Dive Brief:
- The leader of Grand Canyon University accused the U.S. Department of Education on Thursday of retaliating against the college over an ongoing lawsuit.
- Brian Mueller, president of Grand Canyon University, took exception to the Education Department hitting it with a $37.7 million fine. Mueller is also the CEO of Grand Canyon Education, or GCE, an educational services company whose largest client is the university.
- During a call with analysts Thursday to discuss GCE’s third-quarter earnings, Mueller said he “had to file a complaint” over the Education Department’s 2019 decision to treat the university as a for-profit for the purposes of Title IV federal financial aid. “As a result of that, the retaliation started,” he said.
Dive Insight:
The Education Department announced this week that it would fine Grand Canyon University for allegedly misleading over 7,500 students about the cost of its doctoral programs. But Grand Canyon University officials have suggested the fine is related to an ongoing dispute about its for-profit status with the Education Department.
That decision has heavy implications for the college, as it subjects the Christian institution to stricter regulation. It also meant the university was entitled to less COVID-19 federal relief funds, as for-profits received a lower share than nonprofits.
The dispute between Grand Canyon University and the Education Department hearkens to 2018, when the college split from GCE, which was previously its owner.
However, Grand Canyon University and GCE didn’t go separate ways.
Instead, GCE entered into a 15-year contract with the university to provide services like marketing and recruitment. In exchange, Grand Canyon University hands over 60% of its tuition and fee revenue.
As part of the changes, Grand Canyon University also sought to switch from a for-profit institution to a nonprofit. While the IRS approved the conversion, the Education Department denied the university’s request in 2019.
“The department for some reason denied our nonprofit status,” Mueller said on the call Thursday. “We don’t know what the reason is. They don’t tell us.”
However, the Education Department shared an 18-page letter outlining its reasons for the decision in 2019.
The agency explained it took issue with the contract between GCE and Grand Canyon University. Education Department officials concluded the primary reason for the transaction was to “drive shareholder value” for the company, with the university “as its captive client,” according to the letter.
The Education Department also cited problems with Mueller serving as both the president of the university and the CEO of the company it contracts with for services. It said those two roles create “obviously conflicting loyalties.”
Grand Canyon University has maintained in court documents that it has measures to prevent such conflicts of interest.
In late 2022, a federal judge rejected Grand Canyon University’s bid to overturn the Education Department’s decision, ruling the agency has the power to determine whether to consider the college a for-profit under Title IV. Grand Canyon University has since appealed the decision, and oral arguments in the case are scheduled for December.
“We’ve been dealing with the department for five years,” Mueller said. “We’ll continue to deal with it.”
Grand Canyon University has accused multiple federal agencies of coordinating against it, even before the Education Department’s recent fine. This week, it said the Education Department’s fine was evidence of “coordinated and unjust actions the federal government is taking against the largest Christian university in the country.”
The Education Department refutes this.
“Any allegations that the Department is targeting GCU because of its religious affiliation are completely false and only serve to distract from the school’s own clear misconduct,” an Education Department spokesperson said in a statement Friday. “The Department’s decision on Grand Canyon’s attempted conversion from for-profit to non-profit — which we agree with, but which the school has raised as part of its evidence of religious targeting — was made under former Secretary Betsy DeVos.”
Last month, the university also criticized a Federal Trade Commission investigation against Grand Canyon Education. Company officials believe the inquiry is looking into the calls it makes on the university’s behalf, according to an October statement from the university.
Mueller also on Thursday touted Grand Canyon Education’s third quarter performance in 2023. Revenue increased to $221.9 million, up 6.3% from last year. Costs and expenses also rose 4.1% to $180.4 million.
The company saw $35.7 million in profit during the third quarter.
