The University of Phoenix agrees to a $50 million settlement over false advertising claims
The University of Phoenix and its parent company have agreed to pay $50 million in cash and forgive $141 million in student debt to settle Federal Trade Commission allegations of misleading advertising.
The deal, announced on Tuesday, settles a dispute over an advertising campaign the for-profit college launched in 2012 to tout partnerships with companies including Microsoft, Twitter and Adobe. It suggested the school worked with these companies to create job opportunities for students, although no such agreement existed, investigators found.
The Federal Trade Commission said the settlement was the largest the agency had ever reached against a for-profit college.
“Students making important decisions about their education need facts, not fantasy jobs that don’t exist,” said Andrew Smith, director of the Federal Trade Commission’s Consumer Protection Bureau.
The University of Phoenix said in a statement that much of the dispute centered on a single advertising campaign that ran from 2012 to 2014. She said she agreed to the deal “to avoid any further distraction from mentoring students.”
“The campaign took place under previous ownership and was completed before the FTC’s investigation began. We continue to believe that the university acted appropriately,” the company said.
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The Apollo Education Group owns the University of Phoenix. Based in Arizona, the for-profit chain of colleges has 55 campuses across the country and educates thousands of students through its online programs. It is the nation’s largest recipient of GI Bill educational benefits for military veterans.
As part of the settlement, the University of Phoenix and Apollo will forgive all remaining debt for students who first enrolled between October 1, 2012 and late 2016. Borrowers will receive letters telling them they no longer owe the school any payments. The school is also prohibited from making false claims about its relationships with any company or employer.
The FTC says the $50 million payment will be used to help consumers misled by the ads.
According to the FTC’s complaint, the University of Phoenix created the 2012 advertising campaign to differentiate itself from the competition as the chain’s enrollments were declining. After conducting market research, investigators found that the chain implemented a promotional strategy that ties the school to successful career outcomes. The campaign was called “Let’s Get To Work!”.
In a television commercial that aired in 2012, a frustrated driver weaves through a crowded parking lot in search of a space. As one narrator notes that the University of Phoenix is working with companies “to create options for you,” suddenly cars are being lifted out of parking lots and replaced with logos from companies like Microsoft and the American Red Cross.
Other TV, radio, and web ads have boasted similar ties to corporate partners like AT&T, Hitachi, and Avis. In a 2013 radio ad, the University of Phoenix said that companies like AT&T and Adobe “help us shape our curriculum so that today’s classes prepare you for tomorrow’s jobs.” Investigators said that was not true.
Instead, many of the companies touted as corporate partners were actually part of the University of Phoenix’s “Workforce Solutions” program, which provided its employees with reduced tuition in exchange for the companies’ support in sponsoring the school.
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Some companies asked to participate in the ads objected to the way they were portrayed, investigators noted. For example, when approached about being part of the parking lot display, Staples officials said it incorrectly made it sound like they were helping lead the school’s curriculum. In the end, the company did not participate.
Even some senior University of Phoenix officials objected to the ads. In 2012, a senior vice president complained to the chief marketing officer that Adobe’s use in the parking lot display was “smoke and mirrors,” investigators found. “You are not a partner,” the vice president wrote. “We may do business with them, but nothing academic.”
The settlement was welcomed by some education advocacy groups, including Veterans Education Success, which works to support military veterans. Carrie Wofford, the group’s president, thanked the FTC for their work.
“The FTC’s findings should shock every patriotic American,” she said. “Enough is enough. It’s time to stop the cupping of America’s veterans and soldiers by predatory colleges.”