The Federal Trade Commission filed a lawsuit against Grand Canyon University on Wednesday, alleging the school lied about the costs of its doctoral programs.
The suit – which also alleges GCU and the affiliated for-profit Grand Canyon Education Inc. engaged in deceptive marketing practices and illegal telemarketing efforts — after the Department of Education fined GCU $37.7 million over similar allegations;
The FTC alleged GCU told prospective students that its accelerated doctoral programs cost the equivalent of 60 credits when around 78% of students also had to take five or more so-called continuation courses, which can add thousands of dollars in additional costs.
A Department of Education investigation previously found that Grand Canyon misled more than 7,500 current and former students about the cost of doctoral programs.
“Most of the students that enroll in GCU doctoral programs never receive the doctoral degree for which they enrolled,” according to a complaint filed by the FTC in the U.S. District Court for Arizona. “Many of these students are thwarted because they cannot afford the additional costs and time necessary to fulfill GCU’s requirements beyond the twenty courses identified as required.”
In a statement, the university denied the allegations and accused the Biden Administration of targeting the school over ideological differences, citing a statement by the FTC in 2021 that it planned to crack down on for-profit universities accused of making false promises to students.
“Given the major problems that exist in higher education related to high tuition costs, significant student debt, poor student loan default rates, long completion times, etc., it is baffling that the federal government has chosen to target a Christian university that is addressing those issues in very positive ways,” according to the statement. “No other institution in higher education is facing this level of government scrutiny, which speaks volumes about these agencies’ motivations and agenda.”
GCU had operated as a for-profit university since 2004 before it attained nonprofit status in 2018.
But the FTC alleged the university is not actually operating as a nonprofit, arguing the bulk of its revenues go to Grand Canyon Education Inc., a for-profit service provider spun off from the university when it became a nonprofit.
Grand Canyon Education Inc. and GCU President Brian Mueller, who is also CEO of the for-profit company, are also named in the lawsuit.
According to the lawsuit, GCU signed a master services agreement with Grand Canyon Education Inc. that pays the company 60% of the university’s adjusted gross revenues in exchange for a range of services, including marketing, student support, counseling and technology.
The FTC alleged that the for-profit also benefits from 60% of revenue generated by university-owned assets that are not connected to services provided by the company, including student housing, food services, a hotel and conference center and the school’s athletic arena.
The suit noted that the Department of Education declined to recognize the university’s nonprofit status in 2019 after finding “that GCE and its stockholders — rather than [Grand Canyon University] — are the primary beneficiaries of the operation of GCU under the terms of the Master Services Agreement.”
Grand Canyon challenged that determination in court.
A federal judge dismissed the case in November 2021. An appeal filed by the university is ongoing.
In its statement, the university denied it is misrepresenting its status as a nonprofit, saying the IRS, state of Arizona and the Higher Learning Commission accreditation agency all recognize GCU as a nonprofit.
The university claimed its master services agreement with Grand Canyon Education Inc. — in which the for-profit receives 60% of university revenues — is in line with industry norms.
“In fact, GCU receives higher levels of service for that split than many institutions receive,” according to the statement.
The FTC’s lawsuit also accused GCU’s for-profit arm of engaging in “abusive telemarketing calls,” including calling individuals on the National Do Not Call Registry — allegations GCU denied.
