$191 Settlement in University Phoenix Lawsuit

 

 

The University of Phoenix is paying a record $191 million to settle a complaint filed by the Federal Trade Commission accusing the for-profit university of using deceptive ads to lure students with the promise of future job opportunities with large companies such as AT&T, Adobe, Twitter, Microsoft and Yahoo.  The settlement includes a plan to cancel $141 million in student debts that are owed to the school by people who enrolled from October 2012 through the end of 2016 – the period in which the FTC says prospective students might have been duped.  The remaining $50 million in the settlement will be paid in cash, which the FTC says “will be used for consumer redress.”

Court documents show the settlement gives the University of Phoenix and its parent company, Apollo Education Group, 15 business days to send an email and letter to eligible students, informing them that they’re covered by the agreement. The letters inform eligible former students that they no longer owe any money to University of Phoenix and their account balance will be cleared within 45 business days.  The letter also states that the school has 55 business days to tell credit reporting agencies to delete the debt from students’ credit reports.

The FTC says the university wrongly suggested that it worked closely with high-profile companies to develop its courses and the school’s “Let’s Get to Work” ad campaign was one example of how it hyped connections with potential employers that did not exist.  The University of Phoenix successfully targeted minorities, military veterans, service members and their spouses for enrollment, the FTC says, calling the University of Phoenix “the largest recipient of Post-9/11 GI Bill benefits since the program’s inception.”  As part of the deal, the university did not admit or deny any wrongdoing alleged in the federal complaint.

Andrew Smith, director of the FTC’s Bureau of Consumer Protection said in a statement that it’s the largest settlement the FTC has obtained against a for-profit school.  Smith added, “Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist.”  In response to the FTC settlement, the University of Phoenix issued a fact sheet touting both its achievements and its commitments to improve. In it, the school says it devoted 17% of its total spending in the 2018 fiscal year to marketing costs. The fact sheet concludes with a section titled “We Are Committed To Responsible Marketing.”

The settlement affects students who were enrolled between October 2012 and December 2016 but does not apply to those who owe money from federal and private loans.   William Hubbard, a spokesman for Student Veterans of America, said the case “heavily underscores that questionable practices to aggressively recruit students are not acceptable,” but added the debt covered represented “a small piece of the pie.”  “Ultimately private loans, those don’t fall under the debt cancellation rules,” he said. “If you’re a student that is paying for costs out of pocket, presumably through a private loan, you’re still on the hook for that.”

The FTC said in its statement that those who believe they have been defrauded can apply for loan forgiveness using the borrower defense to repayment procedures, and borrowers looking to lower monthly payments on their federal loans could obtain information from the Department of Education about income-driven repayment plans.