University of Phoenix and Western International University may be headed for accreditation probation.
Universities that lose accreditation risk losing federal student loans and grants.
Phoenix-based Apollo Group Inc. (Nasdaq: APOL), parent of both institutions, filed an 8-K with the U.S. Securities and Exchange Commission saying UOP has received notification that a peer review team is recommending to the Higher Learning Commission that UOP be put on probation because it does not have sufficient autonomy from Apollo.
Mark Brenner, chief of staff for Apollo Group, said the peer review team is recommending WIU for probation for the same reason. He said Apollo officials are reviewing the draft reports and are confident that HLC’s concerns will be addressed.
“While we plan to challenge and appeal the review team’s recommended sanctions, we also intend to work closely with HLC to achieve agreement and resolution,” he said. “We are confident that University of Phoenix and Western International University will be successful in achieving institutional reaffirmation.”
He added: “There will be no change in the accreditation status of either University of Phoenix or WIU until the review and appeals are complete.”
Michael Clifford, who has invested in for-profit institutions nationwide, said Apollo founder John Sperling changed the entire global distribution of higher education when he made college degrees available online to busy working adults.
“We haven’t experienced a similar disruption as he caused until now,” Clifford said. “This massive disruption is around accreditation for all high education institutions. Unions are circling the wagons to protect their stranglehold, but entrepreneurs with new models will win the day. Apollo is in the crosshairs of this battle, but they will prevail.”
Trace Urdan, senior analyst for Wells Fargo Securities LLC, said HLC's concern is that the academic mission of the institution is protected against the more financially oriented concerns of the parent company, beholden to shareholders.
"We believe the actual risk of a loss of accreditation is quite low, particularly in light of HLC's shifting standards, which would be difficult to defend upon review," Urdan said.
Brenner said the draft reports include many positive findings and observations.
“For example, the HLC review team notes in its draft report that University of Phoenix is well-resourced and innovative and has a number of strengths, including a high level of relevant student services, technology and systems that benefit students,” he said. “In fact, University of Phoenix was found to be in compliance with substantially all criteria associated with academic matters.”
Apollo’s stock closed at $17.83 today, closer to its 52-week low of $18.36 than its high of $52.05.