November 15, 2023

Accreditor Backs U of Phoenix-Idaho Purchase, As Evidence Grows That Similar Arizona Deal Is a Mess

Accreditor Backs U of Phoenix-Idaho Purchase, As Evidence Grows That Similar Arizona Deal Is a Mess
Source: Facebook Ad Library, January 2023

Chicago-based accrediting agency Higher Learning Commission (HLC), which oversees giant for-profit University of Phoenix, has signed off on the controversial deal, announced in May, for Phoenix to be sold by its owners, led by private equity behemoth Apollo Global Management, to a new non-profit entity tied to the University of Idaho. At its November meeting, HLC, according it its website, approved Phoenix’s continued accreditation in the context of the Idaho deal.

HLC’s decision, one step in a process that will also require approval by the University of Idaho’s accreditor, Northwest Commission on Colleges and Universities, and the U.S. Department of Education, comes amid new indications that a similar deal — the University of Arizona’s purchase of for-profit Ashford University — was a major mistake.

In an email to the University of Arizona community over the weekend, President Robert Robbins admitted that his school has “overinvested and that some colleges and units have overspent.” According to Arizona Public Media, earlier this month, Robbins and his Senior Vice President and Chief Financial Officer Lisa Rulney told the Arizona Board of Regents, which oversees the school, that the university’s financial situation is fragile and that cash reserves are slipping well below the minimum required by the Regents.

Robbins’s team told the Regents that the problem was overspending in areas including athletics and financial aid, but Arizona Public Media, having reviewed “board documents,” says that another factor is the school’s acquisition of Ashford, which is now branded as University of Arizona Global Campus, a deal that, according to the board records, “added $265.5 million in operating costs…”

Arizona’s purchase of Ashford was strongly opposed by UA faculty and staff and other critics, who pointed to Ashford’s long record of deceptive recruiting and other predatory practices. After Ashford, and its parent company, Zovio, last year lost a consumer protection lawsuit brought by California’s attorney general, and was hit with a $22 million verdict by a state trial judge, Zovio bowed out of its lucrative deal to service the school for 15 years. But UA quietly hired almost the entire Ashford staff, including its recruiting team, putting a top state university directly in charge of a predatory operation peddling high-priced, low-quality programs — and an operation that, for now, appears to be hemorrhaging cash.

UA says that, to deal with its financial crisis, it is implementing a 2 percent budget cut, creating hiring freezes, considering cuts to student financial aid, and selling real estate.

Professor Leila Hudson, chair of the UA faculty and a long-time critic of the Ashford deal, told Arizona Public Media, “I think many of the faculty of the University of Arizona are very nervous about having our name on the degrees issued by UAGC. We don’t have oversight; we don’t have quality control. We have a lot of suspicions based on what we know about its predecessor, Ashford.”

Hudson charged that UA officials Robbins and Rulney “were not straightforward in identifying the UAGC operating expenses as the source of our liquidity crunch,” Hudson said. “The University of Arizona is a public trust, right? It should be treated as a conservative investment to be sustained with some public monies albeit a shrinking share of public monies. We are not a venture capital fund.”

More pressure has come from former Ashford students who 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 these 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 UA. 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, UA may be out of luck on that score.

The similarities between the failing Ashford-Arizona deal and the new Phoenix-Idaho deal are numerous.

Like Ashford University, the University of Phoenix has a long record of deceptive practices and corresponding investigations and actions by law enforcement agencies. Most recently, in December 2019, the school reached a record $191 million settlement with the Federal Trade Commission, which asserted that Phoenix had lured students with false claims, during the years 2012-2014, about partnerships with major employers like AT&T, Yahoo!, and Microsoft.

The Department of Education in September used the FTC’s evidence to conclude that former University of Phoenix students were eligible for borrower defense relief, and the Department, as with Ashford, said it would seek to recoup these losses from the offending school’s owners — here, if the deal goes through, an entity tied to the University of Idaho, and thus the citizens of Idaho.

Phoenix’s law enforcement and debt cancellation problems could get even worse. In May, six U.S. senators wrote to the Department of Education, the FTC, and other agencies contending, based on a Republic Report article, that Phoenix was again this year running a deceptive ad campaign, this time falsely implying that it was already a state university.

So far, University of Idaho president C. Scott Green seems unbothered by these issues. He seems supremely confident that his deal with the sharp operators at Apollo Global is a good one for his school — despite criticism from his own faculty and Idaho media commentators, probing questions from Idaho legislators and the state treasurer, a lawsuit from Idaho’s Republican attorney general, and critical letters from U.S. senators and from national organizations representing students, veterans, and teachers.

Green and his minions continue to believe, or claim to believe, that Phoenix had other suitors besides Idaho, even though the University of Arkansas rejected buying Phoenix in April and no other prospective buyers have been named. Green’s team also have repeatedly asserted that the legal compliance problems at Phoenix occurred under a previous management team — a false statement, given the facts, including that Gregory W. Cappelli, insider board member and ex-CEO of the University of Phoenix’s parent company, Apollo Education Group, became CEO in 2009, through the matters that gave rise to the FTC settlement, a Defense Department suspension for violating Pentagon recruiting rules, and other investigations.

Perhaps President Green should read some of the letters published today from readers of the Arizona Daily Star following the admission of his fellow college president at the University of Arizona that his school is in big trouble.

Dr. Pamela Farris writes, “President Robbins and his administrative team thought it was a perfect time to hop aboard this disaster and ride it to its implosion. Faculty concerns that it would tarnish U of A’s reputation as a strong research institution were ignored. Team Robbins was all in. Now that they’ve admitted a $240 million spending deficit (a few months after the Board of Trustees gave Robbins a raise), Robbins is asking faculty to cut budgets, no new hires, and please find ways to generate additional revenue. Some sports will be cut. Exactly what the faculty predicted. The students who attend classes on campus are being asked to sacrifice because Team Robbins thought buying an online for-profit college with high student loan default rates was a good idea. This story is getting national attention and is an embarrassment for U of A faculty, students and alumni. Robbins should resign immediately or be fired.”

Bruce Hilpert says, “I see that UA President Robert Robbins had time to attend the U of A Wildcats game at Duke on Friday (Nov. 10) while the U of A’s financial ship is sinking. The Faculty Senate seems to think the captain has been neglectful of his administrative duties and should, perhaps, walk the plank.”

According to Bonnie Poulos, “Robbins and his overpriced hire, Lisa Rulney, should both be fired for this current debacle.”

Will Idaho president Green see his dream fulfilled, and get the for-profit college prize he seeks?  And if he does, will he end up presiding over the kind of crisis now faced by Arizona president Robbins?

The University of Phoenix accreditor that is allowing the Idaho deal to proceed, Higher Learning Commission, has a mixed record on accountability, for example standing up to deceptions at the Dream Center / Art Institutes, but endlessly tolerating abuses at Phoenix and at another awful for-profit college operation, Perdoceo. But perhaps HLC had the lighter task of the two accreditors here, figuring that the real risks are not to the for-profit school it now accredits but to the prospective new owner, the University of Idaho. Idaho’s own accreditor, Northwest Commission, and the U.S. education department, one hopes at least, would have more concerns, even if University of Idaho president Green keeps telling them, and himself, that everything is awesome.

UPDATE 11-16-23 11:00 am:

The University of Arizona told Inside Higher Ed, “We will not have an operating loss in FY25 due to UAGC. UAGC is making one-time investments as part of its transition into the University of Arizona. UAGC brought $40 million in cash to fund these efforts while also realizing the amortization and depreciation.” Difficult to parse.

UPDATE 02-14-24:

The Northwest Commission on Colleges and Universities sent a letter, dated February 7, to University of Idaho president Scott Green stating its determination that the proposed affiliation between the University of Idaho and the new non-profit it created, Four Three Education, does not constitute a substantive change change requiring accreditor approval.  The accreditor added, “Note that the Commission was not asked to review, nor to take a position on, the acquisition of the University of Phoenix by Four Three Education, Inc.”