University of Phoenix to pay $50M settlement over FTC deceptive advertisement claims

The University of Phoenix and its parent company have agreed to pay $50 million in cash and cancel $141 million in student debt to settle allegations of deceptive advertisement brought by the Federal Trade Commission.

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The deal, announced Tuesday, settles a dispute over an ad campaign the for-profit college unrolled in 2012 touting partnerships with companies including Microsoft, Twitter and Adobe. It suggested the school worked with those companies to create job opportunities for students, even though there was no such agreement, investigators found.

The Federal Trade Commission said the settlement is the largest the agency has ever obtained against a for-profit college.

"Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist," said Andrew Smith, director of the Federal Trade Commission's Bureau of Consumer Protection.

The University of Phoenix said in a statement that much of the dispute focused on a single ad campaign that ran from 2012 to 2014. It said it agreed to the deal "to avoid any further distraction from serving students."

"The campaign occurred under prior ownership and concluded before the FTC's inquiry began. We continue to believe the University acted appropriately," the company said.

Apollo Education Group owns the University of Phoenix. The Arizona-based for-profit college chain has 55 campuses across the nation and teaches thousands of students through its online programs. It's the nation's largest recipient of GI Bill tuition benefits for military veterans.

Under the settlement, the University of Phoenix and Apollo will cancel all remaining debt for students who first enrolled between Oct. 1, 2012, and the end of 2016. Letters will be sent to borrowers saying they no longer owe payments to the school. The school is also barred from making false claims about its relationships with companies or employers.

The FTC says the $50 million payment will be used to help consumers who were misled by the ads. According to the FTC's complaint, the University of Phoenix created the 2012 ad campaign to distinguish itself from competitors as the chain's enrollment was falling. After conducting market research, investigators found, the chain adopted an ad strategy tying the school to successful career outcomes. The campaign was called "Let's Get To Work!" In one TV ad that aired in 2012, a frustrated driver weaves through a crowded parking lot looking for a space. As a narrator notes that the University of Phoenix works with companies "to create options for you," cars are suddenly lifted out of parking spaces and replaced with logos for companies including Microsoft and the American Red Cross.

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Other TV, radio and internet ads boasted of similar ties with corporate partners including AT&T, Hitachi and Avis. In one 2013 radio ad, the University of Phoenix said companies including AT&T and Adobe were "helping us shape our curriculum to make sure today's classes help prepare you to pursue tomorrow's jobs." Investigators said that wasn't true. Instead, many of the companies touted as corporate partners were actually part of the University of Phoenix's "Workforce Solutions" program that provided discounted tuition to their employees in exchange for the companies' help promoting the school.

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Some companies that were asked to participate in the ads raised objections about the way they were being portrayed, investigators found. When approached to be part of the parking lot ad, for example, Staples officials said it falsely made it sound like they were helping guide the school's curriculum. The company ultimately did not participate. Even some senior officials at the University of Phoenix took issue with the ads. In 2012, a senior vice president complained to the chief marketing officer that using Adobe in the parking lot ad was "smoke & mirrors," investigators found. "They are not a partner," the vice president wrote. "We may do business with them, but nothing academically."

The settlement was applauded by some education advocacy groups, including Veterans Education Success, which works to help military veterans. Carrie Wofford, the group's president, thanked the FTC for its work.

"The FTC's findings should shock every patriotic American," she said. "Enough is enough. It's time to stop the fleecing of America's veterans and service members by predatory colleges."