Depending on who you ask, the University of Idaho's plan to acquire the University of Phoenix, a for-profit online school, is either a juicy deal or a potential disaster.
University of Idaho President C. Scott Greene said he sees the deal, which has a price tag of $550 million, as a hedge against the so-called “demographic cliff,” when the number of college students is expected to decline. Ta.
But critics of the university's plan, including U.S. senators including Elizabeth Warren, nonprofit groups and unions, have questioned why the state's top public university has historically low graduation rates and misleading claims. I have doubts about partnering with the well-known University of Phoenix. He was recently mocked on “Saturday Night Live.”
The University of Idaho is the latest publicly funded state school to consider partnering with for-profit companies as a way to develop online enrollment. Arrangements at Arizona State University, Purdue, and most recently the University of Arizona have yielded mixed results as higher education faces an existential crisis.
“There are going to be a lot of schools that won't survive,” Green, a graduate of the University of Idaho and Harvard Business School, said in an interview.
Green, who inherited a deficit when he became president in 2019, set out to run the university as a business. He cut spending, laid off employees, and consolidated programs. He has also worked to attract students to the campus in Moscow, a city in a remote part of the state known as the Palouse, characterized by vast rolling hills covered in wheat. He also published a book on overcoming college crises.
According to a study by Carleton University professor Nathan D. Grau, U.S. college enrollment is expected to peak by next year and then decline sharply as the birth rate declines following the economic downturn.
Idaho State's undergraduate enrollment has been slowly increasing recently, reaching about 7,400 students last fall, a 3.4 percent increase from 2022. But the future is uncertain, especially for the state, which has one of the lowest percentages of students in the nation who enroll in college immediately after high school.
Green says the University of Phoenix can bring in enrollment and revenue. But it comes with its own complicated legacy.
Founded in 1976, the University of Phoenix grew rapidly, enrolling more than 450,000 students, most online, by 2010. The company actively promoted its brand, including acquiring the naming rights for NFL stadiums.
With enrollment skewed toward low-income students and veterans, its operations have been supported by billions of dollars in federal loans and grants. However, with its growth came allegations of deceptive representation. Thousands of students said they enrolled, racked up debt, but were unable to complete their degrees.
The University of Phoenix reached a $191 million settlement with the federal government in 2019 for facilitating non-existent deals with companies like Microsoft and Twitter that helped students find jobs between 2012 and 2016. The Federal Trade Commission announced it would pay restitution to 147,000 students as a result of these allegations.
Alfie Black, an Army veteran from Los Angeles, claims it was a misleading sales pitch and wants his student loans to be forgiven after he attends the University of Phoenix. After she received her degree in 2018, she began to consider it a handicap.
Future employers “kind of laughed,” she said. “They said, 'This isn't a real school.'”
But other University of Phoenix graduates say their degrees were valuable. In December, more than 200 of them sent a letter to Education Secretary Miguel Cardona supporting the Idaho takeover.
“We are often disappointed by the level of attention and vitriol directed at our alma mater. Some officials seem to think we should have earned our degrees at another institution.” The letter to Cardona reads:
Jake Searle, a former Army pilot who lives in Kuna, Idaho, is one of the graduates who signed the letter. Searle, now 41, earned two degrees from the University of Phoenix, including an MBA, in 2019 because he was a working father and found it difficult to attend a traditional campus.
“The University of Phoenix was the first one to knock on my door,” said Searle, who now works in oil marketing. “They designed and developed the online he platform that all other programs have adopted.”
The University of Phoenix has transformed itself, said school spokeswoman Andrea Smiley. The school has eliminated underperforming programs and seen an increase in graduation rates since 2016, when it was acquired for $1.1 billion by a group of investors that included funds associated with Apollo Global Management. Apollo Global is led by billionaire Mark Rowan, who orchestrated the recent donor revolt at the University of Pennsylvania that led to the resignation of university president M. Elizabeth McGill.
“The University of Phoenix is proud of who we are today and the value we provide to our students and alumni,” Ms. Smiley said in an email. evaluation and student satisfaction.” Career-focused education and financial health. ”
The University of Phoenix is marketing itself by emphasizing the value of enrollment and about $75 million in net income, which the university says was intentionally reduced to a more manageable 85,000 students.
It wasn't a smooth process. Last year, the University of Arkansas' Board of Regents rejected a proposal even though the president had asked for a $500 million deal.
“Why would you lie down with a dog? You'll get fleas,” said CC Gibson III, an Arkansas attorney and former member of the university's board of trustees, citing Phoenix's reputational issues. .
In Idaho, the plan roiled state politics. Gov. Brad Little supports it, but the state's attorney general, Raul Labrador, is suing to block it. Labrador questions the secrecy surrounding the Idaho State Board of Education's vote last year that approved a complex deal in which the University of Phoenix was technically acquired by a newly created nonprofit organization.
Idaho lawmakers have questioned the deal, and a legal opinion from the state's attorney says the Legislature did not have the authority to approve it. The controversy comes after Idaho Education News revealed that the University of Idaho paid Hogan Lovells, the law firm where Greene previously served as chief operating officer, more than $7 million for advice on the deal. It got even higher.
“From what I can see, and what I know about acquisitions and restructuring, this “Trading involves considerable risk.” .
In a recent opinion piece expressing his reservations, Lewis asked whether the state might be forced to issue $685 million in bonds planned to finance the deal. Ta.
There's also a sense that the University of Idaho may be late to the party. Byron Jones, former chief financial officer at the University of Phoenix, said Arizona State University and Purdue University already sponsor major online programs.
“The online market itself is flat due to saturation,” Jones said.
At the University of Arizona, a budget crisis has called into question its 2020 acquisition of for-profit Ashford University. Robert Shireman, a former assistant secretary at the U.S. Department of Education, points out that programs currently operating in the red: It's a warning that public universities face “numerous risks and complexities” when partnering with for-profit schools.
Still, the enrollment cliff persists.
Although Idaho is not among the states expected to be hit the hardest, Green said other universities are already trying to poach applicants. He said a recent recruiting event at an Idaho Falls high school attracted colleges from as far away as Tennessee.
“Competitors are already here,” Green said. “I mean, it was unbelievable. So people are going to come pick up our students, because they're going to be desperate.”
