The University of Phoenix Just Took a Huge Blow

October 24th 2015

Alex Mierjeski

The parent company of the University of Phoenix—the nation's largest for-profit college—announced its fourth-quarter earnings Thursday, revealing substantial losses for the institution.

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The news comes just weeks after the University of Phoenix, which reported a loss of of more than $18.5 million, this quarter, was suspended from a government tuition-assistance program after underhanded recruiting and marketing techniques used on military service members and veterans came to light. During that same time period last year, Apollo Education Group reported a profit of $29.8 million, Business Insider reports.

high cost of college

The company also had its quarterly earnings drop by 51 percent compared to last year, and its revenue dip 13.8 percent. In a call Thursday, Apollo CEO Greg Cappalli said that the University of Phoenix would be expanding international reach, putting a focus on certificate programs, and making the school "smaller but better," Business Insider notes.

The changes and financial declines come as the school, and the for-profit college model in general, face increasing scrutiny for deceptive advertising and marketing, low graduation rates, and producing less-than-qualified graduate for the workforce, among other things. This month, the school was removed from the Department of Defense's (DoD) list of tuition-assistance-eligible colleges after being observed turning events such as resume workshops into de facto marketing campaigns, and handing out unofficial military insignia memorabilia at recruitment events for veterans.

"No institution is completely insulated from mistakes," Cappelli said on a call Thursday, in reference to the company's recent blunders. The school's problems seem to be racking up, however: it is under investigation by the Federal Trade Commission for deceptive marketing, and as Business Insider notes, degree program enrollment has dropped from 233,500 to 190,700. 

The school will also have to at least partially restructure its business model since it can no longer recruit military personnel, per the DoD: a federal mandate blocks for-profit institutions from getting more than 90 percent of revenue from federal student aid programs, but funds through the DoD assistance program did not count towards that limit.

Perhaps it's no wonder the school will focus on smaller class sizes.

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