The federal government has been putting for-profit colleges under the microscope over concerns about deceptive advertising, and the parent company of the University of Phoenix became its latest target Wednesday.
Stock prices for Phoenix-based Apollo Education Group Inc. plunged by more than 9 percent Wednesday morning from the previous day’s closing price, then somewhat rebounded mid-day after the company revealed it was under investigation by the Federal Trade Commission. Apollo shares closed the day at $13.14 per share, down 1.8 percent from the previous day and near the bottom end of its 52-week range of $12.12-$34.55, according to Yahoo Finance.
In a filing with the Securities and Exchange Commission, Apollo disclosed that the FTC is demanding to see 4.5 years worth of various internal documents — relating to everything from marketing to financial aid to military recruitment — in order to determine any possible “deceptive” or “unfair” business practices of its wholly-owned subsidiary, the University of Phoenix. Apollo said it intends to fully cooperate with the FTC.
In recent years, the for-profit college industry has suffered from widespread criticism and accusations it is deceiving prospective students about the quality of its education. The FTC and the Department of Education have followed suit by launching probes into such companies as DeVry Education Group Inc., Corinthian Colleges and, most recently, Apollo.
“There is this motive to grow the company and sometimes that profit motive is at odds with what will lead to student success," Elizabeth Baylor, director of post-secondary education at the Center for American Progress.
Baylor was previously senior investigator for the Senate Health, Education, Labor, and Pensions, or HELP, Committee under its Chairman and U.S. Senator Tom Harkin, who led an investigation into for-profit colleges that was released in 2012.
She said that because entrance requirements generally don’t exist, for-profits tend to attract students from varying socioeconomic backgrounds who were more challenged in grade school and high school. That poses problems, she said, when considering the imbalance in how these companies spend their money.
"The amount of money companies are spending on recruiting dwarfs the money they were spending making sure students would succeed," she said. "There were many, many, many more times the number of recruiters than there were academic support counselors who would help students who might fall behind once they’re in school.”
But the industry has fallen far from its heyday just five years ago.
For instance, this past year, Apollo's chief financial officer stepped down, and hundreds of employees have been laid off while profits and enrollment continued to decline. The company, in its regulatory filings, has attributed such losses largely to increased industry competition.
The University of Phoenix saw profits take a 51 percent year-over-year decline, or $207.7 million, during the nine months ended May 31, according to its most recent financial statements.
The college’s enrollment as of May 31 — roughly 236,300 students — was down about 17 percent compared to last year and is about half the figure from early 2010, the filings show. Apollo executives said during its most recent earnings call that it expects another one-quarter drop in enrollment next year.
Updated 7/29/2015 at 4:46 p.m.
