For-Profit Colleges: University Of Phoenix Sale Approved By Department of Education As College Goes Private

The federal government Wednesday approved the sale of the owners of the University of Phoenix to a consortium of private equity groups that will take the operation private.

The U.S. Department of Education OK’d the $1.14 billion sale of Apollo Education Group, with the stipulation $386 million be set aside in a letter of credit, Inside Higher Ed reported. Apollo shareholders approved the sale in May.

The department took more than a year to review the deal in the wake of criticism it had not done enough to oversee for-profit colleges.

A number of lawmakers opposed the sale, including Sen. Dick Durbin, D-Ill., who expressed concern about the University of Phoenix “going dark” (private companies do not need to release as much information as public companies).

The private-equity firms involved in the sale are Vistria Group, Apollo Global Management and the Najafi Cos. Vistria is run by Marty Nesbit, one of President Barack Obama’s friends.

For-profit universities like the University of Phoenix have been criticized for their low graduation rates, low percentage of graduates finding jobs in their fields and high levels of student loan default. The criticism led to trouble for the University of Phoenix. Student enrollment has fallen from a high of 460,000 in 2010 to just 175,000 students now.

The Department of Defense put the University of Phoenix on probation in 2015 but admitted last month in Senate testimony errors had been made in coming to that decision. The probation was lifted in January.

Sen. John McCain, R-Ariz., who heads the Foreign Relations Committee, called the DOD action an “abuse of power,” noting the decision sent the school’s stock plummeting. DOD had accused the University of Phoenix and other for-profits of preying on servicemen.

In its Securities and Exchange Commission filing last month, Apollo admitted 16 percent of its students fail the government’s gainful employment rule. Twenty percent of students pursuing degrees are involved in programs the university said are unlikely to pass the government’s debt-to-earnings standards.