University of Idaho needs more students. Should it buy an online school?

Depending on who you ask, the University of Idaho’s plan to acquire the University of Phoenix, a for-profit online school, is a sweet deal or a potential disaster.

University of Idaho President C. Scott Green said he saw the deal with a $550 million price tag as a hedge against what’s known as the “demographic cliff,” an expected decline in the number of college-age students .

But there are also critics of the university’s plan, such as U.S. senators Elizabeth Warren, non-profit organizations and a trade unionhave questioned why the state’s top public university would partner with the University of Phoenix, which has historically been known for its low graduation rate prices and misleading claims, so much so that it was recently ridiculed on “Saturday Night Live.”

The University of Idaho is just the latest publicly funded state college to consider partnering with a for-profit institution as a way to develop online enrollment. Schemes at Arizona State, Purdue and, most recently, the University of Arizona have produced mixed results as higher education faces an existential crisis.

“There are going to be a lot of universities that don’t survive,” Mr. Green, an alumnus of the University of Idaho and Harvard Business School, said in an interview.

Mr. Green, who inherited a deficit when he became president in 2019, wanted to run the university as a business. He cut spending, laid off workers and merged programs. He has also worked to attract students to the campus in Moscow, a city in a remote part of the state called the Palouse, distinguished by its vast rolling hills covered in wheat. He even published a book about navigating the university through a crisis.

Enrollments across the country are expected to peak next year and then fall abruptly due to lower birth rates after the economic downturn, according to research by Nathan D. Grawe, a professor at Carleton College.

The number of students in Idaho has increased recently 7,400 last fall, an increase of 3.4 percent since 2022. But the future is bleak, especially for a state with one of the lowest percentage of students who enroll in a study immediately after high school.

Mr. Green says the University of Phoenix can provide enrollments and gain. But it carries its own complicated legacy.

Founded in 1976, the University of Phoenix grew rapidly and in 2010 enrolled more than 450,000 students, mostly online. It aggressively promoted its brand and even acquired naming rights to an NFL stadium.

Because enrollment is primarily aimed at lower-income students and veterans, operations are fueled by billions of dollars in federally backed loans and grants. But along with the growth came accusations of misleading representation. Thousands of students said they enrolled and racked up debt but never earned a degree.

In 2019, the University of Phoenix reached a $191 million federal settlement after allegations that from 2012 to 2016 it promoted non-existent deals with companies like Microsoft and Twitter that would help students get jobs. The Federal Trade Commission said it would reimburse 147,000 students as a result of those claims.

Alphi Black, an Army veteran from Los Angeles, is trying to get her student loans forgiven after enrolling at the University of Phoenix following what she says was misleading sales pitches. After graduating in 2018, she came to view it as a disability.

Potential employers “kind of laughed about it,” she said. “They said, ‘It’s not a real school.’”

However, other University of Phoenix graduates say their degrees have been valuable. In December, more than 200 of them wrote a letter to Secretary of Education Miguel Cardona in support of Idaho’s takeover.

“We are often dismayed at the level of focus and vitriol directed at our alma mater. It appears that certain officials believe that we should have pursued our studies at another institution,” the letter to Mr. Cardona said.

Jake Searle, a former Army pilot who lives in Kuna, Idaho, was among the graduates who signed the letter. As a working father who found it difficult to attend a traditional campus, Mr. Searle, now 41, earned two degrees from the University of Phoenix, including an MBA in 2019.

“The University of Phoenix was the first out of the gate,” said Mr. Searle, who now works in petroleum marketing. “They were the ones who designed and developed the online platform that I would say every other program adopted.”

The University of Phoenix has done that transformed itself, according to Andrea Smiley, a spokeswoman for the school. It has closed underperforming programs and achieved higher returns graduation since 2016, when it was acquired for $1.1 billion by a group of investors, including funds associated with Apollo Global Management. Apollo Global is led by billionaire Marc Rowan, who led the recent donor revolt at the University of Pennsylvania that resulted in the resignation of its president, M. Elizabeth Magill.

“The University of Phoenix is ​​proud of who we are today and the value we provide to our students and alumni,” Ms. Smiley said in an email, citing “improving student outcomes, positive external reviews by our accreditor, our students’ satisfaction with our career-oriented education and our fiscal health.”

Emphasizing value of enrollment, which the university says it has deliberately shrunk to a more manageable 85,000 students, and net income of about $75 million, the University of Phoenix has been shopping itself big time.

It has not been a smooth process. Last year, the University of Arkansas Board of Governors turned down a proposal despite the chancellor’s push for a $500 million deal.

“Why would you lie down with a dog? You’re going to get fleas,” said CC Gibson III, an Arkansas attorney and former member of the university’s board of trustees, citing Phoenix’s reputational problems.

In Idaho, the plan has roiled state politics. While Gov. Brad Little has endorsed it, Raúl Labrador, the state’s attorney general, is suing to block it. Mr. Labrador is questioning the secrecy surrounding the Idaho State Board of Education’s vote last year that approved the complex arrangement that would technically see the University of Phoenix taken over by a newly created nonprofit.

Members of the Idaho Legislature are questioning the deal, backed by a legal opinion from a state government attorney who says the board didn’t have the authority to approve it. The controversy was sparked then Education News from Idaho announced that the University of Idaho had paid the law firm Hogan Lovells, where Mr. Green was previously chief operating officer, more than $7 million to advise on the deal.

“From what I can see, and from what I know about corporate acquisitions and restructurings, this deal carries significant risks,” said Rod Lewis, a former general counsel of a major technology company who also once headed the board that oversees at the state’s public universities. .

In a recent one op-ed Describing his reservations, Mr. Lewis asked whether the state could be on the hook for a $685 million bond issue planned to finance the deal.

There is also a sense that the University of Idaho may be late to the party. Arizona State University and Purdue already sponsor major online programs, said Byron Jones, former chief financial officer of the University of Phoenix.

“The online market itself is flattening out a bit due to saturation rates,” Mr Jones said.

At the University of Arizona, a budget crisis has raised questions about its 2020 acquisition of the for-profit Ashford University. Robert Shireman, a former deputy assistant secretary at the U.S. Department of Education, points to the program, which is currently operating at a loss. as a warning sign that public universities face “countless dangers and complications” if they partner with for-profit schools.

Yet the enrollment gap is not disappearing.

Although Idaho is not among the states expected to be hit hardest, Green said other universities were already trying to poach its prospective students. At a recent recruiting event at an Idaho Falls high school, colleges from across Tennessee showed up, he said.

“Our competitors are already here,” Mr. Green said. “I mean, it was incredible. So, you know, people are going to come for our students because they’re going to be desperate.”