Dive Brief:
- The U.S. Department of Education has recognized Grand Canyon University as a nonprofit, marking the end of a lengthy and contentious dispute between the institution and the federal government that began in 2019.
- Previously designated as a for-profit, Grand Canyon University split off from the publicly traded corporation Grand Canyon Education in 2018. The next year, the Education Department said it would continue treating the university as a for-profit given its deep financial relationship with GCE.
- In a press release Monday, the university said that its solidified nonprofit status would expand student access to private scholarships, make it eligible for government relief funds and certain grant funding, and increase access to partnerships with donors, school districts and other groups.
Dive Insight:
Grand Canyon University operated as a nonprofit from its founding in 1949 until 2004, when officials sold the Christian institution to private investors to avoid bankruptcy. It then operated as a for-profit for years, though it attempted to regain nonprofit status when it split from GCE.
Today, the corporation and institution are still deeply tied to each other. GCE provides the university with a wide swath of services in return for a sizable chunk of its revenue.
The company’s suite of services includes everything from recruiting faculty and scheduling their classes to student counseling and human resources operations. In 2019, the Education Department alleged that GCE pocketed 60% of the university’s tuition and free revenue despite performing only 28% of the services necessary for the institution to operate. At the time, the university said the 28% figure was based on faulty calculations.
The university remains by far GCE’s largest client. Grand Canyon University accounts for roughly 97% of all students GCE provides services for, according to the company’s latest annual financial report with the U.S. Securities and Exchange Commission. The filing also lists a host of potential financial risks to the company linked to outcomes at Grand Canyon University. Moreover, the company’s CEO, Brian Mueller, is also president of the university.
Nonetheless, both entities have fiercely argued that Grand Canyon University is an independent nonprofit and should be designated as such by the federal government.
The Education Department under the first Trump administration continued treating the university as a for-profit despite the IRS accepting the nonprofit designation. Last year, though, a federal appeals court agreed with Grand Canyon University, overturning a lower court order and ruling that the Education Department had used the wrong legal standard in rejecting the university’s nonprofit status.
Even before the department’s latest decision to grant nonprofit status, it signaled its support of the university. In May, the agency dropped a $37.7 million fine it had levied against the university under the Biden administration over allegations the institution misled thousands of students about the costs of its doctoral programs.
The Education Department’s Office of Hearings and Appeals dismissed the case “with no findings, fines, liabilities or penalties of any kind,” the university said at the time.
Then in August, the Federal Trade Commission dropped its lawsuit against GCE. That agency’s complaint initially included allegations about Grand Canyon University improperly marketing itself as a nonprofit, but a federal judge dismissed those claims in March..
On Monday, Mueller expressed gratitude for the Education Department’s decision to officially designate it a nonprofit after six years of legal wrangling.
“This decision removes the cloud of confusion over our nonprofit status and allows us to put our complete focus and resources on our mission to provide affordable, Christian higher education to students from all socioeconomic backgrounds,” Mueller said in a statement. “We look forward to working with the Department in a cooperative manner moving forward and being part of the conversation to address the many challenges facing higher education.”
