[Updated (10/9/2015, 11:49 a.m.) with a copy of the department’s letter to the university and a statement by Phoenix’s president.]
The U.S. Department of Defense has put the University of Phoenix on probation and prohibited it from enrolling new students who are using the department’s Tuition Assistance Program, which provides financial aid to active-duty servicemembers. While on probationary status, Phoenix can continue to serve previously accepted active-duty servicemembers using their Tuition Assistance funds, but it cannot enroll new servicemembers who pay with those funds.
The department’s action comes several months after Phoenix’s parent company announced that the Federal Trade Commission had opened a broad investigation into the for-profit university’s practices and following a report by the Center for Investigative Reporting that detailed the company’s strategies for recruiting servicemembers and veterans. The center’s website, Reveal, reported on Thursday that the Pentagon had also barred Phoenix officials from recruiting at military facilities.
For-profit colleges have long been criticized for their reliance on — and aggressive recruitment of — servicemembers and veterans, who pay tuition largely through federal financial aid and through military educational benefits like the Post-9/11 GI Bill and the Tuition Assistance Program. Federal rules prohibit for-profit colleges from receiving more than 90 percent of their overall revenue from federal financial aid, and many companies approach that level, even though the military education benefits are not counted toward the 90-percent cap.
In the 2014 fiscal year, Phoenix enrolled 9,400 students using $20.5 million in funds from the Tuition Assistance Program, ranking it fifth by enrollment and by dollars, according to data compiled by BMO Capital Markets from Military Times Edge magazine.
The university was informed of the probation on Wednesday in a two-page letter to the university’s president, Tim Slottow. The letter, obtained by The Chronicle, indicates that the Defense Department acknowledged that the university had taken actions to halt inappropriate recruiting practices aimed at servicemembers, some of which were the focus of the report by the Center for Investigative Reporting.
But the letter also cites the department’s concerns about continuing investigations by the Federal Trade Commission and the California attorney general into Phoenix’s military-recruiting practices. “The allegations associated with these inquiries, if substantiated, would violate” the terms of the university’s agreement to participate in the Tuition Assistance Program, the letter says.
One of the for-profit sector’s most ardent critics in Congress, Sen. Richard J. Durbin of Illinois, cheered the department’s decision on Thursday, saying its “decisive action” would “protect servicemembers and taxpayers from a company that offers degrees of questionable value.” Mr. Durbin, a Democrat, asked the department in July to launch an inquiry into the company’s recruiting practices.
In a written statement, Mr. Slottow said that the company had been working with the department during its investigation and that “we all expected a different response.” He also called it “troubling” that the department would cite requests for information, from the Federal Trade Commission, for example, in levying the penalty.
The probation status of the university’s campuses can be found here.
Goldie Blumenstyk contributed to this report.
