April 1, 2022

Scam Over? Zovio/UAGC In Tailspin

Scam Over? Zovio/UAGC In Tailspin

Ashford University and its parent entity Zovio comprise a for-profit education operation that the chairman of a Senate committee branded “an absolute scam” during a 2011 investigative hearing highlighting the company’s deceptive advertising, predatory recruiting, high prices, and weak educational offerings.  More than a decade later, after tens of thousands more students have used billions in taxpayer dollars and their own money to attend Ashford (attendance peaked in 2012 at around 77,000), the school is still in business, still enrolling students today, still with more than 20,000 students taking online courses, in an operation still staffed by Zovio, even though University of Arizona bought the school in 2020 and renamed it University of Arizona Global Campus (UAGC).  

But the whole miserable exercise, which has 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, may finally be ending. 

On March 3, following a trial where the California attorney general’s office presented extensive evidence of deceptive practices by the school, a state judge ruled that Zovio, which was previously called Bridgepoint Education, “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.”

This week, in a sign of serious distress, Zovio abruptly cancelled its scheduled quarterly call for investors, and told the Securities and Exchange Commission it would not file its required quarterly financial report. Zovio reported it is “is unable to file, without unreasonable effort or expense, its Annual Report within the prescribed time period because it requires additional time to review and implement the company’s near term strategic direction prior to finalizing its financial statements to be included in such Annual Report.” Zovio said it would file “as soon as practical.” (The image above shows a flurry of insider stock transactions reported the same day.) 

Now, in a letter sent to the U.S. Department of Veterans Affairs today, the group Veterans Education Success (VES) argues that, by law, the VA is required to cut off student aid to UAGC because of the California verdict.  (UPDATE 04-05-22: VES has now sent a similar letter to the Department of Defense.)

I argued in a post here last month that the verdict requires the U.S. Department of Education to do the same.  (UPDATE 04-05-22: Eleven organizations (and me) today wrote to Secretary of Education Miguel Cardona, citing the California court decision and other evidence as grounds for the Department to “immediately restrict UAGC’s access to federal student aid, provide student loan discharge to all students who attended Ashford University via Borrower Defense to Repayment, and initiate an action against UAGC to recover costs associated with student loan discharges,” as well as to take “appropriate action” against Zovio and UAGC’s current and former officials.)

It also appears that a gap in UAGC’s planned move of its state education license from California to Arizona may have immediate implications for the ability of the school to keep getting VA money to enroll veterans, because it means that UAGC has at least temporarily lost the needed approval of a state veterans agency and thus approval of the VA for GI Bill aid. Some 5000 veterans were enrolled at UAGC last year with VA funding. (UPDATE 04-04-22: UAGC informed its GI Bill students on Friday that it has temporarily lost access to those benefits but was working with the VA to resolve the issue.)

The University of Arizona has recently been saying it might jettison Zovio, but Zovio has begged to differ, citing a contract that binds the two until June 30, 2036. But if UA somehow manages to get out of the deal, it needs new admissions, marketing, financial aid, instruction, and technology operations to replace Zovio. Almost all that would be left at UAGC would be the same Department of Education identification number (OPEID 00188100) that it had as Ashford — and corresponding responsibility for what occurred there.

The Department of Education and UAGC’s accreditor, WASC (which has been expressing growing concerns about continuing problems at the school), need to rapidly develop plans in the event UAGC shuts down, including teach-outs for those students who would like to continue their studies and loan relief for others. 

Federal authorities also ought to be pursuing personal accountability for Zovio executives and board members, including company founder Andrew Clark, who got tens of millions running the company before abruptly leaving a year ago, and Ryan Craig, a private equity man who has served on the board since 2003. (Robert Eitel, one of Betsy DeVos’s top aides in the Trump Department of Education, also worked at the company from 2015 to 2017.) [UPDATE 05-13-22: Zovio announced late today that Ryan Craig resigned from the board on May 11.]

There also should be a reckoning for the University of Arizona leaders who engineered this destructive deal despite all the warning signs, and maybe also for any Arizona state regents who pressured UA to quickly stand up an online school. The idea of a cornerstone state university acquiring a for-profit college with a record of predatory practices, locking itself into a decades-long deal to have the former for-profit owner run most school operations, and then potentially using revenues derived from low-income people for sub-standard educations to subsidize the main campus educations of more affluent students, is plainly awful. (The fact that Mitch Daniels at Purdue did a similarly troubling deal with Don Graham and Kaplan doesn’t help at all.)

Scam Over? Zovio/UAGC In Tailspin

UPDATE 04-11-22:

We are posting a series of letters between the U.S. Department of Education and UA/UAGC from November 2021 to January 2022, in which the two sides negotiate a basis for UAGC to continue receiving federal financial aid.

11-29-21: Department of Education to UAGC

12-17-21: UA/UAGC to Department of Education

12-20-21: Department of Education to UA/UAGC

01-03-22: UA/UAGC to Department of Education