The University of Arkansas System is considering a transaction in which it would transform the for-profit University of Phoenix into an independent nonprofit affiliate, spokespeople for both institutions have confirmed. The deal, if it came to pass, would be the latest in a series of controversial absorptions of formerly massive for-profit colleges by public universities.
“Because these conversations are ongoing, we are unable to provide much detail,” Nate Hinkel, director of communications at the University of Arkansas System, wrote in a prepared statement. “However, I do want to confirm that the UA System itself would not be acquiring the University of Phoenix, and no public or university funds would be involved in this potential transaction. The contemplated structure would also not include any remaining private ownership of the nonprofit entity or the University of Phoenix.”
The system has created an affiliated nonprofit entity for the purpose of a potential University of Phoenix acquisition, Hinkel wrote.
The Arkansas Times broke the news about the possible deal based on a leak, according to Hinkel, who confirmed that discussions are under way but that “there is nothing imminent at this time.” Hinkel added that the university system has been exploring new educational markets, especially in online education. Also, this week’s regularly scheduled meeting of the Board of Trustees of the University of Arkansas does not have this item on its agenda, Hinkel said.
At its peak in 2010, the University of Phoenix enrolled 470,000 students, including a mix of in-person and online students who were mostly working learners. Over the course of the next decade, economic trends and aggressive regulatory scrutiny from the Obama administration battered the university’s reputation and drove enrollment down. In 2019, the institution and the Federal Trade Commission agreed to a multimillion-dollar settlement following a five-year investigation into whether the university engaged in deceptive advertising by falsely touting its relationships with big employers; the agreement did not include an admission of wrongdoing. By 2021, the university had 78,600 students, according to the institution’s 2021 annual academic report—the most recent available. The institution, which is owned by Apollo Education Group, once had more than 200 satellite learning centers and campuses but announced last year that it will close all but one, in Phoenix, by 2025.
Andrea Smiley, vice president of public relations at the University of Phoenix, confirmed both that the for-profit university is in talks with the University of Arkansas System and that no deal is imminent.
“Being private equity owned, you’re always having that conversation,” Smiley said. “The aim of our leadership is to find the best structure to sustain the legacy of this institution that’s existed for almost 50 years … Is nonprofit the right path? It could be.”
Should the deal happen, it would not be the University of Arkansas’ first attempt at going big with online education. In 2014, the university system sought to join the growing number of public universities attempting to reach working learners by creating a fully separate online institution known as eVersity. But eVersity never achieved its founders’ enrollment targets or came close to break-even status financially. In 2022, the Arkansas system’s Board of Trustees folded eVersity into a new public institution—University of Arkansas Grantham—after a $1 purchase of the online Grantham University, a for-profit institution that had approximately 5,500 students.
The University of Phoenix “has been on a mission of going from being an advertising juggernaut and accepting everybody, a number of which weren’t able to graduate, to being much more selective and trying to manage their online programs at a much lower enrollment number with a much higher-quality student,” Wallace Boston, co-founder of Green Street Impact Partners, a private equity firm focused on investing in education technology companies, said. Earlier, Boston served as the president and CEO of American Public University System and its parent company, American Public Education.
The potential purchase “would not be surprising in the sense that the Biden administration has tried to put more onerous rules that apply primarily to the for-profit institutions,” Boston said, adding that those rules make the enrollment market especially tough for for-profit institutions.
In recent years, several public universities have absorbed formerly massive for-profit colleges in a series of controversial deals. In 2017, for example, Purdue University, a public institution in Indiana, produced a “tectonic shift” in American higher education when it acquired Kaplan University, including its roughly 32,000 students, 15 campus locations and 3,000 employees. The acquisition produced the nonprofit Purdue University Global. The deal marked a bold entry into the online education market for Purdue, as nearly 85 percent of Kaplan’s students at the time had been enrolled in fully online programs. But critics questioned whether Kaplan’s recruitment tactics and the value of its credentials posed reputational risks to the public institution.
A few years later, in 2020, the University of Arizona, a public land-grant institution, purchased for-profit Ashford University in a deal that included roughly 35,000 students—all online. The acquisition, which became the nonprofit University of Arizona Global Campus, was designed to maintain its own leadership, faculty members, academic programs and accreditation. Several business analysts at the time praised the deal as positive for Zovio, the publicly traded parent company of Ashford, which would run the new institution’s programs. But Arizona’s faculty members were also concerned about reputational risks in associating with a for-profit university that had been accused of predatory recruitment practices. They also questioned why they had largely been sidelined in discussions.
Should the University of Arkansas System absorb the University of Phoenix—one of the oldest for-profit universities—the deal is likely to spark discussion in the system’s community, American higher ed and beyond.
“I’ve seen recent articles that say that the Department of Education under Biden has announced that they’re going to scrutinize these for-profit nonprofit conversions much more than they’ve been scrutinized in the past,” Boston said. “That could possibly explain why there’s been no specific announcement yet.”