March 9, 2022

Verdict Against Zovio Adds to Peril for Arizona Global Campus

Verdict Against Zovio Adds to Peril for Arizona Global Campus

A California court’s $22.4 million judgment last week against for-profit college operation Zovio, for years of deceptions against students at its Ashford University, creates more peril for the University of Arizona, which bought the online school from Zovio in 2020 and renamed it University of Arizona Global Campus (UAGC). 

Following a trial where the California attorney general’s office presented extensive evidence of deceptive practices by the school, San Diego Superior Court Judge Eddie Sturgeon on Thursday issued a 49-page opinion finding that Zovio “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.”

The University of Arizona, facing dissent from numerous faculty members and bad publicity over the California case and other evidence of Zovio’s predatory behavior, has been offering more public suggestions that it will distance itself from Zovio. But Zovio keeps publicly reminding Arizona that its sale of Ashford came with an agreement that Zovio will keep operating many aspects of the school, and keep getting paid for doing so, until June 2036.  So getting out of the deal could be expensive for Arizona. And if Arizona does manage to jettison Zovio, it’s not clear what exactly they would have purchased — not the school name, not a good school reputation, not Zovio’s recruiting prowess. 

It’s also not at all clear that the University of Arizona Global Campus should be allowed to continue receiving the federal student grants and loans that are the core of its revenue.

Under federal law, a college or university that has been determined by a court to have committed fraud involving federal student aid from the U.S. Department of Education is no longer eligible to receive such aid. In 2016, after a Minnesota state court held that for-profit Globe University and its sister school Minnesota School of Business (MSB) had violated the state’s consumer protection laws, the Department of Education invoked these federal rules to end those schools’ access to federal aid.

In 2020, after a Colorado state court issued a comparable ruling against the Center for Excellence in Higher Education (CEHE) schools, nineteen organizations (and me) wrote to then-Secretary of Education Betsy DeVos calling on her to do the same. DeVos, who made it her mission to shield predatory college behavior, did not act, but the Biden administration took action against CEHE last year, and the schools shut down.

Although Zovio says it is considering an appeal of the California court decision, the false advertising and unfair competition violations that Judge Sturgeon found against Ashford and Zovio partake of the same kinds of fraudulent behavior exhibited by Globe, MSB, and CEHE. The judge concluded that Zovio recruiters repeatedly misled students about key facts relevant to their decisions to enroll, such as the eligibility of Zovio graduates to obtain licensure in fields like teaching and nursing, the time it would take to complete programs, the amounts of financial aid available, the costs of attending, and the transferability of credits. The court also found that Zovio higher-ups were not only aware of these predatory abuses but fostered an environment where recruiters were pressured to engage in them; Zovio admissions representatives were expected to make hundreds of calls every day to prospective students, and those who fell short of enrollment goals were shamed and threatened with termination. 

Judge Sturgeon ruled that California did not present enough evidence of ongoing abuses at UAGC to justify a permanent injunction. In truth, the AG office did not offer much at trial on that score, but two recent employees have reported to me (and later to government investigators) that Zovio continues to press recruiters to deceive prospective UAGC students and press  instructors to keep students enrolled even if they are gaining nothing from the overpriced courses. 

The lack of an injunction does not erase the reality that the school, once called Ashford and now called UAGC, has defrauded students — a reality reflected not only in the California verdict but in past investigations and law enforcement settlements — and thereby, under the law, has forfeited its eligibility for federal aid.  Candidate Biden promised in 2020 that for-profit schools would have to demonstrate their eligibility for taxpayer dollars. That should mean the long-time effective permanent entitlement to federal aid for the schools should be disavowed; these are essentially federal contractors, holding a serious obligation to educate our citizens, and when they engage in serious abuses, they should be kicked out of the system.

UPDATE 03-28-22: Zovio announced this morning that it “plans to reschedule its fourth quarter and full year 2021 financial results, which was previously scheduled for March 29, 2022, to a future date…. We will be delaying the filing of our Form 10-K and we look forward to discussing our results and near-term strategic direction during our call in the coming weeks.”  How are Zovio, and also the University of Arizona, going to get out of this mess? How will Arizona, the school’s accreditor WASC, and the Department of Education protect these students?