Antitrust Law Daily University of Phoenix to pay record $191 million to settle deceptive advertising suit
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Tuesday, December 10, 2019

University of Phoenix to pay record $191 million to settle deceptive advertising suit

By Jody Coultas, J.D.

The FTC alleged that the for-profit college and its parent company misrepresented that they had special relationships with high-profile employers to create employment opportunities specifically for Phoenix students and made deceptive representations that they worked with major employers to develop its curriculum.

University of Phoenix students who were harmed by the post-secondary school’s deceptive advertisements will have $141 million in loan debt cancelled in light of a record settlement the FTC announced today. The University of Phoenix and its parent company, Apollo Education Group, will also pay $50 million in cash to resolve charges that they used deceptive advertisements that falsely touted their relationships and job opportunities with Fortune 500 companies and other prominent employers. This is the largest settlement the Commission has obtained in a case against a for-profit school (FTC v. The University of Phoenix, Inc., FTC File No. 152 3231).

According to research by the University of Phoenix, career opportunities are the major motivator for those enrolling in college. Thus, the school’s "Let’s Get to Work" campaign prominently name-dropped top employers. One such television ad stated: "we’re working with a growing list of almost 2,000 corporate partners, companies like Microsoft, American Red Cross, and Adobe, to create options for you." Enrollment advisors also told people that high-profile companies hired students because of its relationships, some claiming that the University of Phoenix had "over 2,000 corporate partners and national industry partners that are looking specifically at University of Phoenix students to hire instead of any other schools."

The FTC alleged that the campaign, which included specific ads targeted to military and Hispanic consumers, gave students the false impression that University of Phoenix worked with numerous companies to create job opportunities for its students and tailor its curriculum for such jobs. In reality, there was no partnership between the school and the employers. Rather, many of those "2,000 corporate partners" simply received tuition discounts for their own current employees. Also, the FTC claimed that many of the students already worked at the companies before they attended University of Phoenix.

The settlement requires University of Phoenix to pay $50 million to the Commission, which will be used for consumer redress, and to cancel approximately $141 million in debts owed by former students who first enrolled during the time period consumers were likely exposed to the deceptive advertising. The proposed order prohibits the companies from misrepresenting University of Phoenix’s relationships with corporate partners and curriculum development. The settlement will not affect student borrowers’ federal or private loan obligations.

"After cooperating fully with the FTC’s inquiry, we are pleased to have reached this settlement agreement and resolved this matter, which principally focused on a marketing campaign that ran from late 2012 to early 2014," the University of Phoenix stated in a press release. "The campaign occurred under prior ownership and concluded before the FTC’s inquiry began. We continue to believe the University acted appropriately. This settlement agreement will enable us to maintain focus on our core mission of improving the lives of students through career-relevant higher education, and to avoid any further distraction from serving students that could have resulted from protracted litigation, as well as the time and expense of the litigation itself."

Commissioner Rohit Chopra noted that the settlement demonstrates "that the agency is here to stay when it comes to policing the [for-profit college] sector." Chopra continued, stating "I am hopeful that this action, along with recent actions against DeVry Education Group and Career Education Corporation, mark the beginning of a more concerted effort by the FTC to safeguard students and veterans from the consequences of debt and default."

In a concurring statement, Commissioner Rebecca Kelly urged the Trump Administration to reverse what she sees as the Department of Education’s failure to protect students. Specifically, Kelly noted the Department has unwound a team whose focus had been investigating fraud and abuse in the for-profit arena, abandoned or stalled major investigations into large for-profit schools, and repealed rules that would have required many for-profit schools to demonstrate that their graduates could find gainful employment in order to maintain access to federal financial aid. "The FTC cannot be the sole bulwark to protect consumers whom bad actors increasingly victimize for profit only to be abandoned by the very government agency best able to help. I join the call for this administration to stop what appears to be its systematic betrayal of consumers pursuing that most fundamental of American ideals—that all should have a chance to secure a better future through education," said Kelly.

Companies: The University of Phoenix, Inc.; Apollo Education Group, Inc.

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