Dive Brief:
- The Federal Trade Commission on Friday dropped its lawsuit against Grand Canyon Education, an educational services company whose largest client is Grand Canyon University.
- The move ends roughly a year and a half of litigation over the consumer protection agency’s allegations that GCE deceived students about the cost of the university’s doctoral programs.
- In a short statement, the FTC’s three commissioners said they voted 3-0 to drop the case, citing court setbacks and the Trump administration’s decision to roll back a massive fine against Grand Canyon University over similar allegations.
Dive Insight:
Filed in late 2023, the FTC’s lawsuit centered on two primary allegations.
One was that Grand Canyon University marketed itself as a nonprofit but operated primarily for the benefit of GCE’s shareholders. The other was that the majority of the university’s doctoral students had to take continuation courses to complete their programs, increasing their time and costs well beyond what was advertised.
Both the FTC and the U.S. Department of Education called Grand Canyon University’s nonprofit status into question after the institution’s spinoff from GCE in 2018. Grand Canyon University remains GCE’s primary client, and the company’s CEO, Brian Mueller — who was also a defendant in the suit— also serves as president of the university.
In its complaint, the FTC noted that GCE was the sole provider of services related to student record management, curriculum, accounting, technology, financial aid, human resources, procurement, and faculty payroll and training.
“The fees GCE receives from GCU are not subject to any limit and are not proportionate to GCE’s costs for providing services,” the agency said, adding that the company receives 60% of the university’s tuition and fee revenue.
However, a federal judge dismissed the FTC’s claims against Grand Canyon University in March, ruling that, as a nonprofit, the university was beyond the FTC’s jurisdiction.
The decision came after an appellate court last year ruled that the Education Department had held Grand Canyon University to a higher standard than necessary under the law when it rejected its request in 2019 to be considered a nonprofit for purposes of federal financial aid.
The FTC’s case against GCE over deceptive marketing practices remained in place, however. Those allegations boiled down to the costs of Grand Canyon’s doctoral programs being driven up by continuation courses needed to satisfy dissertation requirements and complete degrees.
“Many students discover that GCU requires more funds or time than Defendants represented only after they have paid thousands of dollars in tuition and devoted years to GCU courses,” the FTC said in its original complaint. The agency also noted that many students, unable to afford to go on, dropped out before completion.
In March, the Education Department walked back a $37.7 million fine levied against Grand Canyon University during the Biden administration over similar allegations of misleading doctoral students.
In dropping the FTC’s case, the agency’s commissioners cited the Education Department’s move to rescind the fine, as well as the Internal Revenue Service’s affirmation in March of Grand Canyon University’s nonprofit status. All three of the current FTC commissioners are Republicans, after President Donald Trump fired the statutorily bipartisan agency’s two Democratic commissioners.
“In its reduced form, this case presents consumers very little upside relative to the cost of pursuing it to completion, especially given the developments chronicled above,” the commissioners said. “We view it as imprudent to continue expending Commission resources on a lost cause.”
Grand Canyon University lauded the decision, saying in a statement that it ended “years of coordinated lawfare by government officials under the Biden Administration against the largest Christian university in the country.”
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