The Apollo Education Group, the company that runs the for-profit University of Phoenix, will be taken private by a group of investors following declining enrollment numbers. The move could signal increasing dissatisfaction with University of Phoenix, which is infamous for scamming students.
The deal totals $1.1 billion. According to the Wall Street Journal, one of the key investors leading the transition has strong ties to the White House — which has been sharply critical of for-profit colleges and has formulated regulations to reign in their practices.
For-profit colleges, including the University of Phoenix, have come under fire in the past few years over their business models, educational quality, and deceptive marketing practices. While these colleges market themselves as pathways to success, graduation rates are among the lowest in the nation, and student loan default has become a huge problem.
This deal comes as the Apollo Education Group has struggled to receive strong revenue and enrollment numbers in recent years. In the past twelve months, its stock value has dropped 73 percent. The University of Phoenix closed 115 campuses nationwide in 2012. And between 2010 and 2015, the university lost more than half of its student enrollment.
According to Elizabeth Baylor, the director of post-secondary education policy at the Center for American Progress, declining enrollment may partly be due to the improving economy. As the labor market has improved, fewer people feel the need to go back to school in order to find a job, she said. (Disclosure: ThinkProgress is an editorially independent site housed at the Center for American Progress.)
But at the same time, it may speak to a bigger issue with the for-profit college industry. “Some of the decline may also be attributed to concern among prospective students about the value of the education provided because people who attended University of Phoenix have struggled to repay their loans,” Baylor said.
While the University of Phoenix has managed to keep their three-year cohort default rate under 30 percent, as mandated by federal regulations, the five-year student loan default rate for the university is 45 percent. This means that nearly half of the students who enroll in the Apollo Education Group’s signature program will default on their loans.
Bryan Dewan is an intern at ThinkProgress.