Grand Canyon University, already fined $37.7M, faces new federal inquiry

PHOENIX — Another front has opened in the ongoing battle between the federal government and Phoenix-based Grand Canyon University, which already faces a fine of nearly $40 million.

The country’s largest Christian university announced Friday that the U.S. Department of Veterans Affairs (VA) has initiated a risk-based audit.

GCU previously accused the Department of Education, VA and Federal Trade Commission (FTC) of retaliating against the school for suing the DOE over its nonprofit status three years ago.

The latest audit is the fifth federal action, and second by the VA, launched since GCU sued the DOE in February 2021. Most recently, the FTC filed a lawsuit in late December accusing GCU of deceptive advertising and illegal telemarketing.

“It started with the Department [of Education], who said that we’re going to do an investigation … and they didn’t say why,” GCU President Brian Mueller told KTAR News 92.3 FM’s The Mike Broomhead Show on Friday. “They didn’t say your debt levels are too high, your default rates are too high, they didn’t say why. It was a fishing expedition.”

The school said it successfully refuted allegations of misleading marketing tactics in April 2023 after a previous VA audit.

The VA didn’t respond to an email requesting a response before this story was published.

Grand Canyon University already faces fine of nearly $40 million

In October, the DOE’s Federal Student Aid (FSA) office announced it was fining the school $37.7 million after an investigation determined that more than 7,500 former and current students were misled about doctoral program costs as far back as 2017. It was the largest fine of its kind ever issued by the DOE.

FSA investigators concluded that GCU’s “fine print disclosures” weren’t prominent enough to prevent students from being deceived. The school refuted the findings and has appealed the ruling.

What is the history between GCU and federal agencies?

When GCU sued DOE in 2021, it accused the agency of imroperly 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 FTC officials of engaging in a coordinated effort to harm GCU with frivolous accusations as retaliation over the lawsuit.

GCU 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.

What is the history of GCU’s nonprofit status?

Grand Canyon University has about 118,000 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 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.

The state of Arizona, the Higher Learning Commission and the IRS have recognized the nonprofit status. However, GCU said it is being targeted by the DOE as if it were a for-profit institution.

“There is no stated reason that Grand Canyon University is being investigated,” Mueller said Friday.

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