The U.S. Department of Defense (DoD) has put the University of Phoenix on probation, barring the for-profit institution from participating in the federal Tuition Assistance (TA) Program, the company disclosed in a corporate filing. While on probationary status, the U. of Phoenix may continue to serve previously accepted active-duty servicemembers using TA funds, but may not enroll new servicemembers using those funds.
The sanction appears to be related to allegations about the for-profit chain paying for preferential recruiting access to veterans and servicemembers, Inside Higher Ed reported. The nonprofit Center for Investigative Reporting published an article in July asserting that the company paid the U.S. military $250,000 over the last three years to sponsor 89 recruiting events, including concerts, a chocolate festival and a fashion show. The DoD's inquiry also cited investigations of Phoenix by the U.S. Federal Trade Commission (FTC) and California's attorney general. Both of those investigations, which revolve around student recruiting and marketing, are still ongoing.
The department informed the university of its probationary status in a letter sent last week, according to The Chronicle of Higher Education. In the letter, the DoD 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. The letter also cites the department's concerns about continuing investigations by the FTC and the California attorney general, though. "The allegations associated with these inquiries, if substantiated, would violate" the terms of the university's agreement to participate in the TA Program, the letter says.
In 2014, the U. of Phoenix enrolled nearly 9,400 active-duty members of the military, and received more than $20.5 million in revenue from the TA Program, according to figures compiled by BMO Capital Markets, a financial services company.
Although the money associated with the program represents a small fraction of the university's estimated $2.5 billion in annual revenue, the loss of the TA funds could have an outsize impact on the for-profit's bottom line, reported the Chronicle. If the institution's probation turns into a longer-term punishment, the U. of Phoenix could find itself in danger of violating the federal "90/10 rule." The federal rule prohibits for-profit colleges from receiving more than 90 percent of their overall revenue from federal financial aid.
Phoenix currently receives approximately 81 percent of its revenue from federal sources, but funds from the TA Program and other military education benefits are not counted toward the 90 percent cap. With the loss of TA funds, the for-profit's 90/10 calculation would inch even closer to violating the threshold. The problem for the university could grow, too, if the U.S. Department of Veterans Affairs (VA), which administers Post-9/11 GI Bill funds, decides to follow the DoD's actions.
A VA spokesman said in an email to the Chronicle stated that the DoD's actions would not have any immediate effect on veterans who attend the U. of Phoenix. But the VA is working with the Pentagon and the states "to further evaluate any potential impact" on the institution's eligibility to receive the GI Bill money, the spokesman said.
Related Links
Inside Higher Ed
https://www.insidehighered.com/quicktakes/2015/10/09/defense-department-puts-u-phoenix-probation
The Chronicle of Higher Education
http://chronicle.com/blogs/ticker/defense-department-suspends-u-of-phoenix-from-its-tuition-assistance-program/105697
http://chronicle.com/article/Why-a-Certain-21-Million-Is/233720