$80.5 Million Settlement For University of Phoenix Wrongdoings

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The University of Phoenix is the largest private educator in the country and the most well known of the many online educators out there. But the company who owns the school, the Apollo Group Inc., is often a lightning rod because some people see the school’s way of educating adults as being a challenge to traditional higher education practices.

Online Education

Online Education Choice: University of Phoenix

Online Education Choice: University of Phoenix

No matter, online education is here to stay and many of the top schools now offer classes on the internet. The University of North Carolina at Chapel Hill, Rutgers University, University of Texas at Austin and the University of Notre Dame are just some of the schools actively participating in online learning.

But it isn’t Phoenix’s study methods that are coming into question of late, rather it is the way that it performs its revenue accounting practices. The Security and Exchange Commission (SEC) is taking its second look at Phoenix this year with an eye toward the school’s sales particularly since 90% of the school’s funding comes from federal guaranteed student loans.

Revenue Recognition

Forbes magazine says that the “revenue recognition” matter takes issue with how Apollo determines when a student drops out of a class and how much income Apollo can leave on its balance sheet, and for how long. Apollo says it stops recognizing revenue when a refund is processed for a student that has dropped a class, according to attendance records.

Phoenix is also the subject of a whistleblower case where two former enrollment counselors took issue with the school’s recruitment practices. It is illegal for for-profit schools to pay recruiters and counselors based on the number of students they enroll in classes. The result of that action is that unqualified students gain admittance, with their college costs paid by federal student loan funds.

Big Settlement

As a result of whistleblower action, Apollo said on Tuesday it took a charge of $80.5 million in the fourth quarter for litigation settlement relating to the suit which was filed in the U.S. District Court for the Eastern District of California. Though the settlement seems high, the original request was for $1.5 billion.

Shares of Apollo Group stock fell by 15% with the news of its pending settlement.

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Categories: Campus News