University Of Phoenix Will Cancel $141M In Student Loan Debt As Part Of Settlement

Former University of Phoenix owner Apollo Education Group must pay $191 million to settle federal charges that the school deceptively marketed job opportunities to students, suggesting placement offices had job contacts at AT&T, Twitter and other companies, the Federal Trade Commission announced Tuesday.

Under the settlement, Apollo Education will pay $50 million in cash to the agency and spend another $141 million to cancel the debt acquired by enrolled students who were deceived by the marketing, federal officials said. The FTC said Apollo Education's $191 million sets an agency record. 

"This is the largest settlement the commission has obtained in a case against a for-profit school," said Andrew Smith, FTC consumer protection bureau director. "Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist." 

The FTC said in its original complaint that the University of Phoenix created television and radio ads that hinted at partnerships with Microsoft, Adobe and Yahoo. The ads, the FTC said, gave the false impression that university officials worked with those companies and others to create jobs specifically for University of Phoenix students. The television ads ran from late 2012 to early 2014 and was created while the school was owned by Apollo Education. 

The University of Phoenix and Apollo Education were bought by private investors in 2016 for $1.1 billion  

A spokesperson said University of Phoenix is not admitting any wrongdoing. The school said in a statement that the $191 million charge will not have a significant financial impact on its operations.  

"We continue to believe the university acted appropriately," according to the statement. "This settlement agreement will enable us to maintain focus on our core mission of improving the lives of students through career-relevant higher education, and to avoid any further distraction from serving students that could have resulted from protracted litigation." 

In one television ad, actress Phylicia Rashad narrates as a prospective student navigates through a crowded campus parking lot. In the scene, parked cars are lifted out of their spaces and replaced with logos of major companies and Rashad says "at University of Phoenix, we're working with a growing list of almost 2,000 corporate partners, companies like Microsoft, American Red Cross and Adobe, to create options for you." 

"In reality, the companies referenced in the parking lot advertisement did not have direct hiring relationships with the university or Apollo to create job options for students or to develop curriculum," the FTC said in its complaint. 

Those companies weren't corporate partners, the FTC said; rather, they were "workforce solutions partners," companies whose employees got a tuition discount at University of Phoenix in exchange for promoting the school's academic programs. 

Students enrolled between October 1, 2012, and December 31, 2016, will automatically have their outstanding balances at the university forgiven and do not need to contact the university or the commission to begin the process, the FTC said. 

Joshua Sexton, a University of Phoenix alumnus who graduated last month after starting in August 2016, is one of the students who will have his debt forgiven. The Orange County, California, resident graduated with a bachelor's degree in business. Sexton, 36, said his time at two satellite campuses were positive, in part because admissions and financial aid specialists recognized that he was a combat veteran in the U.S. Marine Corps. 

"They were attentive and made sure I knew what I was getting myself into and they always asked how my classes were going," Sexton said.  

Sexton, an alum that the University of Phoenix provided to CBS News, said "I don't believe their intent was to mislead people, but I understand what the perception was [for some viewers of the ad]. For me, it really didn't hurt me. I didn't say 'I need to hide my degree or take it off my LinkedIn page'." 

First published on December 10, 2019 / 12:05 PM

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