing that predatory for-profit schools — with greedy owners, deceptive practices, poor value educational programs, and low return on student and taxpayer investment — remain predatory schools even when dressed up as non-profit colleges or big state universities. (The conversion of another huge predatory chain, EDMC, to non-profit also has been a disaster.)

Yet somehow the president of the University of Idaho, Scott Green, continues to insist he will be serving his school, and students, by acquiring, through an affiliated new non-profit, the giant for-profit University of Phoenix from huge private equity firm Apollo Global Management. Green remains determined to buy and run Phoenix despite Phoenix’s long and continuing record of abuses and law enforcement problems, despite the enormous potential liability Idaho might assume for debt cancellation for former Phoenix students, and despite opposition from many leaders in his own state, as well as advocates for students across the country. If Green — whose team keeps claiming, falsely, that Phoenix is under honest new management — and the Idaho state board of education can’t look objectively at the evidence that past conversions have been a moral disgrace, and a disaster for school operators, as well as students and taxpayers, then others in his state, the University of Idaho’s accreditor, and the U.S. Department of Education, should act to block the deal.

[Editor's note: This article originally appeared on Republic Report.]