Dive Brief:
- The University of Arkansas System’s governing board on Monday narrowly rejected a deal to acquire the University of Phoenix, a beleaguered for-profit institution that has shed hundreds of thousands of students in the last decade.
- Trustees voted against the arrangement 5-4, with one abstention. They were not voting to approve a sale, but rather were signaling whether they were for or against it. Under the proposal, a system-affiliated nonprofit would acquire the primarily online University of Phoenix.
- Arkansas system President Donald Bobbitt has said it would be difficult to move forward with the project without the board’s support. “That statement remains true, and he is certainly disappointed in the outcome of the meeting,” a system spokesperson said in an email Monday.
Dive Insight:
The Arkansas system’s interest in the University of Phoenix raised eyebrows in the higher education world. After all, the for-profit chain, once considered one of the most premiere institutions of its kind, has suffered a precipitous enrollment drop amid mountains of bad press.
The institution exemplified critiques of the for-profit sector, namely that it relies on misleading marketing tactics to enroll students, especially vulnerable prospects like those in the military. For-profit colleges like the University of Phoenix then leave graduates saddled with ruinous amounts of debt, critics argue.
In 2019, the University of Phoenix struck a $191 million settlement with the Federal Trade Commission over accusations it lied about its relationships with major employers like Adobe and Microsoft in advertisements.
Several months later, the U.S. Department of Veterans Affairs threatened to block the university and four others from accepting GI Bill benefits over concerns about false advertising. The agency ultimately backed down.
After reaching a peak of almost half a million students in 2010, enrollment at the University of Phoenix fell to about 86,000 as of fall 2021, according to the most recently available federal data.
Some Arkansas system trustees referenced the university's checkered reputation during a Monday meeting. Faculty on the system’s Fayetteville campus raised similar concerns last month.
Trustee Sheffield Nelson said during the meeting he’s fielded many calls about the University of Phoenix’s notoriety since news of a potential deal went public months ago. He voted against the arrangement.
Another trustee, Kevin Crass, said he was troubled the board would have limited authority over the nonprofit entity that would run the University of Phoenix.
The board of that nonprofit — Transformative Education Services, or TES Inc. — would include some system trustees. Crass said, however, the trustees needed to recognize they’re “giving up control.”
He also voted against it.
System officials have said having TES Inc. acquire the University of Phoenix, instead of the system directly, is strategic. This structure would insulate the system and its leaders from the for-profit’s debt and any potential legal troubles.
The system has also stressed that only private money, and no public funds, would go toward the deal.
Under the proposal, the University of Phoenix would retain its name but be able to use the Arkansas system’s branding. In return, the system could tap into the University of Phoenix's marketing mechanisms, Arkansas officials have said.
The system has said it anticipates the deal could bring in $20 million in revenue. The Arkansas Times, which first reported the possible sale, said the system’s nonprofit could pay $500 million to $700 million for the for-profit institution.
