October 31, 2023

Education Department Fines Grand Canyon U $37 Million for Deceiving Students

Education Department Fines Grand Canyon U  Million for Deceiving Students

The U.S. Department of Education today announced it has levied a $37.7 million fine on Grand Canyon University for alleged deceptions of students in the school’s doctoral programs.

The fine amount, 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: Grand Canyon, which in 2020-21 enrolled more than 100,000 students, gets the largest amount of federal student aid of any college or university. Phoenix-based GCU received $1.1 billion from taxpayers for Department of Education federal student grants and loans in 2021-22.

In a 34-page letter sent today, addressed to Grand Canyon president Brian Mueller and the school’s outside counsel Steven Gombos, the Department describes in detail the deceptive conduct found by investigators from the Department’s office of Federal Student Aid (FSA).

In a press release today, the Department says 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.”

FSA Chief Operating Officer Richard Cordray said, “GCU’s lies harmed students, broke their trust, and led to unexpectedly high levels of student debt.”

The FSA 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 need 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 FSA’s determination that 98% of students enrolled in certain doctoral programs had to pay more than GCU’s advertised cost.”

According to the Department, GCU argued that the information about extra costs were disclosed deep in some enrollment agreements and other documents. But the Department concluded such “fine print disclosures” did not cure the deceptions.

The Department arrived at the $37.7 million fine by determining that Grand Canyon committed 7,547 violations — matching the number of students enrolled in doctoral programs from Nov. 1, 2018, to Oct. 19, 2023 — and imposing a $5000 penalty for each violation. The Department has the authority to impose penalties of up to $67,544 for each violation.

The money won’t go back to GCU students directly, but the Department says that affected students can apply for loan relief through its Borrower Defense to Repayment program.

On October 5, Grand Canyon took the unusual step of denouncing the Department of Education’s probe before it had been made public.  In a press release and media appearances, Mueller suggested that the investigation was driven by ideological, political, or religious issues. In its press release, Grand Canyon called itself “the largest Christian university in the country.” The school’s website describes it as having a “Christian mission” and providing a “private, Christian education.”

For-profit colleges have regularly accused the Biden administration, and, in the past, the Obama administration, of acting with ideological or political motives against their industry. And GCU claims that the current Department probe started in retaliation for GCU suing over the Department’s refusal to treat GCU as a non-profit school.

But in fact it was the Trump administration and its Secretary of Education Betsy DeVos — who staffed her Department with former for-profit college executives and did almost nothing to curb abuses in the career college sector — that, in late 2019, rejected GCU’s application to be re-classified for federal student aid purposes from a for-profit college to preferential non-profit status. That DeVos decision came after GCU restructured itself into two entities: a non-profit college and a for-profit company that gets paid to provide a range of services to the university.

Secretary DeVos had good reason to reject Grand Canyon’s conversion. Not only is Brian Mueller the head of  both the non-profit school and the for-profit servicing company, but also the for-profit company has been getting about 95 percent of the non-profit college’s revenue.

In February 2019, Mueller had bragged to Wall Street investors that enrollment at the school is up, profits for the company are up, and prospective students love hearing that the school is non-profit. “Being out there a million times a day saying ‘we’re nonprofit’ has had an impact,” Mueller told an investor call, adding that actual non-profit colleges had “bullied” Grand Canyon’s target customer “every single day for ten years that you shouldn’t go to a for-profit institution.”

The Trump-DeVos Department of Education found that “the primary purpose” of the Grand Canyon conversion “was to drive shareholder value for GCE with GCU as its captive client — potentially in perpetuity.”

In a press release today, Grand Canyon says it “categorically denies every accusation in the Department of Education’s statement and will take all measures necessary to defend itself from these false accusations.” GCU also has launched a new website defending the school from the Department’s actions.

In addition to the fine, the Department added five conditions to Grand Canyon’s Program Participation Agreement, the contract that makes the school eligible for federal student grants and loans: (A) GCU must commit to not making substantial misrepresentations regarding the cost of its doctoral programs and must provide an accurate picture of those costs; (B) GCU must hire an outside monitor to oversee its compliance with Condition A; (C) “GCU must report quarterly to the Department about investigations, actions, or other legal proceedings by its accrediting agency or any government agency and must report pending litigation in which a plaintiff seeks class certification”; (D) GCU must notify current doctoral students as to how to submit a complaint to the Department; and (E) GCU must inform current employees who provide recruiting, admissions, and other services to doctoral students about how to use the FSA’s Tips line to report misconduct or violations by the school.

Under Department rules, Grand Canyon has 20 days to request a hearing with the Department’s Office of Hearings and Appeals or else file a document asking that the fine be canceled.

UPDATE 11-02-23:

On Grand Canyon Education’s quarterly investor call today, Mueller again charged that the Department’s action was in “retaliation” for the school appealing the rejection of its application to be reclassified as a non-profit. “The Department for some reason denied our nonprofit status,” Mueller said on the call. “We don’t know what the reason is. They don’t tell us.”  Except that the Department did tell Grand Canyon why, in that letter (18 pages) it sent while DeVos was education secretary.