KVIG Informative

The University of Phoenix operated a campus in Henderson for years while its parent company faced federal fraud findings, a $191 million settlement, and repeated attempts by the U.S. Department of Education to claw back money from the private investment firms that now own it.

Apollo Global Management and the Vistria Group, two private investment firms, took the University of Phoenix private in a 2017 deal after the school’s enrollment had already collapsed from a 2010 peak of more than 470,000 students to under 100,000. Former students who attended the Henderson campus have described being promised job placement help that never materialized and being pushed into additional paid coursework beyond what they were told they’d need to graduate.

What Federal Regulators Found The Federal Trade Commission announced a $191 million settlement with the university’s parent company in December 2019, resolving charges that the school ran deceptive advertising campaigns between 2012 and 2014 falsely claiming employer partnerships with specific named companies that either didn’t exist or looked nothing like what the ads implied. The settlement required the university to pay $50 million in cash to the FTC and cancel $141 million in debt owed by students who enrolled during the period the ads ran. The university did not admit wrongdoing as part of the settlement.

In 2023, a senior Education Department official said the agency would attempt to recover the cost of $37 million in canceled loans directly from the university’s current owners, Apollo Global Management and the Vistria Group, rather than from the university itself. The Education Department had already run into legal resistance trying that approach with another for-profit chain, DeVry University, which sued the agency after it moved to recoup more than $23 million tied to loan discharges for defrauded students.

The Ownership Chain Behind the Classroom Apollo Education Group, the university’s prior publicly traded parent company, agreed to go private in a $1.1 billion deal in 2017. That structure matters because it moved a school still receiving billions of dollars a year in federal student aid out of public shareholder scrutiny and into the hands of private investment firms answerable primarily to their own limited partners. The Education Department has separately found that a related services agreement the university struck with an outside company was structured primarily to generate shareholder value for that company, using the university as what the department’s letter called a captive client potentially in perpetuity.

Federal student aid, most of it backed directly by U.S. taxpayers, is what makes this business model work at all. The university received roughly 86 percent of its revenue from federal student aid programs in a single year cited in earlier federal filings, at a time when it was the single largest recipient of federal student aid money of any institution in the country. That funding structure means the investment firms that now own the school aren’t primarily selling an education to students who pay for it directly. They’re managing a pipeline that runs from the federal government, through enrolled students carrying federal loans, into private equity ownership.

Nevada students who enrolled at the Henderson campus and later filed borrower defense claims are part of a national pattern the Education Department has now moved to address at the ownership level rather than only at the institutional level. Whether the department can actually collect from Apollo Global Management and the Vistria Group, given the legal resistance it hit trying the same approach with DeVry, will determine whether owning a for-profit college through a private equity structure continues to insulate the owners from the cost of what happens inside the classrooms they control.