Grand Canyon U takes nonprofit fight to the courts as Biden presidency nears

by Jeremy

Dive Brief:

  • Grand Canyon University says it will sue the U.S. Department of Education over the agency’s 2019 decision to reject the for-profit institution’s request to become a nonprofit for participation in federal student aid programs.
  • In a press release Thursday, the university said that it made several changes to address concerns that the department expressed in its 18-page letter in 2019 denying the status change.
  • A lawsuit isn’t “totally a shock,” said Jeff Silber, a BMO Capital Markets analyst who covers the company, citing the department’s timing.

Dive Insight:

The university split from Grand Canyon Education in mid-2018, becoming a standalone institution that pays its former parent company to provide various educational services. The publicly traded firm was seeking to shift from being a college operator to an education services provider.

Grand Canyon U takes nonprofit fight to the courts as Biden presidency nears

In January 2018, the university sought the department’s preliminary assessment of its request to separate from GCE and be classified as a nonprofit for federal aid participation. Such a review would inform the institution, typically before it moves ahead with the transaction, of any limitations the department would place on its ability to continue accessing federal financial aid. Title IV funding accounted for 72% of the university’s revenue in 2020.

The university and GCE closed the deal in July 2018, saying they hadn’t received a decision from the agency within the expected timeframe.  The department didn’t issue its formal decision until November 2019, at which point it denied the university nonprofit status, though it accepted the request to separate from GCE. Its comments at the time focused on the new relationship between GCE and the university, calling the latter a “captive client.” The department also took issue with the university’s president being CEO of GCE.

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