Phoenix sees tough road to Idaho pairing

Once-largest US online university, embracing new public partner after Arkansas rejection, agrees its for-profit sector deserves scrutiny

May 25, 2023

The University of Phoenix is taking a long view in its latest bid for a public university partner, conceding that its for-profit history sets out a laborious pathway to its planned union with the University of Idaho.

Leaders of the two systems expect a year or more of accrediting and regulatory reviews for their merger plan, announced just a month after the University of Arkansas system outlined and then rejected a similar opportunity.

The University of Phoenix, in a frank assessment of its chances, acknowledged that it’s operating in a reality where the Biden administration has some justification for its heavy scepticism toward behaviours that became common in the for-profit sector.

“There have been legitimate questions raised about recent transitions of for-profit universities to nonprofit status,” the University of Phoenix’s spokeswoman, Andrea Smiley, told Times Higher Education.

High-profile examples include Grand Canyon University, the University of Arizona’s acquisition of Ashford University, and Purdue University’s purchase of Kaplan University, all of which were attempts to shift for-profit institutions into a nonprofit status while maintaining institutional ties to a profit-making partner.

The Biden administration has battled such conversions, and has crafted new federal regulations due to take effect in July making it tougher for them to occur.

The University of Phoenix’s planned purchase agreement with the University of Idaho – as with the University of Arkansas proposal before it – deliberately aims to steer clear of that territory, Ms Smiley said, by making sure that “no private beneficiaries, previous owners or for-profit affiliates will remain associated with” the new combined entity.

The Idaho proposal goes even a step further than the Arkansas effort, the universities noted, by requiring the University of Idaho to maintain sole and direct control over the operation it buys. The Arkansas proposal, by contrast, would have created a separate entity to run the operations of the University of Phoenix, in what the organisers had described as a bid to protect the University of Arkansas system from potential losses.

The University of Phoenix was once the largest online university in the US, with nearly $5 billion (£4 billion) in annual revenue from 500,000 students at more than 130 campuses.

But it has fallen on hard times, down to about 80,000 students, almost all online, after years of scandals at Phoenix specifically and the for-profit sector generally, related to evidence of campuses habitually trying to maximise profits by offering low-quality instructional programmes to poorly qualified students.

The University of Idaho, explaining its willingness to get involved, said that Phoenix’s online expertise would give it a needed opportunity to serve nontraditional adult students in a state with one of the nation’s lowest rates of public spending on higher education.

“The political landscape in Idaho leaves public universities vulnerable,” the University of Idaho’s president, Scott Green, said in announcing the plan.

The agreement calls for the University of Idaho to issue bonds to cover the $550 million purchase price plus other costs, which its Phoenix entity – tentatively called NewU Inc. – would pay back, along with annual payments of $10 million to the University of Idaho.

The University of Idaho’s federally approved institutional accreditor, the Northwest Commission on Colleges and Universities, made clear that it too expected a lengthy assessment process.

“We’re awaiting receipt of the necessary details and paperwork, which will undergo a comprehensive review,” said the Northwest Commission’s president, Sonny Ramaswamy. “It’ll likely be sometime before we see” an outcome, Dr Ramaswamy said.

The US Department of Education also would need to sign off on the deal.

Phoenix has acknowledged reaching out to multiple public universities in its hunt for a buyer, and Ms Smiley declined to say whether it would maintain talks elsewhere while the Idaho process unfolds.

Groups already raising alarm including the American Federation of Teachers and the Institute for College Access & Success, which joined with several other higher education advocates in sending the University of Idaho a letter detailing Phoenix’s long history of student abuses.

In one sign of the reputational baggage that Phoenix carries, the president of NewU – a 5-year-old nonprofit start-up college in Washington, DC, that emphasises low tuition and three-year bachelor’s degrees – immediately protested when he began hearing that the NewU name was being used as a placeholder to identify Idaho’s planned new version of Phoenix.

“We have a reputation to build and protect, and the last thing that I wanted to see is something like that,” NewU’s president, Stratsi Kulinski, told THE.

“We couldn't be more different in our approach to what an educational institution needs to do,” Mr Kulinski said. “We're not prioritising growth and profit above other things – we're prioritising student learning and well-being and success over anything else.”

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