Grand Canyon University faces $37.7M fine for alleged deception about costs

PHOENIX — Grand Canyon University is facing a $37.7 million fine for allegedly misleading graduate students about costs for several years, the U.S. Department of Education’s Federal Student Aid office announced Tuesday.

The Phoenix-based private Christian university said it “categorically denies” any wrongdoing and vowed to “defend itself from these false accusations.”

A Federal Student Aid (FSA) investigation determined that GCU misled more than 7,500 former and current students about doctoral program costs as far back as 2017.

FSA concluded that GCU’s “fine print disclosures” weren’t prominent enough to prevent students from being deceived.

Today, Federal Student Aid fined Grand Canyon University $37.7 million for deceiving thousands of students about the cost of their education. Read more about the steps Federal Student Aid is taking to hold this school accountable and protect students:https://t.co/P2K4Wh0uls

— Richard Cordray (@FSACOO) October 31, 2023

“GCU’s lies harmed students, broke their trust and led to unexpectedly high levels of student debt,” FSA Chief Operating Officer Richard Cordray said in a press release. “Today, we are holding GCU accountable for its actions, protecting students and taxpayers and upholding the integrity of the federal student aid programs.”

How did Grand Canyon University allegedly deceive students?

Grand Canyon University has more than 100,000 students, mostly in online programs. Roughly 20,000 students are enrolled at its west Phoenix campus on Camelback Road between 31st and 35th avenues.

GCU allegedly advertised doctoral program costs at $40,000 to $49,000 while knowing that less than 2% of graduates completed their degrees within that price range.

Citing the school’s data, FSA said 78% of the graduates spent $10,000-$12,000 more than advertised.

The university was given until Nov. 20 to request a hearing about the punishment or respond with written material indicating why the fine shouldn’t be imposed.

How is GCU responding to accusations and fine?

Grand Canyon issued a detailed statement refuting the allegations.

“Grand Canyon University categorically denies every accusation in the Department of Education’s statement and will take all measures necessary to defend itself from these false accusations,” the statement says.

The school argued that its disclosures were more displayed more prominently than FSA portrayed.

“In fact, we believe our disclosures related to continuation courses are more extensive than other universities, yet only GCU is being targeted by the Department [of Education],” the rebuttal says.

A week before the fine was announced, GCU President Brian Mueller sent a letter to Education Secretary Miguel Cardona that said the school was preparing a proposed resolution to their disputes.

“There has to be a way for you and I to sit down and discuss these matters in a rational and productive way, especially given our shared visions on the major challenges facing higher education,” the letter says.

GCU, Department of Education in ongoing dispute

The nation’s largest Christian university has been at odds with the Department of Education for some time.

GCU sued DOE in 2021, accusing the agency of failing to acknowledge the school’s nonprofit status for the purposes of federal student financial aid.

On Oct. 5, GCU posted a lengthy statement on its website accusing the DOE and Federal Trade Commission officials of engaging in a coordinated effort to harm GCU with frivolous accusations as retaliation over the lawsuit.

GCU, which hasn’t raised its tuition in 15 years, said it tried to negotiate with the DOE and only filed its lawsuit when it became clear the agency wasn’t going to change its opinion.

“And they started opening up these investigations,” Mueller told KTAR News on Oct. 5. “They gave no reason for them, there weren’t student complaints.”

What is the history of Grand Canyon University’s nonprofit status?

GCU operated as a nonprofit institution from its founding in 1949 to until 2004, when it almost was forced to close because of financial difficulties.

An investor put up money to keep the school afloat, which led to a period of sustained growth. GCU completed the process of reverting to nonprofit status in 2018.

“Basically, everybody blessed that except the Department of Education,” Mueller said during his Oct. 5 interview with KTAR News. “They said they were going to keep a for-profit tag on us and treat us differently.”

What other conditions must GCU adhere to?

In addition to the monetary punishment, the largest ever handed down by the DOE, GCU was given new conditions it must meet to continue receiving federal money.

GCU will be barred from making “substantial misrepresentations” about the cost of doctoral programs, and it must report any other investigations or lawsuits related to its conduct. It must also send a notice to current doctoral students telling them how to submit a complaint to the Education Department.

For the past four years, GCU has disbursed more federal student aid than any other U.S. institution, the DOE said.

The Biden administration is issuing the punishment amid a broader push for accountability among U.S. universities.

The DOE recently finalized a new regulation that could cut federal funding to for-profit college programs that leave graduated unable to repay loans, and the agency plans to give students and families more information about outcomes from all colleges.

KTAR News 92.3 FM’s Balin Overstolz McNair and The Associated Press contributed to this report.

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