University of Phoenix Settles in Recruiting Violation Case

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From Inside Higer Ed comes news that Apollo group, the company that owns the for-profit University of Phoenix, has agreed to settle out of court and pay the U.S. government $67.5 million in a case that accused Phoenix of illegally compensating college recruiters. Apollo has also agreed to pay $11 million in legal fees.

In 2003 two former admissions personnel at Phoenix, Mary Hendow and Julie Albertson, brought a lawsuit against their former employer, charging that they were paid bonuses and gifts in recognition of the number of students they enrolled. The Higher Education Act prevents colleges from providing incentive compensation to recruiters based on the number of students they enroll because it puts federal student aid money at risk.

In a (curiously unreassuring) press release about the issue, Apollo group said:

“This agreement not only brings closure to a long-running dispute and enables the Company to avoid the uncertainty and further expense associated with protracted litigation, it opens the door for a more constructive partnership with our lead regulator, the U.S. Department of Education,” said Charles B. Edelstein, co-chief executive officer of Apollo Group.

As a result of the settlement the University of Phoenix does not have to admit misconduct with regard to recruiting compensation. Phoenix, like many for-profit schools, has long been accused of deliberately admitting more students than can successfully graduate in an effort to take advantage of federal funds. More than 85 percent of Phoenix’s revenue is derived from federal financial aid.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer