PHOENIX — A Phoenix-based national university has agreed to pay a record $191 million to settle claims it used deceptive advertising to attract students.
The deal with the Federal Trade Commission announced Tuesday requires the University of Phoenix to forgive $141 million in remaining debt for former students who enrolled between Oct. 1, 2012, and Dec. 31, 2016.
That is the period the students were likely exposed to the school’s advertising campaigns claiming it had special arrangements with major national and international companies, the FTC said. The ads suggested the school worked with those companies to create job opportunities for students, even though there was no such agreement, investigators found.
Letters and emails will be sent to borrowers saying they no longer owe payments to the school.
The other $50 million will go to the FTC to process student’s refund requests.
The FTC said the settlement will not affect obligations of students who borrowed from the federal government or private lenders rather than from the university. But these students are eligible to apply to the U.S. Education Department for income-driven repayment plans and, in some cases, loan forgiveness.
The university said there was no admission of wrongdoing. “We continue to believe the university acted appropriately,” it said in a written statement. But it said settling the case will help “avoid any further distraction from serving students that could have resulted from protracted litigation.”
It also pointed out that the campaign occurred “under prior ownership and concluded before the FTC’s inquiry began.”
The Federal Trade Commission said the settlement is the largest the agency has ever obtained against a for-profit college.
“Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection, in a written statement.
Commission member Rohit Chopra said the University of Phoenix “scammed its students by luring them in with false job placement promises.” And Commissioner Rebecca Kelly Slaughter said, “The deceptive claims set out in the commission’s complaint are particularly galling to me because they sold false hope — robbing consumers of their time and money for the prospect of a job that did not exist.”
The settlement follows a sharp decline in enrollment at the university, which has 55 campuses across the nation and is a major operator of online degree programs. University officials confirm that current enrollment is less than 100,000, down from close to 470,000 a decade ago.
It comes three years after shareholders of parent company Apollo Education Group approved sale of the firm for $1.14 billion to private investors, at $10 a share. It traded as high as $89 a share in 2009.
The FTC’s allegations, first filed in 2015, said the school relied heavily on ads to attract students, including specific ads targeting military and Hispanic consumers. One TV ad said the university was “working with a growing list of almost 2,000 corporate partners,” citing Microsoft, American Red Cross and Adobe, “to create options for you,” and to shape curriculum “so when you find the job you want you’ll be a perfect fit.”
“In reality,” the FTC complaint says, “these companies did not partner with University of Phoenix to provide special opportunities for UOP students or develop curriculum.”
