BOISE, Idaho — This article originally appeared in the Idaho Press.
When the University of Idaho announced abruptly last week it was seeking to purchase a long-standing online higher-education institution, the public had less than 24 hours to react before the state education board took action paving the way for the transaction to move forward.
In that week, many have been trying to understand the ins and outs of the potential purchase of the University of Phoenix (UoPX) — wondering why it’s being considered and what it means for students in Idaho. Because the negotiations were done under strict nondisclosure agreements, most people did not know about the proposal until the announcement was made last week.
The Idaho State Board of Education unanimously approved the proposal and showed broad support, but there have been questions circling from the public about the UoPX’s reputation, as it has been the center of lawsuits for misleading incoming students with deceptive marketing.
The Idaho Press sat down with leaders from the University of Phoenix and UI to talk about what this deal means for both institutions.
WHY DOES UOPX WANT TO SELL? WHY DOES UI WANT TO BUY?
The online university has been owned by Apollo Global Management since 2017. Often when private equity firms make an investment, there is a “time horizon,” after which they may no longer wish to continue that investment, said UoPX Provost and Chief Academic Officer John Woods.
“Our owners were not going to be our owners forever,” Woods said. “I think they have a genuine interest in the University of Phoenix being set up for its next nearly five decades and the best place that they thought it could be set up to serve our students ... would be in partnership with a progressive, forward-thinking traditional institution that recognized that the higher ed landscape includes more than just traditional learners.”
Idaho’s flagship university wasn’t the first institution to be approached. In April, the University of Arkansas System Board of Trustees, in a 5-4 vote, narrowly rejected a proposal to move ahead with an acquisition of UoPX, HigherEd Dive reported.
While the Arkansas school system was trying to decide how to move forward, UoPX approached the University of Idaho in March.
Woods said it was drawn to Idaho because UI also serves a high percentage of first-generation college students and both schools are “very student-centric.”
“As we got to talking to the University of Idaho, we realized that we had a strong desire to help students for life not just for a four-year degree, or even a graduate degree, but for life, as needs for new skills continue to evolve,” Woods said.
UI President C. Scott Green said that the opportunity presented to the school would allow it to adjust to an anticipated enrollment cliff that’s quickly approaching. A study by the University of New Hampshire estimates that nearly 2.3 million fewer babies were born in the U.S. between 2008 and 2013 than would have been expected had pre-recession fertility rates continued. This is going to impact the number of students going to college, Green said.
“The world is changing around us, and we have to be prepared to change with it,” Green said.
University of Phoenix serves a higher population of adult learners, which could help stabilize revenue for the UI, Green said.
It’s also a profitable institution, Green noted. If the transaction goes through, UoPX will become a not-for-profit entity, but the revenue it brings in will stay around the same. At least $10 million of annual revenue would go to UI and around 25% of additional cash flow would go to the university with the remaining going to the newly formed not-for-profit that would oversee the online school, NewU.
It’s projected that between now and fiscal year 2030, between $153 million and $170 million could flow to the UI, and between $320 million and $337 million to NewU, UI officials said at last week’s board of education meeting.
WHAT WOULD CHANGE FOR STUDENTS AT BOTH SCHOOLS?
In the short term, there won’t be much of a discernible change for students at either school.
UI will continue to operate as it has, which includes its existing online courses, Green said. And UoPX will continue to operate as it has, maintaining its leadership structure and staff, Woods said.
“I do think that on just about every level I can think of at least, it is getting down to doing what we’ve been doing already but part of a different organization through affiliation,” Woods said.
For UI, there are potential benefits down the line that officials are still exploring, Green said. It’s possible that UI could utilize the technology UoPX has, such as its platforms or systems to track student progress, in its own online programs.
Green also discussed the potential of making more UoPX credits transferable to UI or even statewide. Currently, the university accepts credits from about 560 classes from the online school. Adding more could help improve access for students in Idaho who want do stay at home for an associate’s degree before moving on or who are trying to take online summer classes to graduate on time, he said.
UOPX IS A FOR-PROFIT; WHAT WILL IT LOOK LIKE AS A NOT-FOR-PROFIT?
UoPX has been operating since 1976 and is a for-profit institution.
If the sale goes through, UI will create a not-for-profit entity called NewU and the school will transition to a 501 © (3) organization.
The costs of attending the institution will remain largely the same; it costs $398 per credit with each course accounting for three credits, according to the UoPX website.
However, the revenue generated by the university won’t flow back to investors once it’s a not-for-profit, Woods said.
“In this case, no such investors exist,” he said.
That money could then flow back into the institution and back to the University of Idaho.
For-profit universities have come under scrutiny and are the subject of a number of large settlements. In 2021, University of Phoenix students were awarded a total of nearly $50 million in tuition refunds as part of a larger $191 million lawsuit for deceptive advertisements. In 2009, the U.S. Justice Department settled a False Claims Act lawsuit against the institution for $67.5 million.
Green said he believes UoPX’s reputation will stand to benefit from transitioning to a not-for-profit model.
IS UI TAKING ON FINANCIAL AND REPUTATIONAL RISK?
There is liability that the university would be taking on, Green said. The consultants that UI hired to look into the potential liability estimate it could come to about $7 million annually, he said.
There are thousands of pending Borrower Defense Claims against the online university, which if the Department of Education accepts them, would entitle the filer to student loan forgiveness.
Green said the online university’s insurance policy is enough to cover the expected liability, and that, out of caution, UI is looking into purchasing more coverage.
“All those cases that come forward need to be adjudicated, but I think we feel perfectly comfortable about getting our arms around that risk,” Green said.
As far as reputation, Green said he was impressed with UoPX’s current leadership and thought their business practices would help avoid the mistakes of the past. He noted that other public institutions have acquired for-profit online schools and it hasn’t damaged their reputations; In 2017, Purdue acquired Kaplan University, and in 2021, the University of Massachusetts took control of Brandman University.
“Does anyone think differently of Purdue?” Green asked.
WHAT HAPPENS NOW?
The State Board of Education’s move last week allowed UI to create a new not-for-profit in order to acquire UoPX. To move forward, the accreditors for both institutions would need to approve the transaction.
The two entities are seeking to have UoPX’s accreditor, the Higher Learning Commission, consider the application at its November board meeting, according to a frequently-asked-questions page on UI’s website.
UI’s accreditor, the Northwest Commission on Colleges and Universities, will also have to approve it.
Green said the university plans to convene a number of working groups over the summer to evaluate the transaction and the opportunities it could present, such as improved pathways between the two institutions. These groups will include faculty, staff, students and industry experts, he said.
This article originally appeared in the Idaho Press, read more on IdahoPress.com.
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