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Tuesday, 04 August 2015 00:00

University of Phoenix Under Investigation

On Wednesday, University of Phoenix's parent Apollo Education Group announced that the business and marketing methods of the for-profit school are now under investigation by the Federal Trade Commission (FTC). reports that Apollo will "cooperate fully" with the FTC research, which requires them to provide the federal company with papers on their finances, advertising, certification, and army recruitment practices from the last four years.

Apollo's stock (APOL) predictably took a nosedive following the announcement.

For the University of Phoenix, which is the largest for-profit higher education organization in the U.S. with an emphasis on online programs, a federal research is the latest in a long series of disasters that could topple a once-thriving enterprise.

With this newest investigation, University of Phoenix is under specific scrutiny for recruiting veterans. The Associated Press reports that the school's online program features collected over $488 million in tuition and fees from veterans, not including the hundreds of millions in GI Bill money that individual campuses have gathered. Over the past several years, the college has come under fire for allegedly soaking up this GI cash while making veterans strapped with debt.

Brand new federal rules require schools with career-training programs to produce graduates whom can repay their loans in order to receive federal aid. For a school that currently has notoriously low graduation rates, this goal may be out of reach.

According to Department of Education data, the University of Phoenix online campus has a graduation rate of 7.3 % and a loan default rate of 19 %—5 % greater than the national average. A report from the Center for Investigative Reporting (CIR) claims that 24,000 Iraq and Afghanistan war veterans had been enrolled in the online system over the past 12 months.

Earlier this month, that CIR report prompted Senator Richard Durbin to ask the Department of Defense to investigate allegations pertaining to the school's recruiting on armed forces bases.

In response to Wednesday's news of the FTC investigation, Durbin released a declaration saying, "I wish I could say I am amazed by the news that the FTC is investigating the University of Phoenix for unjust and deceptive methods, but these allegations are all too familiar when it comes to the for-profit university industry."

The research also comes after a long line of financial defeats for the for-profit college.

In 2012, University of Phoenix closed 115 of its locations and released over 4 percent of its staff. These closings came on the heels of a damning 2010 report by The Education Trust (PDF) that discovered the school had a six-year graduation price of just 9 % for students seeking a bachelor's level.

Student debt seems to be a fairly reliable result for University of Phoenix students. In 2013, USA Today listed several of its campuses as "red flag" schools for posting graduation prices that were significantly reduced than the rates of students defaulting on their loans—in Metro Detroit, for example, graduation rates were 10 %, but over 25 percent of students defaulted on their loans.

The college also come under scrutiny for its enrollment of veterans in the past. Last July, the state of California requested the University of Phoenix to halt veteran enrollment in seven of its programs to avoid violations of the Veterans Affairs 85/15 rule, which requires that programs do not enroll more than 85 percent veterans. The guideline is meant to avoid schools from exploiting federal aid for veterans.

This seemingly endless stream of bad news has taken its cost on the school's bottom line: tuition. In accordance to a CNNMoney report from March of the year, University of Phoenix enrollment has fallen from 460,000 students five years ago to 213,000—a precipitous 54 per cent dip.

Apollo declined additional comment to AP about the FTC investigation into the University of Phoenix and did not release any additional statements. The federal government, on the other hand, had already warned that other for-profit schools with poor overall performance numbers could be next.

In a July declaration, U.S. Secretary of Education Arne Duncan said: "The clock is ticking for bad actors in the professional university industry to-do right by students. We understand a number have actually taken steps to enhance or to close programs that underperform, but we think there's more work to be done across the board so students get what they spend for: solid planning for a good job."

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Chris Bush

With over 12 years of experience and thousands of cases as a consumer bankruptcy attorney, Chris Bush is on the cutting edge of Bankruptcy and Student Loan Law. Chris can assist you in untangling the options to find the best solution for your specific debt relief case.