How a Struggling School got Saved

Grand Canyon University is alive and well after surviving a near-death experience.

The campus teems with energy. Students attend class. Construction crews create spaces to work and play. Students fill new residence halls. Concerts and plays bring a state-of-the-art arena to life.

The bustling activity is a far cry from seven years ago when Grand Canyon was days away from closing.

Today, the private, for-profit university campus in west Phoenix heralds its renaissance with a $213 million expansion and 44,000 students, while maintaining its small class sizes and emphasis on Christian values.

The transition hasn’t been easy. Moving from a private, non-profit model to a for-profit university with a considerable online component brought challenges. What university officials discovered, however, is a melding of online and traditional higher education.

As more universities explore an online strategy, Grand Canyon provides a blueprint for success.

With a scholarship and family assistance, Amanda Gardner enrolled in Grand Canyon’s music program in 2004.

What she found was startling and depressing. Rumors of financial problems swirled. Gardner practiced in a portable building with a piano slowly sinking into the deteriorating floor.

"It was very surreal," Gardner said. "The instructors were great, but even they were waiting to see if the school would still be there the next year."

In April 2005, she learned that the music program would close. Her dream derailed.

In 2004-05, Grand Canyon was $20 million in debt. An unceremonious ending loomed for the private college founded in Prescott in 1949.

Typically, universities rely heavily on alumni donors to build endowments, to attract top professors and researchers, and to expand courses and facilities. Many of the dollars come from philanthropists, corporations and alumni donors who have found success in the business world.

For 60 years, Grand Canyon, which relocated to Phoenix in 1951, has focused on liberal-arts education, primarily nursing and teaching – fields that don’t generate the salaries that help grow endowments.

And with an enrollment in 2004 of about 1,000 students, tuition didn’t cover costs to maintain programs and keep the lights on.

Grand Canyon, at 33rd Avenue and Camelback Road, was failing. But where others saw its demise, Brent Richardson, now executive chairman of the board, saw its potential.

Richardson’s Masters Online company was partnering with Grand Canyon to launch an online component when the school’s closure was imminent. He saw the university’s strengths – a well-respected reputation and status as a private, Christian university in a state with few options – and refused to let Grand Canyon die, rallying investors to save the school.

At the time, colleges offering online degrees were required to have a physical presence. With the acquisition of Grand Canyon in 2004, Richardson moved quickly to build the online component, creating various Master of Education programs for working adults. The move improved the cash flow, but the university couldn’t afford to keep all its existing programs, including music.

Facing an uncertain future and with little time to apply for other universities, Gardner decided to enroll at Glendale Community College. She figured that she could at least complete basic courses while she regrouped.

During her first semester, Gardner learned that Disney offered a college program at its Florida theme park. She auditioned and won a character role.

It wasn’t the opera stage she envisioned, but it was an opportunity.

The new Grand Canyon investors were looking for opportunities, too. They needed to improve crumbling buildings on campus and to construct top-notch facilities to attract more traditional students and high-end faculty.

"We look at ourselves as a traditional school that has online. We need to be successful at both," Richardson said.

A cash infusion was necessary, and the investors decided to adopt a for-profit model. They turned to Brian Mueller, a former executive at Apollo Group, parent company of University of Phoenix, leaning heavily on his for-profit, online expertise.

An initial public offering generated about $30 million and online education still fuels growth.

Today, Grand Canyon has 40,000 online students, half of whom seek graduate degrees, mostly in education and health care.

Across the country, colleges and universities have discovered the lucrative nature of online learning. According to a 2009 survey, nearly 4 million college students, more than 20 percent of all students, have taken at least one online course.

Increasing online courses is a goal of the Arizona Board of Regents’ Arizona Higher Education Enterprise strategy introduced last year for the state’s public institutions.

But online, for-profit universities have faced increased scrutiny as critics and regulators question tuition costs, student-loan defaults, enrollment strategies and job potential for degree holders.

Grand Canyon is no exception.

Its parent company paid $5.2 million to settle a lawsuit alleging that Grand Canyon violated U.S. Department of Education enrollment regulations.

Administrators now are addressing other Education Department issues and are providing information about its program to a U.S. Senate committee studying for-profit universities.

Mueller is confident that Grand Canyon’s practices meet regulations, and he touts student benefits.

Richardson said in hindsight, he wishes that it could have remained a non-profit school, but then the university wouldn’t have cash to improve the 112-acre campus.

Using funds generated from investors and online programs, Grand Canyon officials are spending heavily on the campus. A $213 million expansion includes two new dormitories, a student recreation center, classroom buildings and the showpiece – a 5,000-seat, $40 million arena that will be home to the school’s basketball team and offer public concerts and events.

In the past four years, the number of traditional students has grown from 1,000 to about 4,000, with 45 percent of those living on campus. Mueller said the university is confident that it can grow to 11,000 on campus within three years.

After a year in Florida, Gardner returned to Grand Canyon only to suffer an illness that caused her to lose her singing voice. She spent the next few years rebuilding her prized instrument.

Gardner stopped by Grand Canyon in summer 2010 to pick up her transcripts and was told its music program was being revived. Gardner auditioned and received a hefty scholarship. She’ll graduate in May.

"I spent years being angry at GCU for disrupting my plans," Gardner said. "But now is the time to be here; there’s a lot more promise here. It’s an incredible difference."

Private universities are needed to help grow and diversify higher-education options in Arizona. Grand Canyon’s model is proving effective. Melding traditional and online offerings has worked for Grand Canyon’s students and Richardson’s investors.

"We saved a great school for Arizona," Richardson said, "and it’s going to be there for a long time."


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