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.
C. Scott Green, president of the University of Idaho, said he viewed the deal with a $550 million price tag as a hedge against what is known as the “demographic cliff,” an expected decline in the number of college-age students.
But critics of the university’s plan, including U.S. senators like Elizabeth Warren, nonprofits and a union, have questioned why the state’s top public university would partner with the University of Phoenix, known historically for its low rates. graduation and his misleading claims. 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. Arrangements at Arizona State, Purdue and, most recently, the University of Arizona have produced mixed results as higher education faces an existential crisis.
“There will be many universities that will not survive,” Mr. Green, a graduate of the University of Idaho and Harvard Business School, said in an interview.
Mr Green, who inherited a deficit when he became president in 2019, set out to run the university as a business. He cut costs, laid off employees and merged programs. He has also worked to attract students to the Moscow campus, a town in a remote region of the state called the Palouse, which is distinctive for its vast rolling hills covered in wheat. He even published a book about navigating the university through the crisis.
According to research by Nathan D. Grawe, a professor at Carleton College, college enrollments across the country are expected to peak next year and then plummet as a result of lower birth rates since the recession.
Undergraduate enrollment in Idaho has been growing recently, to about 7,400 last fall, a 3.4 percent increase from 2022. But the future is murky, especially for a state with one of the lowest rates of students in the nation enrolling in college right away after high school.
Mr. Green says the University of Phoenix can provide enrollment and revenue. But it comes with its own complicated legacy.
Founded in 1976, the University of Phoenix grew rapidly, and by 2010, more than 450,000 students were enrolled, mostly online. She aggressively promoted her brand, even acquiring naming rights to an NFL stadium.
Because its enrollment is geared toward lower-income students and veterans, its operations have been fueled by billions of dollars in federally backed loans and grants. But with its growth came allegations of misrepresentation. Thousands of students said they enrolled and racked up debt but never got degrees.
In 2019, the University of Phoenix reached a $191 million federal settlement after allegations that, from 2012 to 2016, it promoted nonexistent deals with companies like Microsoft and Twitter that would have helped students find jobs. The Federal Trade Commission said it will reimburse 147,000 students as a result of these claims.
Alphi Black, an Army veteran from Los Angeles, is trying to get her student loans forgiven after enrolling at the University of Phoenix following what she says were misleading sales. After earning her degree in 2018, she considered it a handicap.
Prospective employers “kind of laughed,” he said. “They said, ‘It’s not a real school.'”
Other University of Phoenix graduates, however, say their degrees were valuable. In December, more than 200 of them wrote to Miguel Cardona, the education secretary, to support the Idaho buyout.
“We are often disappointed by the level of focus and vitriol directed at our Alma Mater. It appears that some officials believe that we should have done 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 alumni who signed the letter. A working father who struggled to attend a traditional college campus, Mr. Searle, now 41, 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 were the ones who designed and developed the online platform that I would argue every other program has adopted.”
The University of Phoenix has been transformed, according to Andrea Smiley, a spokeswoman for the school. It has closed low-performing programs and seen higher graduation rates since 2016, when it was acquired for $1.1 billion by a group of investors, including funds tied to 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 bring to our students and alumni,” Ms. 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 value of its enrollment, which the university says has purposely shrunk to a more manageable 85,000 students, and its net income of about $75 million, the University of Phoenix has shopped around.
It was not a smooth process. Last year, the University of Arkansas board of trustees rejected a proposal, despite the chancellor’s push for a $500 million deal.
“Why would you lie with a dog? You’re going to get fleas,” said CC Gibson III, an Arkansas attorney and former university board member, citing Phoenix’s reputational problems.
In Idaho, the plan has upset state politics. While Gov. Brad Little has ratified it, Raul Labrador, the state’s attorney general, is suing to block it. Mr. Labrador questions 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 fledgling nonprofit.
Members of the Idaho Legislature are challenging the agreement, bolstered by a legal opinion from an attorney with the state government that says the board did not have the authority to approve it. The controversy was sparked when Idaho Education News revealed that the University of Idaho had paid the law firm Hogan Lovells, where Mr. Green was formerly managing director, more than $7 million for advice on the deal.
“From everything I can see and from what I know about corporate acquisitions and restructurings, this deal carries significant risk,” said Rod Lewis, a former general counsel at a major technology company who also once headed the board that oversees the state’s public universities. .
In a recent opinion piece outlining his reservations, Mr. Lewis asked whether the state could be on the hook for a $685 million bond issue 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, the University of Phoenix’s former chief financial officer.
“The online market itself is kind of flattening because of the saturation rates,” Mr Jones said.
At the University of Arizona, a budget crisis has raised questions about acquiring the for-profit Ashford University in 2020. Robert Shireman, a former deputy assistant secretary at the U.S. Department of Education, points to the program, which is currently operating at a loss, as a warning a sign that public universities face “innumerable risks and complications” when partnering with for-profit schools.
However, the enrollment cliff is not going away.
Although Idaho is not among the states expected to be hardest hit, Mr. Green said other universities were already trying to poach his prospective students. At a recent recruiting event at a high school in Idaho Falls, universities from Tennessee showed up, he said.
“Our competitors are already here,” Mr. Green said. “I mean, it was incredible. So, you know, people will come for our students, because they’ll be desperate.”
