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Grand Canyon University faces another audit months after $37.7M fine

Grand Canyon University is facing another audit in the fifth federal investigation into the school in the last few years.
The Jerry Colangelo Museum at Grand Canyon University is seen.
Posted at 7:17 PM, Jan 15, 2024

Grand Canyon University faces another federal inquiry as the push-and-pull battle between the country's largest Christian university and government agencies continues.

The Phoenix-based institution said it received notice at the end of December that the U.S. Department of Veterans Affairs (VA) had initiated its second risk-based audit, eight months after the school said it had "successfully refuted" the agency's first.

This is the fifth federal investigation into GCU since February 2021, when GCU sued the U.S. Department of Education (DOE) for denying its request to be classified as a nonprofit entity. 

The university alleges these federal actions by DOE, VA and the Federal Trade Commission (FTC) are proof of the federal government's retaliation campaign against the school after its lawsuit.

"This is unfortunately yet one more example of unelected bureaucrats weaponizing federal government agencies in a coordinated effort to target institutions to which they are ideologically opposed," said GCU President Brian Mueller. "The level of unwarranted scrutiny being imposed on GCU is nothing short of harassment."

Though founded as a nonprofit institution in 1949, financial difficulties pushed GCU to become the nation's first for-profit Christian college in 2004. Ten years later, it began a push to return to its original nonprofit status.

In 2018, GCU's regional accreditation body, Higher Learning Commission (HLC), accepted its application to be classified as a nonprofit again, and later, so did the IRS. However, the DOE did not change its view of the school's status due to its financial relationship with its former parent company. 

After its nonprofit status was denied twice, the GCU "reluctantly" filed its 2021 lawsuit against the DOE, which a federal judge dismissed the following year.

But later in 2021, the FTC announced it would be working with the DOE's Federal Student Aid (FSA) office and the VA to take further action in penalizing for-profit colleges that enforce "unfair and deceptive practices" upon students, particularly in programs that consistently leave graduates unable to pay high student debt.

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Two years later, the FSA office fined GCU $37.7 million — the largest fine of its kind ever issued by the DOE — after an investigation found the school misled more than 7,500 current and former students from 2017 on about the cost of its doctoral program. 

The DOE said fewer than 2% of GCU's doctoral graduates completed the program within the advertised cost range of $40,000 to $49,000, with 78% having to take five or more "continuation courses," racking up $10,000 to $12,000 more in tuition costs.

The FSA investigation also became the basis of the FTC's December lawsuit against GCU, which accused the university of using deceptive advertising and illegal telemarketing to present itself as a nonprofit with programs costing less than they truly did. It also alleged GCU paid 60% of its revenue to its former parent company, highlighting its operation as a for-profit institution.

GCU has refuted the findings of the FSA office — a ruling which it's appealing — and the lawsuit thereafter. It claimed it provides more financial transparency than is legally required and has repeatedly accused the DOE and FTC of coordinating efforts to target GCU "without any corroborating evidence" using resources that "could be used to investigate schools with legitimate concerns."

"FTC spokesperson Douglas Farrar, echoing similar comments by the DOE, has stated their lawsuit was filed to 'protect students harmed by the alleged deceptive and illegal practices,' yet neither agency has provided GCU any evidence that students were harmed nor have they identified any student complaints supporting their allegations," the university said in a statement. "Rather, their claims are based on their same subjective impressions about the same doctoral disclosure documents."