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University of Phoenix gets heat from Richard Durbin

by Chris Nolter  |  Published February 22, 2012 at 4:04 PM
University-of-Phoenix-gets-heat-from-Richard-Durbin.jpgSen. Richard Durbin urged a higher education accrediting body to give Apollo Group Inc.'s University of Phoenix close scrutiny in an upcoming review.

The Illinois Democrat's letter to the Higher Learning Commission, sent late Tuesday, Feb. 21, and made public the next day, is the latest example of the growing legislative and regulatory pressure facing Apollo and other for-profits. The companies, which have historically grown quickly, and in some cases attracted private equity backing, have drawn criticism for student outcomes and for reliance on federal aid.

The University of Phoenix is the most prominent name in the sector. The Higher Learning Commission's review will be closely watched.

In his letter to the HLC, Durbin noted that the University of Phoenix had not been reviewed for a decade. Since then, he wrote, the school "has been the subject of at least five state lawsuits and an investigation by the U.S. Government Accountability Office" and had been "fined by the U.S. Department of Education for violating federal regulations."

The University of Phoenix has operated for more than 30 years. It has more than 373,000 students enrolled in degree programs, and generated $4 billion in revenue during the most recent fiscal year.

"We appreciate Senator Durbin's focus on ensuring a thorough accreditation process," University of Phoenix president Bill Pepicello said in a written statement.

The HLC's review of the University of Phoenix will be "the largest and most significant in higher education accreditation history and will be the benchmark for review of all institutions and online programs," Pepicello added.

Accreditation is one of the requirements for eligibility in the U.S. government's subsidized grant and loan programs.

Schools can generate up to 90% of their revenue from Title IV loans and grants, but must obtain the remainder from other sources. The 10% revenue stub can include federal dollars from military educational programs.

Durbin has referred to accreditors as "gateways to federal funding."

In his letter to the HLC, the senator said, "The proprietary sector has grown faster than any other sector and warrants careful scrutiny."

Recently proposed legislation from Durbin and Sen. Thomas Harkin, D-Iowa, would change the ratio of Title IV to nongovernmental dollars to 85%-to-15%. It would also count GI Bill funds with Title IV funds.

Last year the Department of Education instituted new standards for students' ability to repay their debt and find work. The gainful employment rules were less strict than anticipated, but have resulted in significantly lower enrollments as for-profit schools have changed recruitment or other practices to better meet thresholds.

The scrutiny from Washington, and the sector's struggles with enrollment, have produced swings in valuation and clouded the outlook for private equity buyouts or M&A.
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Tags: Apollo Group Inc. | Bill Pepicello | Higher Learning Commission | Richard Durbin | Thomas Harkin | U.S. Department of Education | U.S. Government Accountability Office | University of Phoenix
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Chris Nolter

Senior writer media and telecommunications

Chris Nolter, a senior writer who focuses on media and telecommunications, covers topics ranging from profiles of dealmakers to the inner workings of deals. Contact



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