Grand Canyon University announced earlier today that it has completed its conversion to nonprofit status, going back to the way the school operated when it opened in 1949.
The new nonprofit will continue to use the name Grand Canyon University and will focus on core academics for students, faculty and staff. Meanwhile, Grand Canyon Education, which sold the school to the nonprofit entity, will focus on providing back-office support functions such as marketing, admissions, and curriculum development for online offerings. The education service providers will also handle financial aid processing and strategic enrollment management.
“This arrangement furthers the ability for the university to continue to invest in educational infrastructure,” said Brian Mueller, who will serve as both president of the university and CEO of the educational services company. “The university has operated in many ways like a nonprofit in that almost every dollar made has been invested in faculty, classrooms, and supporting student learning. We’ll continue to do that as a nonprofit.”
Mueller noted that as a nonprofit school, faculty, and staff would now be able to apply for grants that support research. Certain functions regarding research are closed to for-profit schools, he said. One of the initial priorities for the new university will be to create a development office to pursue grants and other philanthropic giving, especially in the science, technology, engineering and math (STEM) areas.
Mueller also noted that students will continue to benefit from Grand Canyon University’s low tuition.
“We have not raised tuition on our traditional campus in 10 years,” he said. “This new operating form will continue to help us make higher education affordable to all socioeconomic classes of Americans.”
Full tuition for students attending school on-campus is $16,500, but a school spokesman said that 90 percent of students receive institutional scholarships that bring the cost down, on average, to $8,600 per year. Online tuition credit hours range from $400 to $600, depending on the program. Students pay $10,000 on average for the online offerings.
The school expects nearly 21,000 students to enroll on-campus for the fall semester and another 70,000 to partake in online courses.
For-profit colleges and universities have been under intense scrutiny in recent years over the amount of loan debt many students incur and the difficulty some graduates have obtaining jobs in their fields of study. The move to nonprofit entities has especially ginned up fervent opposition.
“Usually, a school that is nonprofit is safer for students because all of the tuition is dedicated to education and the ultimate decision-making is in the hands of a board without any financial interest,” said Robert Shireman, senior fellow at The Century Foundation. “Unfortunately, consumers cannot and should not trust Grand Canyon University’s nonprofit label. GCU is structured for the benefit of the investors, not for the benefit of the public or students.”
In an interview with InsideSources prior to a press conference announcing the conversion, Mueller said Grand Canyon has not paid dividends to investors. He also said the economic models of institutions should be judged on the quality of programs and learning outcomes.
Data from the U.S. Department of Educations shows that 25 percent of students attending recently converted nonprofit schools have defaulted on their loans whereas the rate is less than 8 percent at other nonprofit schools and 15 percent at for-profit schools. Jennifer Wang with The Institute for College Access and Success, which has been critical of for-profit schools and used that data in recent testimony against for-profit schools converting to nonprofits before the National Advisory Committee on Institutional Quality and Integrity, said that default rates from Grand Canyon University were not included in the data. The school’s press release announcing the conversion noted that its most recent cohort default rate is estimated to 6.2 percent.
Following the conversion, Grand Canyon University and Grand Canyon Education will have separate governing boards. The school’s press release said that no member of the university’s Board of Trustees has served in a management or corporate board role with the education services company. The school has a conflict of interest policy prohibiting trustees from having a financial interest in or role with the education company. Mueller is the only employee to have a dual role in each company, and the school said that is permitted under guidelines from the Higher Learning Commission.
Douglas A. Webber, associate professor of Economics at Temple University, briefly reviewed the materials issued from the university regarding the conversion. He said there is potential for conflict of interest with the university president serving as CEO of the services company. But it appears the school made “a real attempt to insulate other academic functions from [education company] shareholder interests.”
“There have been some for-profit institutions which have truly exploited students, but I never viewed [Grand Canyon University] as being one of those bad actors,” Webber said.
The Higher Learning Commission, which is the university’s regional accreditor, approved the conversion, as did the state regulator, the Arizona State Board for Private Postsecondary Education. The Internal Revenue Service has approved its application to operate as a 501(c)(3). The U.S. Department of Education will not approve of the change of control transaction – control of the school’s continued participation in federal Title IV student loan programs – until after the closing.