Proposal for Idaho to purchase University of Phoenix should stop in its tracks | Opinion

Idaho Statesman file

The Idaho State Board of Education made a stunning announcement Wednesday afternoon: The following day, it would “consider a proposal by the University of Idaho to create a not-for-profit entity to acquire the University of Phoenix.”

The proposal was listed as an action item, meaning with almost no public debate, the board could act Thursday.

Almost all that is known about the deal comes from a Q&A posted to the University of Idaho’s website on Wednesday afternoon. While the vote to create the entity to acquire the University of Phoenix had not yet taken place, the Q&A treated the matter as a fait accompli — giving us serious concerns about whether the outcome of the vote had been determined in nonpublic meetings beforehand.

The Q&A indicates that a nondisclosure agreement prevented prior public discussion of the proposal. It is improper for public institutions to operate in the dark, regardless of what an NDA says.

The Q&A indicates that the deadline for the deal to go through is Friday, only two days after the announcement and one day after the meeting. It indicates that the University of Idaho could be on the hook for up to $10 million each year if the University of Phoenix isn’t able to generate sufficient revenue to cover payments on the bonds that would be issued to fund the $550 million purchase price — nearly three times the University of Idaho’s annual budget.

This is a lot of public money, and this process is moving far too fast with no debate. The board should defer action and wait until this idea gets a much more thorough vetting. If that means the deal falls through, so be it.

The action comes less than a month after the Arkansas university system turned down a deal to buy the for-profit college at a reported potential price of $500 million to $700 million.

There are important reasons to be wary of buying the University of Phoenix, which once boasted a roster of nearly half a million students, but had fallen to 86,000 as of 2021, according to Higher Ed Dive.

The reputation of the school is that it overcharges students, many of whom are misinformed, for degrees that are not worth nearly what it costs to get them. Many students who believed a degree would land them a lucrative job instead wound up with no improvement in job prospects, plus a mountain of debt.

The University of Phoenix has a graduation rate of just 27%, roughly half the national average, according to a U.S. Department of Education scorecard. After financial aid, the typical student graduates with about $32,000 in debt. For students who don’t qualify for a lot of aid, the cost can be nearly $20,000 per year. Slightly less than half of graduates earn more than the average high school graduate.

Of those left with debt, a third have their payments in forbearance, another third are not making progress toward paying it down, 5% are delinquent and 11% have defaulted. Only about 10% are making progress, have paid off their debt or have had their debt discharged.

In 2019, the for-profit university had settled with the Federal Trade Commission for $191 million, including debt that had to be forgiven and cash payments to former students, for deceptive marketing. It was the largest settlement a for-profit college had ever agreed to. The FTC alleged that Phoenix had lied by saying it worked closely with prospective employers so that students would receive job-ready skills.

Why would Idaho want to own a for-profit college with a history of behavior like that?

In Arkansas, the answer seemed to be money. A trustee there compared the potential acquisition to Blockbuster’s missed opportunity to acquire Netflix, according to the Arkansas Democrat Gazette.

“An affiliation with Phoenix would help the (University of Arkansas) System appeal to a new audience and create cash flow, the latter of which could address deferred maintenance needs and possibly avoid tuition increases,” the paper reported.

There appears to be a similar profit motive in Idaho, according to the Q&A.

“The initial benefit is $10 million in supplemental education funding to U of I. We expect that amount will grow over time,” it states.

If the plan is for the University of Idaho to operate the University of Phoenix as an income-generating sideline to subsidize traditional students, as appeared to be the plan in Arkansas, it’s a bad one. If morals matter, don’t buy the University of Phoenix because it’s exploitative. If morals don’t matter, just buy up a whole bunch of payday lenders instead. Their margins are probably better.

This is way too much, way too fast. The State Board of Education is supposed to be administering public assets, not running a hedge fund.

Statesman editorials are the unsigned opinion of the Idaho Statesman’s editorial board. Board members are opinion editor Scott McIntosh, opinion writer Bryan Clark, editor Chadd Cripe and newsroom editors Dana Oland and Jim Keyser.