Troubles Grow for a University Built on Profits

The University of Phoenix became the nation’s largest private university by delivering high profits to investors and a solid, albeit low-overhead, education to midcareer workers seeking college degrees. President William J. Pepicello says the university meets the needs of working students.

But its reputation is fraying as prominent educators, students and some of its own former administrators say the relentless pressure for higher profits, at a university that gets more federal student financial aid than any other, has eroded academic quality.

According to federal statistics and government audits, the university relies more on part-time instructors than all but a few other postsecondary institutions, and its accelerated academic schedule races students through course work in about half the time of traditional universities. The university says that its graduation rate, using the federal standard, is 16 percent, which is among the nation’s lowest, according to Department of Education data. But the university has dozens of campuses, and at many, the rate is even lower.

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The complaints have built through months of turmoil. The president resigned, as did the chief executive and other top officers at the Apollo Group, the university’s parent corporation. A federal court reinstated a lawsuit accusing the university of fraudulently obtaining hundreds of millions of dollars in financial aid. The university denies wrongdoing. Apollo stock fell so far that in November, CNBC featured it on a “Biggest Losers” segment. The stock has since gained back some ground. In November, the Intel Corporation excluded the university from its tuition reimbursement program, saying it lacked top-notch accreditation.

It adds up to a damaging turnaround for an institution that rocketed from makeshift origins here in 1976 to become the nation’s largest private university, with 300,000 students on campuses in 39 states and online. Its fortunes are closely watched because it is the giant of for-profit postsecondary education; it received $1.8 billion in federal student aid in 2004-5.

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