To most Americans, colleges like Grand Canyon University look pretty benign. But not to the Federal Trade Commission. Until recently, the FTC looked at this Phoenix-based institution and many others like it and saw a big target.
Fortunately, its yearslong assault against GCU seems to have failed. Last month, the FTC dropped its lawsuit against the school, “ending years of coordinated lawfare by government officials” against a Christian university that had once been a for-profit institution.
Yes, Grand Canyon’s alleged sin was that it had once earned profits… by meeting students’ educational needs, no less.
Then there’s the Center for Excellence in Higher Education. In May of this year, a Utah jury exonerated it over a technical violation of Department of Education regulations. But it had already closed its colleges due to a long train of persecution by the department and by Colorado’s assistant attorney general. Although it was a nonprofit school, its own transgression of leftist ideology was that it had bought for-profit colleges long before.
Even though the center had converted them to nonprofit schools, an anti-profit animus on the Left remains strong. But for-profit colleges deserve equal treatment.
In my new Heritage Foundation report, I explain the Center for Excellence in Higher Education’s ordeal and the broader story of unequal treatment of the “proprietary” sector.
When public and nonprofit colleges have low graduation rates and low return on investment for their degrees, these colleges tend to escape scrutiny and criticism. Appropriators, regulators, and accreditors usually keep their heads in the sand. But when the focus is on a for-profit college, anti-market forces are quick to punish the college or even blame capitalism itself.
The story goes back decades. By 1992, legislators had concluded that easy money for federal student aid — highly subsidized student loans that had no relation to future earnings or the kind of risk analysis used for loans in the private sector — had a perverse effect on America’s colleges. Schools were heavily recruiting new students who weren’t prepared to succeed.
In response, Congress amended the Higher Education Act to prohibit any “incentive payment based directly or indirectly on success in securing enrollments or financial aid.” All participating colleges, public or private, still follow this rule as a condition of access to Department of Education programs.
This provision interfered with a free market in enrollment. Congress treated every college as a potential fraudster. Moreover, this provision gave the Department of Education a new tool to target proprietary colleges.
In 2014, the Department of Justice partly joined a False Claims Act lawsuit alleging that Stevens-Henager College, one of the colleges owned by the Center for Excellence in Higher Education, was out of compliance with the ban on enrollment incentives.
This was one of many tools that the federal government used against proprietary colleges. In the case of GCU, the Department of Education refused to accept that the university had become a nonprofit school.
When the Stevens-Henager College case finally went before a jury this spring, the question was whether the college knew it was out of compliance with the latest version of the rules against incentive payments and, if so, whether that noncompliance triggered federal liability.
The jury decided for the college, but it was too late.
From delayed approvals to requiring unreasonable “letters of credit” to weaponizing the ban on enrollment incentives, the process was sufficient punishment to put the Center for Excellence in Higher Education out of business.
Fortunately, Grand Canyon University has survived the federal onslaught.
The government persecutors have been egged on by nongovernmental actors as well. Arnold Ventures and the Institute for College Access and Success have worked against the for-profit sector for years. Antagonists spin minor, technical violations into enterprise-level “consumer protection” scandals.
The legal process demonstrated that the Center for Excellence in Higher Education’s infractions were indeed minor, but critics have pursued a hyperventilating outrage narrative.
Next, watch for developments in the center’s 2022 lawsuit against the federal government for ill-treatment.
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Meanwhile, the broader saga involves implementing the One Big Beautiful Bill Act, which brings accountability to all colleges participating in federal student aid programs. Degree programs that fail a minimum income test will lose access, whether the institution is proprietary or not.
We may finally see some equal justice in the higher education sector.
Adam Kissel is a visiting fellow for higher education reform at the Heritage Foundation.