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University of Idaho needed State Board OK to acquire U of Phoenix. See what it decided

The Idaho State Board of Education voted unanimously Thursday to approve the University of Idaho’s plan to buy the University of Phoenix for $550 million — just one day after the deal became public.

The State Board gave its approval at a special meeting with nearly no public input or debate.

The University of Phoenix is a predominantly online school with about 85,000 students, according to an FAQ page about the acquisition on U of I’s website. U of I plans to purchase the university through a not-for-profit entity it created called NewU.

U of I President Scott Green said at the meeting that the University of Phoenix first approached Idaho’s land grant university in March. State Board President Linda Clark said the members held three meetings regarding the possible acquisition in executive session, meaning the discussions were not open to the public.

Green said a “very strict” nondisclosure agreement prevented university leadership from publicly disclosing the bid.

“We didn’t go into this lightheartedly,” Green told the State Board. “The value proposition to the state of Idaho is the opportunity to enhance affordable online education to the entire state.”

Idaho’s deal came less than a month after the University of Arkansas System board of trustees voted to reject a similar measure to acquire the University of Phoenix, Inside Higher Ed reported in April.

U of I acknowledged on its website that the deal posed “reputational issues,” even noting that the University of Phoenix “has been criticized, and sued, for business decisions leading to millions of dollars in fines and punitive actions by regulators.”

In 2019, the school had a lawsuit settlement over deceptive advertising that totaled $191 million.

The college once enrolled over 450,000 students and had physical locations across the country, including in Meridian, but those have mostly shuttered as the school faced sharp declines in enrollment. According to a U.S. Department of Education scorecard, the University of Phoenix has a graduation rate of just 27%, roughly half the national average.

State Board member Kurt Liebich said “we’ve received a number of letters” at the office since news of the transaction was announced Wednesday.

“I was trying to put them into buckets of areas of question or concern, and there were three that jumped out at me,” he said. “One is, are we taking on reputational risk if we do this transaction because of some of the prior missteps University of Phoenix made?”

He also said the State Board received letters from U of I faculty who questioned why they were left in the dark. Liebich said others imparted concern about the lack of opportunity for public input.

Green tried to rebuff worries about damage the deal could cause to U of I’s standing.

“We understand there’s been problems in the past, and people were rightly upset with them for past behaviors, but it is our opinion in dealing with them and going through our due diligence that they’re on a very different path now,” Green said. “There is some reputational risk there because all private institutions are under attack. We’re not afraid of it because we are comfortable with who they are, and we know we can help them.”

He also made comparisons to Purdue University’s acquisition of the formerly for-profit Kaplan University in 2017, which Purdue similarly claimed would allow it to extend its reach into online and adult education, according to reporting from The Washington Post.

The University of Phoenix will be transitioned from a for-profit institution to a not-for-profit with the U of I deal.

Green said he doesn’t believe Purdue’s acquisition of Kaplan tarnished its reputation. Purdue ranked No. 51 in the latest college rankings done by U.S. News & World Report. The University of Idaho ranked No. 176.

“I don’t think it’s diminished them one iota,” Green said of Purdue, long known for its outstanding engineering and science programs.

To acquire the University of Phoenix, U of I formed NewU to purchase all assets. That includes the university’s digital education platform and a few remaining leases for physical locations. According to U of I’s website, a few of the school’s campuses remain open but are soon expected to transition completely online.

U of I said it plans to keep the University of Phoenix’s leadership and staff on for at least a year with similar pay and benefits. The university’s Phoenix campus, which houses administrative offices, will not close.

The transaction is expected to be finalized by early 2024. The universities still need approval from U of I’s accreditor, the Northwest Commission on Colleges and Universities, and University of Phoenix’s accreditor, the Higher Learning Commission.

The purchase price is $550 million, but the seller would provide $200 million in cash that would transfer to the not-for-profit entity once the transaction is complete, according to U of I.

U of I said it would finance the deal through both nontaxable and taxable bonds, which would be separate from the money used to fund the university’s budgets. Idaho taxpayers would not be involved in paying for the acquisition, but the university has agreed to fork over $10 million a year should the not-for-profit entity running University of Phoenix miss payments on debt.

Green said the acquisition would allow U of I to diversify its revenue streams and improve access to higher education for working adults in the state. More than 600 students in Idaho are enrolled in the University of Phoenix, according to Green.

State Board member Cally Roach voiced her support for the deal along with others.

“Many adult learners or people out in the workforce don’t have the opportunity to stop their careers and go to the University of Idaho or another university, and they have to continue to work, so this type of situation is a great opportunity for many adult learners,” Roach said.

Clark said that the move would “level the playing field” and that someone’s address shouldn’t determine their access to various programs and training.

“As we face a national enrollment cliff in traditional students and increased demand from adult learners, this brings together two institutions that complement each other and share a vision for student success,” U of I said on its website.

Before the vote, Liebich echoed concerns of an impending enrollment cliff. He said the acquisition would allow U of I to be innovative in the way it approaches a shrinking market for higher education as Idaho’s go-on rate declines.

The transaction is also expected to bolster the university financially. U of I said on its FAQ page that the University of Phoenix acquisition will provide $10 million in annual supplemental education funding to the Moscow school, an amount it expects to grow over time.

“The higher education landscape is changing,” Green told State Board members at the special meeting. “The way we engage with students is changing. As a land grant institution, it is imperative that we meet the mission that has shaped us for nearly 140 years, as well as embrace new ways to learn and meet the needs of our students for the next 140 years.”

University of Idaho has a plan to acquire University of Phoenix. Here’s what we know