After 7-year battle, GCU’s nonprofit status recognized by Department of Education

PHOENIX – Grand Canyon University has emerged victorious in its lengthy battle with the U.S. Department of Education over its return to nonprofit status.

GCU, the nation’s largest Christian university, announced Monday that the federal government has officially recognized its nonprofit status, ending a dispute that began seven years ago.

“We’ve been locked in this struggle with the Department of Ed since 2018, which has been very unfortunate. But we’ve operated as a nonprofit all that time,” GCU President Brian Mueller told KTAR News 92.3 FM.

With the nonprofit issue settled, GCU and its students can look forward to benefits such as:

• Expanded access to private scholarships
• Increased access to partnerships
• Eligibility for government relief funds
• Access to nonprofit-specific grant funding

Why did GCU switch back to nonprofit status?

GCU was founded as a nonprofit school in 1949 but switched to a for-profit model in 2004 after nearly going out of business.

“And that gave us the capital necessary to build this thing out, and it’s been unbelievably successful beyond our wildest imaginations,” Mueller said. “And in 2018, we had a chance to go back as a nonprofit university, and we thought that was the best long-term future for the institution.”

The IRS, Higher Learning Commission, state of Arizona, Arizona Private Postsecondary Board and NCAA all recognized the school’s nonprofit status years ago. The IRS even affirmed the school’s tax-exempt status earlier this year after conducting an audit.

However, the Department of Education wouldn’t accept the change for the purpose of federal financial aid, prompting the school to file a lawsuit in 2021 after failed negotiations.

“Ninety-nine percent of our students didn’t even know about the conflict and about them labeling us as a for-profit institution, even though we were operating as a nonprofit,” Mueller said. “But it just clears up that confusion and it clarifies officially our status, which is going to be helpful to us going forward.”

GCU president says school ready to move forward after expensive battle

GCU can now move on after enduring a series of conflicts with the federal government, including a $37.7 million fine for allegedly misleading graduate students about costs. The Department of Education rescinded the fine in May of this year and cleared the school of wrongdoing.

Mueller said the university spent millions of dollars in recent years defending itself from multiple investigations into its practices, none of which found any violations.

“Our legal fees during this time were over $20 million. But extra staff time and the moneys allotted to that was probably easily $20 million, as well,” he said.

With its legal issues behind it, GCU is positioned to prosper, Mueller said.

“We are unbelievably excited about the next 10 years because of this university being where it is in this dynamic economic environment,” he said.

KTAR News 92.3 FM’s Shira Tanzer contributed to this report.

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