Judge rejects Grand Canyon University’s bid to overturn its for-profit status

Higher Ed Dive

Natalie Schwartz

December 2, 2022

Dive Brief: 

• A federal judge on Thursday rejected Grand Canyon University’s bid to reverse the U.S. Department of Education’s decision to consider the institution a for-profit under Title IV, the law governing federal student aid.

• In 2019, the Education Department determined Grand Canyon University is a for-profit college, citing a contract that gives a sizable portion of the institution’s revenue to its former owner. The university asked U.S. District Judge Susan Bolton to reverse that decision, but she sided with the Education Department, ruling the agency has the power to determine whether a college is a nonprofit or for-profit under Title IV.

• The university’s executive team has not made a decision yet on whether to appeal, Bob Romantic, the institution’s executive director of communications and public relations, said in an email Friday.

Dive Insight: 

The ruling means Grand Canyon University must continue to follow a stricter set of regulations than nonprofit colleges do.

The university has maintained the Education Department should consider the institution a nonprofit under Title IV because the Internal Revenue Service approved the institution’s tax-exempt status in 2015. However, Bolton ruled the Education Department’s process for determining whether a college is nonprofit under Title IV is separate from IRS approvals.

The legal battle stems from Grand Canyon University’s split in mid-2018 from its former owner, Grand Canyon Education, or GCE.

Although Grand Canyon University separated from GCE, it entered into an agreement under which it pays 60% of its adjusted gross revenue to the company in exchange for support services, such as marketing. The contract spans 15 years, with automatic five-year renewals, according to court documents.

As part of the separation, Grand Canyon University sought to convert from a for-profit college to a nonprofit under Title IV. The Education Department looks at several criteria to evaluate nonprofit conversions, including whether the IRS has determined the college is tax-exempt and whether shareholders benefit from its net earnings.

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