Regulators Investigating University Of Phoenix’s Business Practices

Apollo Education Group, owners of the country’s largest for-profit college – University of Phoenix – is the latest target for federal regulators set on reining in the for-profit education industry for engaging in allegedly deceptive marketing practices.

The for-profit chain, which also counts Western International University, Carnegie Learning and College for Financial Planning among its other schools, announced through a Securities and Exchange Commission filing [PDF] Wednesday that it is now under federal investigation for engaging in possible deceptive and unfair business practices.

According to the filing, Apollo received a Civil Investigative Demand from the Federal Trade Commission on Tuesday requiring the company to provide all information regarding business practices at the University of Phoenix from January 2011 to present.

“The demand indicates that it relates to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or education accreditation products or services,” the filing states.

The information supplied by Apollo must include details about marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment and other compliance matters at the University of Phoenix.

Apollo notes in the filing that it is evaluating the FTC’s demand and plans to cooperate fully with regulators.

The investigation into Apollo and the University of Phoenix comes as the company goes through a “transition,” as CEO Greg Cappelli told investors back in March.

The online school has seen enrollment falter in recent years, as the for-profit industry has come under greater scrutiny from regulators related to allegedly deceptive marketing practices like inflated graduation and job placement rates and aggressively pushing students into expensive private loans.

However, at the time of the March investor call, Cappelli blamed the continued enrollment decline on the transition the career college has undergone and a decrease in marketing expenditures.

“University of Phoenix is going through a transition, but we’re building a stronger foundation for future success,” Cappelli said on the call. “We’re working to build a much more competitive and efficient university for the long-term.”

Despite enrolling fewer students, the for-profit college – which operates mainly online and at several campuses around the country – continues to be the top recipient of federal student aid for veterans – collecting more than $488 million in tuition and fees from veterans since 2009. The school often sponsors large military education and employment events in hopes of attracting new enrollments.

A recent report from Reveal detailed how the company skirts some rules in order to showcase the school’s prowess to military members, in hopes of enrolling servicemembers.

Several recent investigations into practices at top for-profit chains have resulted in fines and even contributed the recent closure of once-prominent Corinthian Colleges Inc, the operator of Everest University, Heald College and WyoTech.

The company began its downward spiral last summer when the Department of Education withheld federal funding. The two parties reached an agreement in which CCI would sell several of its campuses. However, it was too late for the chain, and after selling nearly 60 campuses early this year, the company abruptly closed its remaining schools and filed for bankruptcy.

The investigation into the University of Phoenix and Apollo Group comes less than a month after new federal rules went into effect for any school with career training programs.

Under the rules [PDF], for-profit colleges will be at risk of losing their federal aid should a typical graduate’s annual loan repayments exceed 20% of their discretionary income, or 8% of their total earnings.

Discretionary income is defined as above 150% of the poverty line and applies to what can be put towards non-necessities.

So for example, say the typical recent graduate of a career education program earns $25,000. That student would need to average annual student loan payments less than $2,000, or the school would be at risk for losing federal financial aid.