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 good deal or a potential disaster.
C. Scott Green, president of the University of Idaho, said he viewed the deal with a price tag of $550 million as a hedge against what is known as the “demographic cliff,” an expected drop in the number of middle-aged students. university.
But critics of the university plan, such as U.S. senators including Elizabeth Warren, non-profit organizations and a unionhave questioned why the state’s top public university would partner with the University of Phoenix, historically known for its low graduation rates. rates and misleading claims, to the point that he was recently ridiculed on “Saturday Night Live.”
The University of Idaho is just the latest publicly funded state school to consider partnering with a for-profit company as a way to develop online enrollment. Deals at Arizona State, Purdue and, most recently, the University of Arizona have yielded varying results as higher education faces an existential crisis.
“There will be many universities that will not survive,” Green, an alumnus 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 like a business. He cut expenses, laid off employees and merged programs. He has also worked to attract students to the Moscow campus, a city in a remote part of the state called the Palouse, distinguished by its vast wheat-covered hills. He even published a book on navigating college through the crisis.
College enrollment nationwide is expected to peak next year and then fall precipitously as a result of lower birth rates after the economic crisis, according to research by Nathan D. Grawe, a professor at Carleton College.
Undergraduate enrollment in Idaho has inched up recently, to about 7,400 last fall, an increase of 3.4 percent from 2022. But the future is cloudy, especially for a state with one of the largest in the country. lower Rates of students enrolling in college immediately after high school.
Green says the University of Phoenix can offer enrollment and revenue. But it comes with its own complicated legacy.
Founded in 1976, the University of Phoenix grew rapidly and, by 2010, had enrolled more than 450,000 students, most of them online. He aggressively promoted his brand, even acquiring the naming rights to an NFL stadium.
Because its enrollment skews toward low-income students and veterans, its operations have been boosted by billions of dollars in federally backed loans and grants. But along with its growth came accusations of misleading representation. Thousands of students said they had enrolled and racked up debt but never earned degrees.
In 2019, the University of Phoenix reached a $191 million federal settlement over allegations that, from 2012 to 2016, it promoted nonexistent deals with companies such as Microsoft and Twitter that would help students find jobs. The Federal Trade Commission said it would refund 147,000 students as a result of those statements.
Alphi Black, an Army veteran from Los Angeles, is trying to have her student loans forgiven after enrolling at the University of Phoenix following what she says were misleading sales pitches. After earning her title in 2018, she came to see it as a disadvantage.
Potential employers “laughed a little,” he said. “They said, ‘It’s not a real school.’”
Other University of Phoenix graduates, however, say their degrees have been valuable. In December, more than 200 of them wrote to Miguel Cardona, the secretary of education, supporting the Idaho takeover.
“We are often dismayed by the level of focus and vitriol directed at our alma mater. It appears that certain officials believe that we should have obtained our degrees at a different institution,” the letter to Mr. Cardona said.
Jake Searle, a former Army pilot who lives in Kuna, Idaho, was one of the graduates who signed the letter. Searle, a working father who found it difficult to attend a traditional campus, now 41, earned two degrees from the University of Phoenix, including an MBA in 2019.
“The University of Phoenix was the first one out,” said Searle, who now works in oil marketing. “They were the ones who designed and developed the online platform that I think all the other programs have adopted.”
The University of Phoenix has turned itself, according to school spokesperson Andrea Smiley. She has closed underperforming programs and seen greater graduation rates since 2016, when it was acquired for $1.1 billion by a group of investors, including funds associated with Apollo Global Management. Apollo Global is led by billionaire Marc Rowan, who led the recent donor revolt at the University of Pennsylvania that resulted in the resignation of its president, M. Elizabeth Magill.
“The University of Phoenix is proud of who we are today and the value we provide to our students and alumni,” Smiley said in an email, citing “improving student outcomes, positive external reviews from our accreditor, our students’ satisfaction with our career-focused education and our fiscal health.”
Highlighting the worth of its enrollment, which the university says it has intentionally reduced to a more manageable 85,000 students, and of its net income of about $75 million, the University of Phoenix has been buying up.
It has not been an easy process. Last year, the University of Arkansas board of trustees refused a proposal, despite pressure from the chancellor for a $500 million deal.
“Why would you sleep with a dog? You’re going to get fleas,” said CC Gibson III, an Arkansas attorney and former member of the university’s board of trustees, citing Phoenix’s reputation problems.
In Idaho, the plan has roiled state politics. While Gov. Brad Little has backed it, Raul Labrador, the state’s attorney general, has sued to block it. Labrador is questioning the secrecy surrounding the Idaho State Board of Education’s vote last year approving the complex deal, in which the University of Phoenix would technically be acquired by a newly formed nonprofit.
Members of the Idaho Legislature are questioning the agreement, reinforced by a legal opinion from a state government attorney who says the board lacked the authority to approve it. The controversy was fueled when Idaho Education News revealed that the University of Idaho had paid the law firm Hogan Lovells, where Mr. Green was previously chief operating officer, more than $7 million for advice on the deal.
“From everything I can see, and from what I know about acquisitions and corporate restructuring, this deal carries substantial risk,” said Rod Lewis, former general counsel for a major technology company who also headed the board that oversees public universities. of the state. .
In a recent opinion article In outlining his reservations, Mr. Lewis asked whether the state could be affected by a $685 million bond issue that is being planned to finance the deal.
There is also a sense that the University of Idaho may be late to the party. Arizona State University and Purdue already sponsor major online programs, said Byron Jones, former chief financial officer at the University of Phoenix.
“The online market itself is stagnating due to saturation rates,” Jones said.
At the University of Arizona, a budget crisis has raised questions about the acquisition of for-profit Ashford University in 2020. Robert Shireman, former deputy assistant secretary of the U.S. Department of Education, notes that the program, which currently operates with losses, as a warning sign that public universities face “countless dangers and complications” when they partner with for-profit schools.
Still, the enrollment gap is not going to disappear.
Although Idaho is not among the states expected to be hardest hit, Green said other universities were already trying to poach their prospective students. At a recent recruiting event at a high school in Idaho Falls, colleges from as far away as Tennessee showed up, she said.
“Our competitors are already here,” Green said. “I mean, it was amazing. “So, you know, people will come for our students because they will be desperate.”
