Grand Canyon University Sued by FTC
Lawsuit includes charges similar to those leveled by Department of Education last fall
Grand Canyon University (GCU) has once again been accused by the federal government of deception and misrepresentation regarding its doctoral programs and nonprofit status.
The nation’s largest Christian university, with an enrollment of about 118,000, was sued by the Federal Trade Commission (FTC) on December 27 in an Arizona federal court. The FTC is seeking monetary relief and a permanent injunction.
The lawsuit includes allegations similar to those that resulted in $37.7 million in fines by the Department of Education last fall.
According to the FTC lawsuit, GCU tells prospective students that its doctoral programs are “accelerated” and the total cost will be equivalent to 20 courses or 60 credit hours. However, nearly all GCU doctoral students are required to take “continuation courses” that add thousands of dollars to the cost of the doctoral program.
The Department of Education reported that fewer than 2% of GCU doctoral program graduates complete it within the cost that GCU advertises.
The FTC claims authority to bring the suit against GCU because it enforces the FTC Act, “which prohibits unfair or deceptive acts or practices in or affecting commerce.” It also has enforcement authority over “deceptive and abusive telemarketing practices.”
According to the court documents, GCU advertises and markets its educational services through online and telemarketing efforts. The FTC alleges that these efforts include “deceptively” advertising the university as a nonprofit.
Until June 2018, GCU was owned and operated for-profit by Grand Canyon Education (GCE). In July 2018, Brian Mueller — who is both the CEO of Grand Canyon Education and the president of GCU — “directed GCE’s efforts to re-brand the University as a nonprofit.”
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However, GCE and GCU are still heavily integrated, with GCE operating as the “exclusive provider of marketing for GCU and services related to communicating with prospective GCU students.”
Through the arrangement, GCE “receives 60% of GCU’s revenue from tuition and fees from students, including 60% of charitable contributions to GCU for payment of student tuition and fees,” the court filings state.
While the university is designated as a nonprofit by the Internal Revenue Service, the federal Department of Education rejected the college’s request to be treated as a nonprofit under the Higher Education Act for financial aid services like federal student loan programs.
The Department of Education stated in 2019 that the financial arrangement between GCU and GCE “violates the most basic tenet of nonprofit status – that the nonprofit be primarily operated for a tax-exempt purpose and not substantially for the benefit of any other person or entity.”
The FTC also alleged that GCU has hundreds of telemarketer representatives who represent themselves to potential students as “counselors.” These telemarketers are pressured to meet performance metrics for student enrollment or be placed on a “corrective action plan.”
According to the FTC, as part of its telemarketing campaigns, GCU has called consumers who had previously placed their numbers on the National Do Not Call Registry.
“Grand Canyon deceived students by holding itself out as a non-profit institution and misrepresenting the costs and number of courses required to earn doctoral degrees,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, stated in a press statement. “We will continue to aggressively pursue those who seek to take advantage of students.”
“The fact that the FTC is using the same accusations as the Department of Education makes it clear that the two agencies are coordinating efforts and suggests that the FTC’s real goal is to further burden GCU by forcing it to defend against duplicative lawsuits,” Mueller reportedly told Higher Ed Dive.
The school also “categorically denie[d] every accusation in the Department of Education’s statement” and appealed the $37.7 million in fines assessed by the department.
In December 2021, GCU issued $1.2 billion in junk bonds to pay off the transition from for-profit to non-profit status that it started in 2018.
According to a press release, the transition to non-profit status allows the school to create a development office that will pursue grants and other gifts, operate a philanthropic foundation, and offer educational services to other Christian colleges and high schools.
In the MinistryWatch database, Grand Canyon University earns a “C” transparency grade, a five-star financial efficiency rating, and a donor confidence score of 73 out of 100, meaning donors can give with confidence. It is not a member of the Evangelical Council for Financial Accountability.
Main photo: GCU President Brian Mueller on Nov. 16, 2023 / Photo courtesy of GCU