University of Phoenix barred from U.S. bases
The University of Phoenix was barred this week from recruiting on U.S. military bases and cut off from new funding for educating troops in a move that at least temporarily closes a source of revenue for the company.
On Wednesday, the Department of Defense notified the school it was putting the university on probation and considering more permanent action, according to records filed today with the Securities and Exchange Commission by the Apollo Education Group, the parent company to the university.
The Pentagon cited concerns about the university’s unauthorized use of “challenge coins” bearing military logos, as well as ongoing investigations opened this summer by the Federal Trade Commission and California’s Attorney General's Office, according to the SEC records. It also noted the school had not received appropriate written approval for various events at military installations.
The university’s suspension affects the Defense Department’s Tuition Assistance Program, which Apollo said represented less than 1 percent of net revenue. The action does not apply to current students using the program’s funds.
The move is the latest in a series of governmental actions against the company in recent months and helped push down Apollo’s stock more than 8 percent, to $11.29 during regular trading.
Apollo noted that it stopped using the challenge coins when the defense agency approached it about the matter and would seek appropriate permission for future events.
“As to the investigative demands to produce information, neither the FTC Civil Investigative Demand nor the California Attorney General subpoena contains any allegations of misconduct, and the University currently is cooperating fully with these agencies to produce the specified information. No charges have been made in connection with these investigations,” Apollo wrote in its filing for investors.
Tim Slottow, the president of the university, pledged cooperation with the Pentagon and disappointment that it tied its actions to the other probes.
Declining enrollment at University of Phoenix suggests much leaner Apollo ahead
“The University intends to continue its cooperation with federal and state agencies to respond to their requests,” Slottow said in a statement. “We will continue to hold ourselves to the highest standards of accountability, transparency, ethics and compliance. The Department of Defense in its letter acknowledged the corrective actions taken by the University to date. University representatives had been working closely with DoD leaders and we all expected a different response from DoD. It is troubling that the DoD has used requests for information from other governmental agencies as grounds for placing the University’s DoD MOU in a probationary status. At this time, the University will not accept new students who wish to use Tuition Assistance Program funds.”
Sen. Richard Durbin, D-Ill., and the ranking member of the Senate Appropriations Committee's defense subcommittee, welcomed the latest action against a company he said is unworthy of public support.
“This is a decisive action by the Department of Defense to protect servicemembers and taxpayers from a company that offers degrees of questionable value. With below-average graduation rates and a student loan default rate almost forty percent higher than the national average, the University of Phoenix is going to have a hard time explaining why students should continue to enroll in this institution,” he said in a statement Friday. "I will be calling on the Department of Education and the Department of Veterans Affairs to review the Defense Department’s findings and take appropriate action against the University of Phoenix to protect Title IV students and veterans using GI Bill benefits.”
The university maintains it has improved graduation rates and cut its most recent default rates to nearly the national average.
The Tuition Assistance Program is one of several types of funds for education available to members of the military.