Depending on who you ask, the University of Idaho’s plan to take over the University of Phoenix, a for-profit online school, is either a sweet deal or a potential disaster.
University of Idaho President C. Scott Green said he viewed the $550 million agreement as a hedge against the so-called “demographic cliff,” an expected decline in the number of college-age students. Hedge.
But critics of the college plan, such as U.S. senators including Elizabeth Warren, nonprofits and labor unions, question why the state’s top public university would partner with the University of Phoenix, which has a history of low graduation rates and is known for misleading claims, so much so that it was recently mocked on “Saturday Night Live.”
The University of Idaho is the latest public school to consider partnering with a for-profit company to develop online enrollment. As higher education faces an existential crisis, arrangements at Arizona State University, Purdue University and, most recently, the University of Arizona have produced mixed results.
“There are going to be a lot of colleges that won’t survive,” Green, an alumnus of the University of Idaho and Harvard Business School, said in an interview.
Mr Green inherited a deficit when he became chancellor in 2019 and set out to run the university as a business. He cut expenses, laid off employees and consolidated projects. He also worked to attract students to the campus in Moscow, a city in a remote part of the state called Palouse known for its rolling hills covered in wheat. He even published a book on how to guide universities through crises.
Research by Carleton College professor Nathan D. Grawe shows that college enrollment nationwide is expected to peak next year and then decline sharply due to a post-recession drop in birth rates.
Idaho’s undergraduate enrollment has increased slightly recently, reaching about 7,400 students last fall, a 3.4% increase since 2022. But the future is cloudy, especially for a state with one of the lowest enrollment rates in the nation for students enrolling in college immediately after high school.
Mr. Green said the University of Phoenix can provide enrollment and revenue. But it also has its own complicated legacy.
Founded in 1976, the University of Phoenix has grown rapidly, enrolling more than 450,000 students by 2010, the majority of whom are online. It aggressively promotes its brand, even acquiring naming rights to NFL stadiums.
Its operations are fueled by billions of dollars in federally backed loans and grants, as its enrollment is geared toward low-income students and veterans. But as it developed, so did accusations of deceptive representation. Thousands of students say they have enrolled and racked up debt but never earned a degree.
In 2019, the University of Phoenix reached a $191 million federal settlement after allegations that from 2012 to 2016, the school entered into non-existent deals with companies including Microsoft and Twitter to help students find jobs. The FTC said it would compensate 147,000 students for the claims.
Alphi Black, a veteran from Los Angeles, is trying to have her student loans forgiven after being accepted to the University of Phoenix because of what she said was a misleading sales pitch. After earning her degree in 2018, she began to see it as a hindrance.
The prospective employer “kind of laughed,” she said. “They said, ‘This is not a real school.'”
Still, other University of Phoenix graduates say their degrees are valuable. In December, more than 200 of them wrote a letter to Education Secretary Miguel Cardona supporting Idaho’s acquisition.
“We are often frustrated by the attention and vitriol our alma mater receives. It appears that some officials believe we should pursue our degrees at a different institution,” the letter to Mr. Cardona said.
Jack Sale, a former Army pilot who lives in Kuna, Idaho, is one of the graduates who signed the letter. Mr. Searle, 41, a working father who found it difficult to attend traditional campuses, earned two degrees from the University of Phoenix, including an MBA in 2019.
“The University of Phoenix was the first out of the gate,” said Mr. Searle, who now works in oil marketing. “They designed and developed the online platform that I think every other program has adopted.”
University of Phoenix spokesperson Andrea Smiley said the school has transformed itself. It has closed underperforming programs and has seen graduation rates improve since it was acquired by a group of investors, including funds tied to Apollo Global Management, for $1.1 billion in 2016. Apollo Global is led by billionaire Marc Rowan, who recently led a donor revolt at the University of Pennsylvania that led to the resignation of Chancellor M. Elizabeth Magill.
“The University of Phoenix is proud of where we are today and the value we provide to our students and alumni,” Ms. Smiley said in an email. “Our career-focused education, as well as our fiscal health. “
Phoenix has been shopping around, emphasizing the value of its enrollment size (the university says it has intended to reduce its student body to a more manageable 85,000 students) and its net income of about $75 million.
This has not been a smooth process. Last year, the University of Arkansas’ Board of Trustees rejected a proposal despite the president’s push for a $500 million deal.
“Why would you lie down with a dog?” CC Gibson III, an Arkansas attorney and former member of the university’s board of trustees, said of the University of Phoenix’s reputational issues.
In Idaho, the plan roiled state politics. While Gov. Brad Little has supported the bill, the state’s Attorney General Raúl Labrador is suing to block it. Mr. Labrador questioned the secrecy surrounding the Idaho State Board of Education’s vote last year to approve the complex arrangement, under which the University of Phoenix would technically be acquired by a newly created nonprofit organization.
Members of the Idaho Legislature are challenging the deal, which was bolstered by a legal opinion from state attorneys who said the board lacked the authority to approve the deal. Controversy arose when Idaho Education News revealed that the University of Idaho had paid more than $7 million to the law firm Hogan Lovells, where Mr. Green served as chief operating officer, for advice on the deal further intensified.
“From everything I’ve seen and from what I know about corporate acquisitions and restructurings, it’s a big deal,” said Rod Lewis, the former general counsel of a major technology company and former chairman of the state’s public university board of trustees. Trading involves huge risks.”
In a recent opinion piece, Lewis expressed his reservations, asking whether the state would be held liable for a planned $685 million in bonds to finance the deal.
There’s also a sense that the University of Idaho may be late to the party. Byron Jones, former chief financial officer of the University of Phoenix, said Arizona State University and Purdue University already sponsor major online programs.
“The online market itself is flattening due to saturation rates,” Mr Jones said.
At the University of Arizona, the budget crisis has raised questions about its 2020 acquisition of for-profit Ashford University. Robert Shireman, a former deputy undersecretary at the U.S. Department of Education, noted that the program is currently operating at a loss as a warning sign of the “numerous dangers and complexities” public universities face when partnering with for-profit schools. .
Still, the enrollment cliff has not gone away.
Although Idaho is not one of the states expected to be hit hardest, Mr. Green said other universities are already trying to poach his prospective students. Colleges from Tennessee also showed up at a recent recruiting event at a high school in Idaho Falls, he said.
“Our competitors are already here,” Mr. Green said. “I mean, it’s unbelievable. So, you know, people are going to come and get our students because they’re going to be desperate.”