Recent Dept. of Defense Decision to Bar U of Phoenix from Participation in Tuition Assistance Program Can Have Major Financial Ramifications!

Dear Commons Community,

The University of Phoenix is already reeling from the US Department of Defense decision barring it from further participation in the Tuition Assistance Program.  However, the news may have much greater financial ramifications under the US DOE “90/10” rule.  As reported in The Chronicle of Higher Education:

“For now, the University of Phoenix is barred from enrolling active-duty military personnel under the Department of Defense’s Tuition Assistance Program. The money associated with that program — some $20.5 million — represents a small fraction of the university’s estimated $2.5 billion in annual revenue, but the loss of the program’s funds could have an outsize impact on its bottom line.

The department announced that decision on Thursday in a letter to the nation’s largest for-profit university, citing investigations by the Federal Trade Commission and the California attorney general into Phoenix’s practices for recruiting servicemembers.

The university was also put on probation, but it is allowed to continue to enroll previously accepted active-duty servicemembers using their Tuition Assistance money. In 2014, Phoenix enrolled about 9,400 active-duty members of the military, and received more than $20.5 million in revenue from the Tuition Assistance Program, according to figures compiled by BMO Capital Markets, a financial-services company.

But if the probation turns into a longer-term punishment, the university could find itself in danger of violating the federal “90/10 rule,” which prohibits for-profit colleges that receive federal financial aid from getting more than 90 percent of their revenue from federal sources, including Pell Grants and federally backed student loans.

The University of Phoenix now gets about 81 percent of its revenue from federal sources, and servicemembers are helping to keep it comfortably on the right side of the line. That’s because revenue brought in through the Tuition Assistance Program doesn’t count against the 90-percent cap, so it’s a valuable counterweight in the 90/10 calculation for proprietary institutions, many of which have focused heavily on recruiting military personnel.

Put another way, for every $90 of Title IV student-aid money Phoenix takes in, the university needs to draw $10 from other sources. So the $20.5 million it receives through the Tuition Assistance Program allows Phoenix to collect more than $180 million in other federal dollars.

The problem for Phoenix could get much bigger, too, if the Department of Veterans Affairs, which administers money under the Post-9/11 GI Bill, decides to follow the Defense Department’s actions. Education benefits under the GI Bill also don’t count toward the 90-percent cap.”

It is going to be a rough going for the University of Phoenix but it has no one to blame but itself.



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