University of Idaho abandons plan to acquire University of Phoenix

Dive Brief:

• The University of Idaho and the University of Phoenix have agreed to nix their deal for the state university to acquire the for-profit college, the two institutions said Tuesday. 
• The University of Idaho will ask the state’s board of regents to terminate the agreement at a meeting Thursday, according to a news release. The university stands to receive over $17.2 million in termination fees from the University of Phoenix as reimbursement for expenses incurred during the talks. 
• With the $550 million purchase off, the private equity-backed University of Phoenix plans to continue operating independently, it said in a separate release.

Dive Insight:

University of Idaho officials hoped to bolster revenue and enrollment by absorbing the adult education-focused University of Phoenix ahead of expected demographic declines in traditional-aged students. But the for-profit college entered the deal with reputational issues going back years. 

In 2019, the Federal Trade Commission accused the University of Phoenix of deceptive advertising that exaggerated the benefits of the education it provided. The FTC’s complaint led to a $191 million settlement that included both debt forgiveness for and cash payments to the college’s students. 

In 2023, just months after the deal with the University of Idaho was announced, the U.S. Department of Education moved to forgive tens of millions of dollars in federal student loans to University of Phoenix students. At the time, an Education Department official said the agency would try to recoup the cost of the loan discharges from the for-profit’s owner. 

“The University of Phoenix brazenly deceived prospective students with false ads to get them to enroll,” then-Federal Student Aid Chief Operating Officer Richard Cordray said in a statement then. “Students who trusted the school and wanted to better their lives through education ended up with mounds of debt and useless degrees.”

Under their agreement, the University of Idaho would have converted the University of Phoenix into a nonprofit online-focused arm, much as the University of Arizona did through its acquisition of the for-profit Ashford University in 2020 and Purdue University did with the acquisition of the for-profit Kaplan University in 2018. 

Both of those deals have faced opposition from faculty and other stakeholders over possible reputational damage and concerns about poor education quality from those for-profit institutions. The University of Idaho has faced similar pushback. 

Shortly after the deal in May 2023, a group of higher education advocates wrote to Idaho’s regents, flagging the University of Phoenix’s poor student outcomes and pointing out that the University of Idaho could face liability for borrower defense claims against the for-profit. 

Even a group of Democratic U.S. senators weighed in that year, describing the University of Phoenix as a “nefarious for-profit college with a history of preying on veterans, low-income students, and students of color” and urging University of Idaho President C. Scott Green to reconsider the deal.

Although Idaho’s education board approved the deal, the state’s legislative council argued in early 2024 that the panel lacked the legal authority to acquire the private college. The state’s attorney general also sued over the deal in 2023, arguing that the education board’s early closed-door dealmaking talks violated transparency laws.

In its Tuesday release, the University of Idaho described “legal challenges around the open meetings laws from the Idaho attorney general, as well as concerns from the Idaho Legislature about process and authority,” all of which “pushed the conversations past the first agreement deadline” of May 2024.

With talks between the institutions stalled, the University of Idaho and the University of Phoenix extended their deal last summer. The extension allowed the for-profit college chain to seek other potential buyers. 

The University of Phoenix said Tuesday that it has “actively explored other strategic options” since the extension. The for-profit’s parent company, private equity firm Apollo Global Management, has considered putting the university’s holding company up for initial public offering in addition to a sale, Bloomberg reported. For now, though, the University of Phoenix plans to go it alone. 

On Tuesday, Green said in a statement, “Although we continue to see great value in University of Phoenix, it has become cost prohibitive, and potentially distracting to our other work, to continue conversations.”