University of Phoenix to affiliate with University of Idaho

The Idaho State Board of Education is expected at a special meeting Thursday to approve the University of Idaho’s creation of a new nonprofit entity that will buy and manage the University of Phoenix as a nonprofit university.

This arrangement appears to be plan B for Phoenix after a proposed deal between it and the University of Arkansas system fell apart last month after sharp disagreement among the system’s board members and concerns expressed by critics of for-profit higher education.

The University of Idaho tweeted late Wednesday that “The U of I and the University of Phoenix intend, with proper approvals, to affiliate with the goal of increasing access to all learners, improving capacity for supporting all learners and helping all learners achieve their higher education goals.” The tweet linked to an extensive website with details about the proposed affiliation.

Spokespeople for both institutions confirmed the planned deal Wednesday afternoon.

Among the highlights:

• The University of Idaho will create (and fully control) a new nonprofit corporation that will issue bonds to pay $550 million to buy all of Phoenix’s assets, which include about 85,000 students. Phoenix’s current owners will provide $200 million in cash to the new nonprofit entity as part of the deal. The University of Idaho will receive at least $10 million in supplemental funds per year under the arrangement.
• Phoenix’s leadership and staff will continue to run the university, which will close its few remaining campuses and operate entirely online.
• The arrangement will require approval of the Higher Learning Commission, Phoenix’s accreditor, and the Northwest Commission on Colleges and Universities, which accredits Idaho.

“We share a common mission, to illuminate and elevate students to be successful in their careers and lives,” the Idaho statement said in explaining the rationale for the deal. “Both institutions serve a significant number of first-generation students who benefit from robust support systems. We can learn from each other how to best serve all learners and ensure that address does not dictate access. We believe we are culturally aligned around student success.”

It added, “This is an incredible opportunity for both institutions to diversify our programmatic portfolios. This transaction will improve student access to higher education and will expand learning technologies and strategies.”

The Back Story

Phoenix was once the biggest university in the United States, and it was also the flag bearer of a for-profit higher education sector that burgeoned during the 2000s and early 2010s but has shrunk significantly in the last decade. Though Phoenix is far from its peak of nearly 470,000 students in 2010, documents from the University of Idaho list it as about 85,000 now, making it still one of the nation’s largest institutions.

Significant regulatory scrutiny from the Obama administration and consumer advocates and changes in the economy battered Phoenix’s reputation and drove down enrollment. Phoenix had been on the market for several years, and its name had cropped up in recent years as numerous public universities sought to absorb major online players, often for-profit ones, to jump-start or expand their own online operations, such as Purdue University’s 2017 purchase of Kaplan University and the University of Arizona’s 2020 purchase of Ashford University.

Those deals were controversial in part because they involved public institutions absorbing formerly troubled for-profit universities, but also because the newly created nonprofit institutions continued to have managed in part through services offered by the for-profit companies that sold them.

Like the proposed Arkansas-Phoenix marriage, which disintegrated last month, the deal between Phoenix and Idaho would involve no such arrangement. Under the plan, Phoenix’s owners, Apollo Global Management and Vistria Group, would sell the university outright to the nonprofit corporation that the University of Idaho creates, and that entity — whose sole “member” would be the University of Idaho through its Board of Regents — would operate Phoenix.

This is a developing story.