The move is a significant blow to the Arizona-based, for-profit college—the largest recipient of military-education benefits. And the sanction could have widespread implications for the school and its 227,000 civilian and military students in Greater Phoenix and across the country.
Last year the U of P enrolled about 9,400 active-duty military members, for which it received about $20 million in revenue from the federal Tuition Assistance Program, reported BMO Capital Markets, a financial-services company that compiled the figures.
That money is a small fraction—about 1 percent— of the U of P’s estimated $2.5 billion in annual revenue. But the university also gets 81 percent of its revenue from federal sources, most of which includes educational benefits for veterans under the GI Bill.
And if the Department of Veterans Affairs, which administered the funds under the Post-9/11 GI Bill, decides to follow the DoD’s lead, the school could face a potential financial implosion.
“It’s a big deal that the Defense Department is standing up and saying our service members are not going to be subject to predatory recruiting, and if you do, we are kicking you out of our Pentagon education program,” said Carrie Wofford of Veterans Education Success, which provides assistance to veterans deceived by for-profit colleges.“It may not be a big chunk of money, but it's a huge symbolic act, and its critically important that the Pentagon is protecting its service members."
Currently, the VA has no plans to prevent veterans from attending the school using GI Benefits, but officials have taken notice of the recent sanctions.
“The recent actions taken by [the] Department of Defense do not have an immediate effect on GI Bill beneficiaries attending University of Phoenix schools,” said a VA spokesman in a statement to New Times. “VA is working with DoD…to further evaluate any potential impact to U of P’s GI Bill approval.”
The sanctions come at a time where the U of P is struggling. In the last five years, enrollment at the nation’s largest university—which at its peak had 600,000 students—has plummeted by more than half. In the past year alone, the U of P has fired 900 employees and closed 100 campuses.
“It may not be a big chunk of money, but it's a huge symbolic act, and its critically important that the Pentagon is protecting its service members."
It’s been a rapid decline for the school, which in 2006 inked a 20-year, $154.5-million dollar deal for corporate sponsorship of the stadium where the Arizona Cardinals play in Glendale.
The school has been plagued by allegations of aggressive recruiting, high costs and poor student performance.
Earlier this year two, former employees filed a lawsuit claiming recruiters at the U of P deceived prospective students and surreptitiously recruited military veterans to enroll at the school. And the U of P has been under investigations by the Federal Trade Commission and the California Attorney General's Office into U of P's practices for recruiting service members.
Citing those two investigations, the DoD, which oversees the Tuition Assistance Program for active-duty military, placed the U of P on probation but allowed it to continue to enroll previously accepted active-duty service members using their Tuition Assistance money.
In a letter to the U of P, the DoD said the sanctions were related to allegations that the school was “engaging in deceptive or unfair practices in or affecting commerce in the advertising, marketing, or sale of secondary or post-secondary educational products or services or education-accreditation products or services."
U of P officials have 14 days to respond to the letter, but in a statement, university President Tim Slottow said the announcement was surprising to school officials.
“The University intends to continue its cooperation with federal and state agencies to respond to their requests,” Slottow said. “University representatives have been working closely with DoD leaders, and we all expecte a different response from DoD.”
Still, veterans groups are applauding the DoD action as a step in the right direction.
“This is good and long overdue news for veterans and active-duty troops worldwide,” said Iraq and Afghanistan Veterans of America founder and CEO Paul Rieckhoff. “[Military service members] have been taken advantage of and manipulated by many for-profit 'schools,' but the University of Phoenix is constantly reported as the single worst by far.”