Online Program Manager for University of Arizona Global Campus Facing Financial Collapse

Zovio (ZVO), the for-profit online program manager for University of Arizona Global Campus (UAGC)*, is facing a financial collapse.

With three consecutive years of financial losses, Zovio (formerly known as Bridgepoint Education) lost a record $61 million in 2020.  Over the trailing 12 months (ttm) the company has lost $76 million.  Cash assets have decreased from $357 million in 2016 to $33 million in 2021.  

Zovio's cash runway (a key indicator of financial health) is now less than a year from zero, with revenues amounting to a fraction that they once were.  Liabilities are also greater than all assets.  

Zovio is working with a new CEO, Randy Hendricks, who has limited management experience, and the company has already been pared down to about 1500 full-time employees.  

Insiders tell the Higher Education Inquirer that the deal between Zovio and University of Arizona was a deal between people of low integrity and a lack of imagination.  

According to the Department of Education's College Navigator, University of Arizona Global Campus has just 194 full-time instructors for about 35,000 students, and many of those full-time instructors are also tasked with management roles: the tell-tale traits of a subprime robocollege.  

To make matters worse, ZVO, which was already financially unstable, was recently ordered to pay $22 million in compensation to California students who were defrauded.  

While Zovio's 2021 Annual Earnings will not be presented until Tuesday, March 29, 2022, there are strong indications that ZVO has reached a point of no return in its balance sheet.

Zovio's Assets (2009-2021) Source: Macrotrends.net

Zovio's Annual Report is coming out weeks late, just before the Securities and Exchange Commission deadline, and ZVO has not presented any revenue numbers to relieve shareholder anxiety.

Since March 18, ZVO shares have been below the $1 per share threshold to remain on the NASDAQ. Thirty consecutive trading days below $1 will trigger the first stages of a delisting from the stock market.

Zovio Share Price, March 3-March 28, 2022 (Source: Seeking Alpha)
 

What we are seeing looks very much like Corinthian Colleges and ITT Education before they collapsed. Each day, ZVO is getting closer to being delisted from NASDAQ and they are quickly running out of cash.

But what happens to federal government funding and oversight if Zovio collapses?  And how about UAGC--will it end up costing Arizona taxpayers?  

With UAGC, only a handful of edtech companies could handle such a large transition.  Experts we have contacted do not agree on potential surrogates for the online university or whether a surrogate is even necessary.  

Will the US Department of Education (ED) try to get another company to take over the business? In the Corinthian Colleges collapse, ED was able to get ECMC to take over operations. 

Will the US Department of Education require a special monitor, as they did with Corinthian Colleges?

University of Arizona could hire key executives and personnel, but that could cost the State of Arizona to hire those folks as state employees. 

These are issues that need to be addressed by the Department of Education and the State of Arizona now, to avoid another student loan train wreck.  

[Post script:  On Monday, March 28, 2022, Zovio announced that their 2021 Annual Earnings would be delayed.  No new date was reported.]  

*University of Arizona Global Campus was previously known as Ashford University.   According to the US Department of Education's College Scorecard, Ashford University has a 22 percent 8-year graduation rate. The College Scorecard reported that of student debtors two years into repayment, 32 percent were in forbearance, 28 percent were not making progress, 13 percent defaulted, 12 percent were in deferment, 7 percent were delinquent, 5 percent were making progress, 2 percent were paid in full, and 2 percent were discharged.

Related link: Verdict Against Zovio Adds to Peril for Arizona Global Campus (David Halperin, Republic Report) 

Related link: College Meltdown 2.0
Related link: Ashford University Deceiving Consumers, Violating Department of Defense Regulations
Related link: Unnamed Ashford University Suitor Joining Purdue University Global in "Race to the Bottom"

He Helped Run Some of the Worst For-Profit Colleges. The Trump Team Just Picked Him to Oversee College Quality. (David Halperin)

On the eve of the Thanksgiving holiday, when most people are focused on travel plans and food preparation, the Trump administration released a list of its four nominees for open slots on the National Advisory Committee on Institutional Quality and Integrity (NACIQI). That is the panel of outside experts that advises the U.S. Department of Education on whether to approve or reject the accrediting bodies that serve as gatekeepers for federal student financial aid. Amid five candidates picked by Secretary of Education Linda McMahon — representatives from conservative think tanks and universities, and a student member — one name stands out: Robert Eitel, a senior education department official in the first Trump administration, and before that — which the Department’s press release does not mention at all — a senior executive at two of the most deceptive and abusive companies in the history of U.S. for-profit higher education.

Eitel, who had served as the Department of Education’s deputy general counsel during the George W. Bush administration, joined Career Education Corporation (CEC) in 2013 as a vice president of regulatory operations. In 2015, Eitel left CEC to join Bridgepoint Education as vice president of regulatory legal services. He remained in that role through April 2017, the last three months on leave of absence while serving as an advisor to Trump Secretary of Education Betsy DeVos. Eitel then resigned from Bridgepoint and was senior counsel to DeVos through Trump’s first term.

The first of Eitel’s corporate employers, Career Education Corp., which changed its name in 2020 to Perdoceo, has faced multiple law enforcement investigations for predatory conduct.

In 2013, soon after Eitel joined CEC, the company agreed to a $10.25 million settlement with the New York state attorney general over charges that it had exaggerated job placement rates for graduates of its schools.

In 2019, after Eitel’s departure, the company entered into a $494 million settlement with 48 state attorneys general, plus the District of Columbia, over an investigation, launched in 2014, that for years it had engaged in widespread deceptive practices against students.

Later that same year, Perdoceo agreed to pay $30 million to settle charges brought by the Federal Trade Commission that its schools, at least since 2012, had recruited students through deceptive third-party lead generation operations.

In each case, the company did not admit guilt.

Misconduct at CEC/Perdoceo continued well past Eitel’s departure, suggesting the rot at the company’s core. In this decade, Perdoceo employees told media outlets USA Today and Capitol Forum, as well as Republic Report, that company recruiters have continued to feel pressure to make misleading sales pitches and to enroll low-income people into programs that aren’t strong enough to help them succeed. Some of those former employees also spoke with federal investigators. USA Today reported in 2022 that the U.S. Department of Education, in December 2021, requested information from Perdoceo; the Department also asked Perdoceo to retain records regarding student recruiting, marketing, financial aid practices, and more. Perdoceo confirmed the probe, while seeming to minimize its significance, in a February 2022 SEC filing. Perdoceo also acknowledged in May 2022 that it received a request for documents and information from the U.S. Justice Department.

The Department of Education has provided CEC/Perdoceo schools — with current brand names including American Intercontinental University and Colorado Technical University and demised brands including Brooks Institute and Sanford-Brown College — with billions of dollars over the years. American Intercontinental University and Colorado Technical University have at times received as much as 97 percent of their revenue from taxpayer dollars in the form of federal student grants and loans.

But data released by the Department in 2023 showed that the Perdoceo schools deliver poor results for students, with low graduation rates and graduate incomes and high levels of student debt.

Meanwhile, the company Eitel left CEC to join, Bridgepoint Education, compiled its own record of predatory abuses. At a 2011 investigative hearing, then-Senate HELP committee chair Tom Harkin (D-IA) called Bridgepoint’s main school, Ashford University, “an absolute scam”; the hearing highlighted the company’s deceptive advertising, predatory recruiting, high prices, and weak educational offerings. Bridgepoint used false promises to purchase in 2005 a small college in Iowa and used that school’s accreditation to build a giant, mostly online school whose attendance peaked in 2012 at around 77,000 students and received billions from taxpayers.

Bridgepoint/Ashford deceived, crushed the dreams of, and buried in debt veterans, single moms, and others across the country, and put the company in jeopardy with law enforcement multiple times. In 2022, justice finally caught up with the company, which by that time had changed its name to Zovio. Following a trial where the California attorney general’s office presented extensive evidence of deceptive practices by the school, a state judge ruled that the company “violated the law by giving students false or misleading information about career outcomes, cost and financial aid, pace of degree programs, and transfer credits, in order to entice them to enroll at Ashford.” An appeals court subsequently upheld the verdict.

Zovio tried to launder its bad reputation by selling Ashford in 2020 to the public University of Arizona, while maintaining a lucrative service contract to run the school. After the California verdict, Zovio was pushed out of the deal, and the troubled school operation was folded into U. of Arizona, creating more controversy and turmoil at that school; the deceptive practices have continued.

After his revolving door journey through the Department of Education, two predatory college companies, and back to a Trump education department that repeatedly used its regulatory and enforcement powers to make it easier for predatory schools to prosper, Robert Eitel co-founded and became president of the Defense of Freedom Institute, a well-funded think tank dedicated at its outset to fighting the Biden administration’s education agenda through lawsuits and “vigorous oversight” of the regulatory process and advocating for public money for religious schools. It also has aggressively opposed the rights of transgender students.

In July, the Trump administration, in another effort to bulldoze laws and norms to get the personnel it wants, declared after the fact that the appointment earlier this year of Zakiya Smith Ellis, a Democratic appointee, as chair of NACIQI was “erroneous.” Accordingly, as far as the Trump administration is concerned, NACIQI currently has no chair. Don’t be surprised if, at the next NACIQI meeting, set for December 16, Trump officials maneuver to make Bob Eitel, a former top executive of some of the worst colleges in America, the head of the committee that is supposed to guard against college failures and abuses. Responsible NACIQI members should pick someone else as chair.

David Halperin
Attorney and Counselor
Washington, DC

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

Fraud Claims Against University of Phoenix Continue to Grow

The Higher Education Inquirer received a FOIA response today from the US Department of Education stating that 73,740 consumer fraud claims have been filed against the University of Phoenix. These claims have been made through the Department of Education's Borrower Defense to Repayment program.

The Sweet v Cardona lawsuit, concluded earlier in 2023, allowed for about 19,000 claims to be settled immediately--in favor of student debtors and against the University of Phoenix. Another 15,000 or so cases are supposed to be expedited as a result of the federal ruling.  

23-02373-F Final Response

We estimate that the potential liability of these immediate claims to be $200M-$600M with another $500M-$1.5B for the remaining cases. The higher estimates are based on the median federal loan debt among borrowers who completed their undergraduate degree ($32,421) and a study by Adam Looney and Constantine Yannelis that indicated University of Phoenix debtors, on average, paid off almost nothing of their principal. The authors also estimated that total student loan debt from more than a million University of Phoenix debtors was $35B. 

The Department of Education has not presented any estimates on the total debt by University of Phoenix students or its costs to the US government.  

Thousands of new cases continue to be filed. From January 2015 through January 1, 2022, there were 32,040 Borrower Defense claims made against the University of Phoenix. An additional 41,700 claims were filed between 2022 and August 2023. 

Idaho Sale

University of Phoenix's current owners are Apollo Global Management and Vistria Group, who have been trying to unload the online robocollege for years. The University of Idaho has been the most recent target, but the sale is far from being consummated.  The entire deal is expected to cost $685M. Idaho Attorney General Raul Labrador has filed a lawsuit to stop or at least slow down the acquisition. And members of the Idaho Legislature continue to have questions.

In order to shield itself from liability the University of Idaho created a non-profit organization called 43 Education. But the state university may be responsible if the non-profit fails to make enough money to repay the bondholders of the new non-profit. 

The liability of these Borrower Defense claims to the current or future owners of the University of Phoenix seems possible in light of a recent statement by Department of Education Undersecretary James Kvaal. Kvaal said the University of Arizona Global Campus may be liable for the misdeeds of Ashford University (UAGC's former name). The University of Arizona purchased Ashford in 2020 for one dollar. 

Related articles:

Feds Cancel Loans for 2,300 Students Scammed by Ashford U. So Why Does the School Still Get Tax Dollars? (David Halperin)

University of Phoenix and the Ash Heap of Higher Ed History

Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.

The Growth of "RoboColleges" and "Robostudents"

More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution

 

"Edugrift": Observations of a Subprime College Lead Generator (by J.D. Suenram*)

First a little about my background. I came to work at a company called Edsoup in 2010. I worked there for four years. Previously I worked for DOD as a civilian contractor as a military contractor. This very lucrative job ended when the Defense Department under Bill Gates decided to eliminate the civilian military recruiter in each recruiting office across the country. 

I knew nothing about Edsoup when I was hired there in Salt Lake City in 2010. Ostensibly, as the job was explained to me, I was to help people make college decisions by setting appointments telephonically for the students. The colleges would then contact them about enrolling. Simple right?

Wrong. Four years later, I had received an education of sorts, on the countless  layers of grift which can only be described as subprime education. And, unlike housing, in which you do get a house, the educational grift here left the consumers/students with nothing. Zip. Zero. Nada.

Why you ask? First of all uniformity. Many would choose to quibble here. Our schools (Liberty University and Grand Canyon come to mind) are not like the 'bad apples' (Everest, Ashford, Kaplan) That is simply a lie.

While it is true that GCU and Liberty have large campus enrollment, that reality was built on backbreaking debt laden online subprime degrees. Hundreds upon hundreds of thousands of them. The vast majority of which are useless, except for adding to the coffers of old, rich white men.

Look at uniformity. Whether it was Kaplan or GCU, Edsoup would set appointments for these schools off a monthly menu. Say you had the misfortune of thinking a 4 year online degree in cybercrime or homeland security would improve your economic standing. If we ran out of the GCU monthly budget option for those degrees, we would hook you up with Kaplan. Until they ran out. At the end of the month you might just have Everest as your only option. No problem. They will call just like the other grifters did.

Now Edsoup's menu was just the tip of iceberg. You express your degree preference to me over the phone. We pull up the menu, which was just the number of candidates each school needed to keep the grift juggernaut rolling. We also set appointments for OTHER menus, like Mediaspike and Quinstreet. We were a grifterpalooza of education. 

You may ask where did we find the leads for these subprime schools? We did have that inbound 800 number, which produced 2 dozen appointments a month. The other THIRTY THOUSAND appointments were outbound. Hammer time baby.

You may ask who did we call? Again, uniformity. Indeed.com, legaljobs.com, militaryjobs.com, warehousejobs.com, the list of about 50 jobsites here. We even had sleazy companies cut and pasting legit sites like Monster and getting leads from them. Also, if you wanted Medicaid, food stamps, power assistance, we are calling you. Hammer time. 

The bait and switch went like this. I know you were online recently, looking for a job. But if you WERE to go back to school, what would you want to study? Most said no in rather unpleasant terms. But many did not. Ka-ching.

Uniformity. Who received these leads? Enrollment counselors/salespeople at Ultimate Medical Academy, Kaplan, Everest, Colorado Technical (University), (University of) Phoenix, Grand Canyon, Post University, Ashford University, Virginia College, Le Cordon Bleu, Art Institutes, Western Governors University, to name a few of roughly 50.

Liberty U we set leads for in the beginning until Jerry Falwell Junior in housed the call center leads at his former Lynchburg Sears mall.

Now more recently, organizations like Ashford thru Arizona, GCU, and Kaplan through Purdue Global have in housed their own subprime appointment factories. Not having first hand information, I would still unequivocally  say these operations have not changed their operations one bit.

I was able to successfully put a lawsuit on the docket in Salt Lake Federal Court in 2015. Two firms, one the largest player in Salt Lake, the other the largest player in San Francisco, took the mega case to challenge the operational scam of this subprime juggernaut. A good 2 dozen schools (I left out Full Sail above they were in the lawsuit) were on the hook for their "uniformity".

Unfortunately, this was for naught as the election happened. Some of the same CEO's we sued were now IN The Department of Education. So we withdrew. They were decidedly not the same dozen or so Edgov and DOJ folks we met with in Salt Lake prior to the election. 

Fortunately, edugrift slowly has become a much harder sell. Even with a few major U's taking on the subprimes and airbrushing them. With 2020 coming, there may be yet a death knell for this sad chapter in U.S. educational history.

*This article is the opinion of the author.  

College Inc. Redux is Overdue

We desperately need a PBS Frontline updating of College Inc. This 2010 documentary by Martin Smith and Rain Media took us behind the curtains, into the big business of US for-profit higher education. At the time, College Inc. made an important statement: that for-profit higher education had become a racket, funded by greedy Wall Street investors, and that government oversight was necessary to rein in the worst abuses at schools like Corinthian Colleges and Ashford University.

 

 

From 2010 to 2012, the Senate Harkin Commission researched and exposed the systemic abuses of the largest for-profit colleges. And under President Obama, some of these abuses were addressed through policy changes at the US Department of Education, Department of Veterans Affairs, and Department of Defense. 

 

Times Have Changed, Not In a Good Way

 

Much has happened in the last decade and a half since College Inc. was produced. US higher education did not become less predatory, even as a number of for-profit colleges (Corinthian Colleges, ITT Tech, Art Institutes, Le Cordon Bleu, and Virginia College) were shuttered. Republicans worked to ensure that meaningful policy changes, like gainful employment safeguards, were blocked. And some of the worst predators (Kaplan and Ashford) morphed into businesses owned by state universities (Purdue and University of Arizona).

 

Online education has become pervasive despite concerns about its effectiveness. Content creators and facilitators have replaced instructors at large robocolleges like Southern New Hampshire University, Grand Canyon University, Liberty University Online, and the University of Phoenix. 

 

The for-profit (aka neoliberal) mentality has spread. Online Program Managers (OPMs) have brought for-profit education to non-profit institutions, carrying with it an enormous cost to consumers. Advertising and marketing has become out of control, helping fuel a manufactured College Mania of anxious parents and their children. 

 

Despite the College Mania, folks have become more skeptical of higher education, and for good reason. Student loan debt has further crippled the lives of millions of Americans as Republicans have stepped in to block debt forgiveness. Community colleges and some state universities have gone through significant enrollment declines. Small colleges have closed. And elite colleges have become more wealthy and powerful and controversial. Something not on the radar in the 2010 documentary or in popular culture at the time. 

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.

University of Phoenix Reportedly Considering Public Offering or New Buyer (David Halperin)

Bloomberg reports that the private equity firms Apollo Global Management and Vistria Group are considering a sale or an initial public offering for the for-profit school they jointly own, the University of Phoenix. Unnamed sources told Bloomberg an IPO could occur as soon as the third quarter of 2025.

For the past two years, Phoenix’s owners have been in talks with the University of Idaho about the state university acquiring the for-profit school. While U of Idaho President C. Scott Green has touted the deal as a revenue raiser and step into the future, the sale has bogged down amid concerns by legislators and others in the state. Last June, the two sides agreed to continue negotiations but that Phoenix’s owners could talk with other potential suitors.

The leak to Bloomberg may be a sign that Phoenix’s owners are ready to move on. But it could instead be a bluff aimed at fooling Green, a self-styled dealmaker, into revitalizing efforts to buy the school.

Green’s plan has been thwarted again and again, with negative votes in the Idaho legislature, a successful court challenge by the state’s attorney general, criticism from the state treasurer, and sharp scrutiny from news outlets in the state.

The Green school deal has assumed that operation of Phoenix would bring millions in new revenue to fund his university. But it ignores that running a for-profit college, one that has repeatedly gotten in trouble with law enforcement for deceiving students, would be a tremendous challenge: If Green pushed to end Phoenix’s predatory practices and improve student outcomes, it probably would start losing money, because predatory practices, coupled with high prices and low spending on education, have made up the school’s secret sauce. But if Green allowed the deceptive conduct to persist, the school could face more legal peril. And, whatever route he took, Green’s school might end up assuming massive liability for student loan debt the government has cancelled based on past abuses at Phoenix.

At its peak, Phoenix was the largest for-profit college in the country and got upwards of $2 billion a year in federal student aid, while reporting dismal graduation rates and high levels of loan defaults.

Phoenix’s owners pursued a deal with Idaho only after the trustees of the University of Arkansas rejected a similar purchase negotiated by that school’s president.

Phoenix’s parent company, Apollo Education Group, had been publicly traded until Apollo and Vistria took the company private in 2017.

There have been previous marriages between big state universities and large predatory for-profit colleges that were seeking to evade the stigma and regulations that the industry’s bad behavior has provoked. The University of Arizona’s purchase of Ashford University has turned into a fiasco both for Arizona, which rebranded the school University of Ariziona Global Campus (UAGC), and for Ashford’s previous owner, now-shuttered Zovio. Meanwhile, Graham Holdings sold predatory Kaplan University to Purdue, while locking that Indiana state school into a 30-year service contract that allows Graham to keep making big money. The arrangement harms Purdue’s reputation, and Purdue Global has struggled financially. Both Purdue Global and UAGC continue to enroll students in their sub-par, overpriced programs.

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

DOD, VA Get Low Grades for Helping Vets Make College Choices

The Department of Defense (DOD) and the Department of Veterans Affairs (VA) are tasked with helping servicemembers and their families make successful transitions to civilian life.

The Department of Defense offers college classes on base through their education centers. They also provide free education opportunities through DOD Tuition Assistance (TA). DOD offers a tool called TA Decide to help servicemembers choose schools and a short series of classes for outgoing servicemembers, called the Transition Assistance Program (TAP). The US Army also has Army University which puts all military education in one place.

VA claims to offer individual counseling for transitioning servicemembers and veterans seeking information about post-military careers and education. This includes a career tool called Career Scope and an online tool for selecting schools, called the GI Bill Comparison Tool.

How well are these education and career programs working? It would certainly appear from the available data that DOD and VA are failing many servicemembers, veterans, and their families.

I have reached out to DOD for information about the effectiveness of DOD TA, TA Decide, US Army University, and other programs but have not gotten any feedback. I have also tried to connect with VA but they also have not responded.

According to Student Veterans of America and their NVEST report, 46 percent of all people using the GI Bill do not finish school, and 25 percent use their hard earned GI Bill on for-profit colleges. In 2017, CBS News also reported that 40 percent of all GI Bill money goes to for-profit colleges. To make matters worse, some of the worst actors in the subprime college sector (like University of Phoenix, Ashford University, Colorado Tech, and Purdue University Global-Kaplan) get a large amount of TA and GI Bill money.

[Image below from GI Bill Comparison Tool shows the schools with the most GI Bill students. Downloaded 11-8-2018. ]




In 2011, the Government Accountability Office (GAO) reported that DOD had done some work on ensuring greater accountability from online schools, but that more needed to be done. Since 2017, DOD has made two reviews of schools receiving TA funds, but the information has not been released to the public. US Army University also continues to partner with subprime colleges such as University of Phoenix, DeVry, and Ashford University.


Related links:

8 tips to help vets pick the right college (Military Times)

Veteran Mentor Network on LinkedIn

Warrior Scholar Project

Service to School

Veterans Upward Bound

University of Phoenix and the Ash Heap of Higher Ed History

 (Updated September 14, 2023)

The University of Phoenix (or at least its name) may soon enter the ash heap of US higher education history--and rise again as a state-run robocollege.  But it shouldn't--at least not yet. Once hailed as the leader in affordable adult education for workers entering middle management, it is a shell of its former self--in an economy less certain for workers and consumers. 

With the school's wreckage are approximately one million people buried alive in an estimated $14B-$35B in student loan debt.  

Pattern of Fraud

As of January 2023, more than 69,000 of these student loan debtors have filed Borrower Defense to Repayment fraud claims with the US Department of Education against the University of Phoenix (UoPX). Many more could file claims when they become aware of their rights to debt relief. In the partial FOIA response below, the US Department of Education reported that 69,180 Borrower Defense claims had been made against the school.

In a recent federal case, Sweet v Cardona, most if not all of the 19,860 "denied" cases were overturned in favor of the student loan debtors.  We estimate the smaller number of fraud claims alone to amount to hundreds of millions of dollars.  

Through a FOIA request, we also discovered 6,265 consumer complaints in the FTC database. In 2019, the FTC and the University of Phoenix settled a claim for $191M for deceptive employment claims.  Based on the consumer complaints, we have no reason to believe that Phoenix has changed its behavior as a bad actor. 

On May 3, 2023, six US Senators (Warren, Brown, Blumenthal, Durbin, Merkley, Hassan) called for the US Department of Education, Department of Veterans Affairs, and Department of Defense to investigate the University of Phoenix for launching a new program suggesting that it was a public university.  The letter stated that the school "has long preyed on veterans, low-income students, and students of color."

Wolves in Sheep's Clothing

University of Phoenix's owners could potentially be liable for refunding the US government for the fraud. But as a state-related organization, it may be more politically difficult to claw back funds, no matter how predatory the school is.  

Purdue University Global and University of Arizona Global set a precedence in state-related organizations acquiring subprime schools (Kaplan University and Ashford University) and rebranding them as something better. Whether they are better for consumers is questionable. Phoenix will have to cut costs, largely by reducing labor. Using Indian labor (like Purdue Global) and AI could be profitable strategies.  It's likely that this deal, even if profitable, will add fuel to the growing skepticism of higher education in the US. 

University of Phoenix's Finances

Apollo Global Management and Vistria Group currently own University of Phoenix but have been trying (unsuccessfully) to unload the subprime college for more than two years. Little is publicly known about the school's finances. What is known is that UoPX gets about $800M every year from the federal government, through federal student loans, Pell Grants, GI Bill funds, and DOD Tuition Assistance.

Despite this government funding, US Department of Education data show the school's equity value for the Arizona segment declined significantly, from $361M in FY 2018 to $187M in FY 2021. 

$347M of the University of Phoenix's $518M in assets are intangible assets. Intangible assets typically include intellectual property and brand reputation. The school has $348M in liabilities.  

The University of Phoenix has been reducing expenses by cutting instructional costs, from $70M in FY 2020 to $60M in FY 2021. UoPX spends about 8 percent of its revenues on instruction.

Marketing and advertising expenses are not available, but Phoenix has been visible on the Discovery Channel's Shark Week, CBS' Big Brother, and other television events. ISpot.tv reports that University of Phoenix spends millions of dollars each year on television ads.  On one ad alone, the ad spend from February 2023 to July 2023 was an estimated $3.5M. 

Attempts to Sell UoPX

There have been two known potential buyers for the University of Phoenix: the University of Arkansas System and the University of Idaho. In both cases, the owners required the potential buyers to keep the deal secret until the sale was imminent.  

Fear of the impending higher education enrollment cliff appears to be an important pitch to potential buyers. 

Arkansas, the first target, was in the process of making the deal, and it might have gone through if nit for the voice of one whistleblower and one outstanding investigative reporter, Debra Hale Shelton of the Arkansas Times.

In the case of Idaho, news of the potential deal was publicly noted just one day before the preliminary agreement was made with the Idaho Board of Education. Two other secret meetings were held before that.  

A number of journalists including Kevin Richert (Idaho EdNews), Laura Guido (The Idaho Press), Troy Oppie (Boise State Public Radio), and Noble Brigham (Idaho Statesman) have exposed some of the problems and potential problems with the deal.  In June, Idaho legislators began questioning the acquisition.  

More recently, the opinion editor at the Idaho Statesman argued that the deal may actually be worthwhile. 

Particulars about the finances are sketchy at best and misleading at worst.  The University of Phoenix is said to include $200M in cash in the deal, but they have not said how much of that sum is required by law as "restricted cash"--money the school needs if the Department of Education needs to claw back funds.  Phoenix also claims to be highly profitable, but without showing any evidence.  

What is known about the deal is that the University of Idaho will have to borrow $685M and put its (bond) credit rating at risk. The school has not identified important information how the bonds would be sold (underwriters, bond raters, date to maturity, interest rate). 

The University of Idaho has created an FAQ to answer questions about the sale, but HEI has identified a number of misleading statements about University of Phoenix's present finances (failure to report the school's equity), potential liability (cost of tens of thousands of Borrower Defense claims), and leadership (lack of background information about Chris Lynne, the President of the University of Phoenix).  These deficiencies have been reported to the University of Idaho and to the Representative Horman. 

On June 20, Idaho Attorney General Raul Labrador filed a lawsuit to halt, or at least slow down the deal. 

The University of Idaho submitted a Pre-Acquisition Review from the US Department of Education, and it may take up to three months before the application is completed. 

As of September 2023, the deal is far from done.  Since this article was first published there have been a number of developments:

On September 11,  US Senators Elizabeth Warren, Dick Durbin, and Richard Blumenthal called on University of Idaho President Green to abandon the sale.  The Senators also asked Green if he had a plan to pay for the Borrower Defense claims, noting that University of Arizona may be on the hook for thousands of claims against Ashford University (aka University of Arizona Global campus).

In November, the Joint Finance-Appropriations Committee of the Idaho Legislature is expected to discuss the issue again.

*The Higher Education Inquirer has made a FOIA request for more up-to-date numbers from the US Department of Education. We have also filed FOIA requests with the FTC. 

Related link: 

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

The Growth of "RoboColleges" and "Robostudents"

More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution

Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.

More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution

It's commonly known that US student loan debt is now about $1.7 trillion and that more than 44 million Americans are laden with this debt.  It's also known that student debt is not a problem for everyone who goes to college or everyone who takes out loans.  

Student loan debt is not equally distributed: while the children of elites can go to school without incurring debt and find meaningful work after graduation, working families are burdened because so many cannot find decent, gainful employment after dropping out or even after graduating from college--work that would enable them to repay their loans.

Student loan debt is also not distributed equally among the schools that generate the debt.  Working class people who have the opportunity to get to elite schools may incur less debt there than by attending state universities--but others who attend these elite schools, especially online at the graduate level, may not be so lucky.  

Those who attend subprime colleges, and who take the wrong majors, may incur debt they can never repay.  

And the multitude of debtors in between, the many millions going to less than elite schools, are having to restrict their dreams as they pay back their loans.  

The US Department of Education and other organizations publish important information on student loan debt.  The College Scorecard, for example, gives consumers information on the debt they can expect, gainful employment after attending, and the numbers on student loan repayment.   The Washington Monthly also ranks colleges, and important numbers, like social mobility rankings and amount of principal paid are in the rankings. The Century Foundation and The Institute for College Access and Success (TICAS) also contribute to our knowledge. 

But there are glaring gaps in our current knowledge about student loan debt, knowledge necessary for establishing greater transparency and accountability.  

One of the most important knowledge gaps is in learning about student debt by institution.  In 2016, Adam Looney and Constantine Yannelis presented a conference paper on student loan debt that listed student loan debt by institution.  

Table 5 in this report showed an important aspect of the debt, of accumulated debt, the percent of principal still owed on debt, and the 5-year student loan default rate.  University of Phoenix attendees had an estimated $35 billion in accumulated debt, outpacing Walden University.  And Argosy, Strayer, Capella, DeVry, American Intercontinental, and Nova Southeastern attendees owed more money than the principal of their loans, 5 years after the loans were taken out.  Kaplan University (know known as Purdue University Global) had a 5-year student loan default rate of 53 percent, and Ashford University (know known as University of Arizona, Global Campus) and Colorado Technical Institute had 5-year student loan default rates of 47 percent.  These subprime colleges, in effect, were draining the student loan portfolio while providing a service that hurt many of their customers.  

Even some big brand name schools like NYU, University of Southern California, Penn State, Arizona State University, Ohio State, University of Minnesota, Michigan State, Rutgers, Temple, UCLA, and Indiana University had students with enormous amounts of debt that they were having to pay off.  

The data in this study were from 2009 and 2014.  What has happened since then at the institutional level?  What schools today are draining the student loan portfolio and financially crippling those who have attended?  Consumers and tax payers should be allowed to know.  

Related link: The College Dream is Over (Gary Roth)

Related Link: USC Pushed a $115,000 Online Degree. Graduates Got Low Salaries, Huge Debt (Wall Street Journal-Lisa Bannon and Andrea Fuller) 

Related link: A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan default ( Looney and Yannelis, 2016)

Related link: College Meltdown Expands to Elite Universities

Related link: What happens when Big 10 grads think "college is bullsh*t"?

Higher Ed Became More Brutal During 2020-21 Pandemic

The Covid-19 pandemic was the largest news item in US higher education in 2020 and the beginning of 2021.  It certainly had an effect on higher education enrollment and revenues.   But the larger story, according to author Gary Roth, was that the “College Dream is Over.”  

College is supposed to be a transitional space between K-12 education and good jobs. But savage inequalities in the K-12 pipeline, alienating and sometimes questionably substandard online education, and fewer good jobs at the end of the pipeline meant that more students would be unprepared for college and for work life in the brutal tech (fintech, medtech, and edtech) and gig economy.  

Banks and big businesses (including brand name universities and for-profit colleges ) were bailed out twice in 2020 by the federal government as student debtors only got temporarily relief.  

Savage inequalities in the K-12 pipeline intensified with online education and the hollowing out of America continued.  

Under the Trump administration, privatization, deregulation, and lack of transparency  (in gainful employment, defense to repayment, student loan repayment rate) were the rule.  2021 shows promise for progressive change, but we'll have to wait and see if anything gets done to reduce the College Meltdown.  

• The Student Debt Crisis is a Crisis of Non-Repayment (Marshall Steinbaum)
• More people with bachelor’s degrees go back to school to learn skilled trades (John Marcus, Hechinger Report)
• Student Loan Losses Seen Costing U.S. More Than $400 Billion (Josh Mitchell, Wal Street Journal)
• Nearly All States Suffer Declines in Education Jobs (Barb Rosewicz & Mike Maciag, Pew)
• COVID-19 Will Likely Shrink Job Market For College Grads (Government Executive)
• Law student debt averages about $165K at graduation, creating stress and restricting choices, survey says (Debra Cassens Weiss, ABA Journal)
• Higher Ed's Dirty Little Secrets (Steven Mintz, Inside Higher Education)
• Colleges Slash Budgets in the Pandemic, With ‘Nothing Off-Limits’ (Shawn Hubler, NY Times)
• Permamanent Budget Cuts Are Coming (Robert Kelchen, CHE)
• A Separate And Unequal System of College Admissions (Anthony Abraham, NY Times)
• House Democrats Drop Canceling Student Loans (Kery Murakami, IHE)
• College Town Economies Brace for Covid Blow (WSJ)
• 30 college towns that could face economic ruin if schools don't reopen or have to close again this fall (Madison Hoff, Business Insider)
• Laureate Education to Sell Walden University to Adtalem Global Education (Market Watch)
• 'It's going horribly': College towns fret about census count (ABC News)
• Student Loans Plummeted for the Summer Term (Kevin Miller, The Century Foundation)
• University of Arizona Acquires Ashford University (IHE, Lindsay McKenzie)
• The Nightmare That Colleges Face This Fall (Adam Harris, The Atlantic)
• No students. No graduation. ‘Total devastation’ in college towns during coronavirus pandemic (Zoe Nicholson and Ed Semmler,Yahoo Finance)
• University Leaders Are Failing (François Furstenberg, Chronicle of Higher Education)
• The Coming Disruption of Higher Education (New York interview with Scott Galloway)
• Demand for refunds intensifies among college students (Jessica Dickler, CNBC)
• Latest Coronavirus News (Inside Higher Education)
• Coronavirus Pushes Colleges to the Breaking Point, Forcing 'Hard Choices' about Education (Wall Street Journal)
• Adjuncts Barely Getting By (Colleen Flaherty, IHE)
• Students are considering dropping out of college because of coronavirus (Abigail Hess, MSN.com)
• Will Parents Pay? (Scott Jaschik, Inside Higher Ed)
• Masters of None (Grace Gedye, Washington Monthly)
• Public Colleges Face Looming Financial Blow (Kery Murakami, Inside Higher Education)
• With May 1 'Decision Day' Looming, 69 Percent of Parents and 55 Percent of Students Say Coronavirus Has Impacted Their Ability to Pay for College (KPVI)
• ‘I Was Horrified’: For Millions of Borrowers, the Coronavirus Stimulus Law Offers No Relief (Danielle McLean, Chronicle of Higher Education)
• Preparing for a Fall Without In-Person Classes (Doug Lederman, Inside Higher Education)
• Presidents Fear Financial, and Human, Toll of Coronavirus (Doug Lederman, Inside Higher Education)
• Will spring breakers become super-spreaders? (Politico)
• The Real Lesson of the College Closures (Saahil Desai, The Atlantic)
• To Fight Coronavirus, Colleges Sent Students Home. Now Will They Refund Tuition? (Melissa Korn and Douglas Belkin, Wall St. Journal)
• The Covid-19 Crisis Is Widening the Gap Between Secure and Insecure Instructors (Megan Zahneis, Chronicle of Higher Education)
• Moody's lowers higher ed outlook to negative amid coronavirus crisis (Jeremy Bauer-Wolf, Education Dive)
• What Is a College Education in the Time of Coronavirus? (NY Times Opinion)
• Community Colleges and the Coronavirus (Madeline St. Amour, Inside Higher Education)
• California AG sues Betsy DeVos for overturning Obama-era rule aimed at for-profit colleges (Aarthi Swaminathan, Yahoo Finance)
• Coronavirus and Admissions Fears (Scott Jaschick, Inside Higher Education)
• Already stretched universities now face huge endowment losses from market meltdown (PBS, Jon Marcus)
• Uncertain Fate for Support Staff (Lilah Burke, IHE)
• 41% of Recent Grads Work in Jobs Not Requiring a Degree (Inside Higher Education)