GCU pushes back against $37.7 million fine over claims it ‘lied’ about costs

Grand Canyon University has denied charges by the U.S. Department of Education that the school intentionally misled prospective students about the cost of a doctoral education, leaving students in debt. The $37.7 million fine proposed by the department is the largest ever imposed against a school for misrepresentation. (File photo by Nick Serpa/Cronkite News)

WASHINGTON – Grand Canyon University said it “categorically denies” charges by the U.S. Department of Education that the school willfully misled prospective students about the costs of a doctoral degree, leaving those students deeply in debt.

The comments were in response to the department’s announcement Tuesday that it will fine the school $37.7 million for lying about the costs of its doctoral programs to “more than 7,500 … students,” who wound up paying 25% more than they were told a degree would cost.

The department said it is the largest fine imposed against a school for misrepresentation.

“GCU lied about the cost of its doctoral programs to attract students to enroll,” said Richard Cordray, the chief operating officer of the Office of Federal Student Aid, in a statement Tuesday. “GCU’s lies harmed students, broke their trust and led to unexpectedly high levels of student debt.”

Asked for comment, GCU officials pointed to university statements that accused federal regulators of retaliating against the school for its legal fight to revert from for-profit to nonprofit status. The university sued the Education Department when it refused to change the school’s classification and insisted on “mis-classifying GCU as a for-profit institution for purposes of federal student aid.”

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The department “is now able to target the university as part of a coordinated effort … to ‘pursue the full range of sanctions’ against for-profit institutions that they frequently decry as bad actors due to the disproportionate number of Americans who attended those schools and then defaulted on federal student loans,” the school said in an Oct. 5 statement.

The Education Department said on background Wednesday that GCU’s claim that it is being targeted “are completely false and only serve to distract from the school’s own clear misconduct.”

In announcing the fine, the department said its investigation of GCU found that as far back as 2017, GCU advertised costs for its doctoral programs that were far lower than the actual cost of the degrees.

GCU’s website said the programs cost $40,000 to $49,000, the department said, but in reality less than 2% of graduates were able to finish their program in that price range. Most had to take “continuation courses” that added $10,000 to $12,000 to the final cost, the department said.

In addition to the fine, the department said it will require GCU to advise future students of the average cost paid by other students for a degree, hire a monitor to make sure it is doing so, and tell current students how to file a complaint with the department, among other requirements.

Cordray’s statement said the department is “holding GCU accountable for its actions, protecting students and taxpayers, and upholding the integrity of the federal student aid program.” GCU has 20 days to respond to the charges.

GCU is not the first Arizona institution to come under Education Department scrutiny this year. The White House in September said it was canceling $37 million in debt for more than 1,200 former students at the for-profit University of Phoenix who it said were misled by “false ads to get them to enroll” by promising they would land jobs at Fortune 500 companies with their degree – jobs that did not materialize.

GCU said in its statement that its alumni carry less debt and are more likely to pay back their loans than the national average. It said the school has done more than required to advise students of their financial obligations, and that it is “nonsensical that they (the department) would seek to impose penalties against a university that is going above and beyond what is required.”

Grand Canyon University denies the Education Department charges, which it calls retaliation for legal action the school took in its fight to shift from for-profit to nonprofit status. (File photo by Griffin Fabits/Cronkite News)

“Grand Canyon University categorically denies every accusation in the Department of Education’s statement and will take all measures necessary to defend itself from these false accusations,” the school said.

But some applauded the government’s action.

“This is welcome news and accountability from the Department of Education. We must crack down on predatory institutions that mislead, defraud, and cheat students saddling them with mountains of debt,” Rep. Raul Grijalva, D-Tucson, said in a statement Tuesday.

Michael Itzkowitz, president of the Higher Education Advisory Group, said that GCU is under fire “because there are indicators that they have misled students regarding the costs of their graduate programs.”

“Getting a graduate degree is an impressive accomplishment, only about 14% of people in the United States have one and it typically helps you earn more money,” Itzkowitz said Wednesday. “But when you have an institution that’s misleading students on costs and not producing high enough earnings, you’re going to end up with students that have unmanageable debt.

“No students should be misled,” he said.

That was echoed by Diane E. Brown, executive director of the Arizona Public Interest Research Group Education Fund.

“Universities and colleges need to be up front and transparent about costs related to obtaining a degree. Students often maintain a tight budget and any unanticipated expenses can be the difference of completing their program,” Brown said.

Alexandria Cullen ah-le-xan-dree-ah cul-len (she/her/hers)
News Broadcast Reporter, Washington, D.C.

Alexandria Cullen expects to graduate in December 2023 with a bachelor’s degree in journalism and mass communication. Cullen has interned as a reporter at Ability360 and was news director and a reporter for CTV at Colorado State University.