Arizona under pressure over Ashford student loan debt

 The acquisition of the University of Phoenix by the University of Idaho has taken place during a challenging period, drawing attention to a similar acquisition in Arizona that has resulted in costs and political accusations. In 2020, the University of Arizona began the process of purchasing Commercial Ashford University, which was finalized last year. However, the initiative has faced criticism due to declining enrollment, budgetary spending, and student loan defaults, prompting demands for answers from the state’s governor.

An additional setback for the University of Arizona came when the Biden administration canceled $72 million in federal student loan debt owed by over 2,300 former students at Ashford. This move raised concerns about the quality of education, staffing, and high dropout rates at Ashford, with the suggestion that the University of Arizona should bear the responsibility for the debt. The renamed University of Arizona Global Campus, formerly Ashford University, is estimated to have incurred losses of $2.5 million in the current fiscal year, further exacerbating budget challenges resulting from a $240 million deficit.

The University of Arizona attributed this significant deficit to unforeseen expenditures in athletics and student financial aid, leading to criticism from the state’s Democratic governor, Kathy Hobbs, who denounced a lack of leadership at the university. Governor Hobbs demanded an explanation regarding the assumptions and verifications made in the Ashford University purchase. In response, the University of Arizona acknowledged the challenges faced by Ashford and claimed that the $72 million federal student loan debt was not the responsibility of Ashford but rather accumulated before the sale.

The situation mirrors that of the University of Idaho, which has been working on acquiring the University of Phoenix throughout the past year. The University of Phoenix, once the largest online university in the nation, has faced significant challenges similar to Ashford due to policies governing federal student aid. The U.S. Department of Education has proposed that the federal government cover nearly $37 million in loan support for over 1,200 students who were misled about the value of a University of Phoenix education. It remains unclear what potential liability the University of Idaho would assume if it completes the purchase of the University of Phoenix.

University of Phoenix has indicated its intention to vigorously contest the students’ attempt to hold them responsible for repaying the government’s debts through legal means. These cases in Arizona and Idaho represent just a few examples of attempted and completed acquisitions in the United States in recent years, driven by the belief that struggling for-profit institutions can offer government agencies a rapid entry into the lucrative and fast-growing online education market. However, these cases also underscore the risks involved in universities undertaking such deals. Robert Shireman, a senior fellow at The Century Foundation and former deputy under the Obama administration’s Department of Education, emphasized the dangers of excessive secrecy in these agreements, which hindered proper scrutiny.