University of Phoenix Won't Force Students to Arbitrate Claims; Scope Unclear

The University of Phoenix just announced that it will no longer require students to agree when enrolling to give up their rights to pursue in court any disputes with the school. Many for-profit colleges have used such fine-print clauses to force any complaint into secret arbitration proceedings that tend to be stacked against students and keep school abuses from coming to light.

The Department of Education is currently considering issuing new regulations that would prohibit or limit the ability of colleges receiving federal aid from imposing such mandatory arbitration clauses. (I am working with our coalition of pro-student groups to try to convince the Department to implement a full ban on these provisions, which legitimate non-profit colleges do not require.)

Under its new private equity ownership, the University of Phoenix is attempting to portray itself as a changing institution, after years of revelations of for-profit college abuses have sent the industry into a tailspin.  The University of Phoenix has seen enrollments, revenues, and share price plummet in recent years, but it is still the industry leader, drawing nearly two billion annually in taxpayer dollars through federal student grants and loans.

Whether the changes are real or cosmetic remains to be seen.  The same CEO who has presided over years of poor performance remains in place, and the new private equity owners have not articulated a convincing explanation as to how the school's business model will become at once more ethical and more efficient.

In the same vein, the scope of the company's commitment to allow students greater legal rights is unclear so far, and the devil is, of course, in these details.  When loan collection company ECMC took over many of the campuses of disgraced Corinthian Colleges last year, it promised a more principled start, including, after pressure from student advocates, an end to mandatory arbitration clauses.  But without informing the Department of Education, ECMC implemented an agreement that remained highly restrictive of student rights, barring students from jury trials, class actions, or combining of claims.

The industry's desperate trade association, APSCU, has thus far bitterly clung to its tradition of denying students access to the courts.

The University of Phoenix should promptly provide the details of its new proposal.  And other for-profit colleges, if they want to improve their reputations, should act now to restore legal rights for all their students.

UPDATE 05-19-16 5:40 pm: This morning, a public relations firm representing Apollo Education contacted me regarding this issue.  I wanted to ask some questions about the arbitration ban, and that firm connected me to a second PR firm for that purpose.  I don't have answers from the company yet, but here are my questions:

1.  Apollo has committed to "eliminate the use of mandatory arbitration clauses in its students' enrollment agreements."  Will mandatory arbitration also be removed from the school catalogue -- see http://www.phoenix.edu/content/dam/altcloud/doc/catalog/washington-dc.pdf?cm_sp=HLC+Catalog-_-Washington+DC-_-Washington+DC  at p. 84.

2. Will Apollo impose any other restrictions on students' legal rights, such as the right to a jury trial, mass action, or class action, or requiring an internal appeal before suing?

3. Will Apollo support a federal regulation barring all Title IV recipients from forcing students into arbitration for disputes?

4. Is Apollo planning other reforms to improve outcomes for students and accountability for the institution?

5. Does the commitment apply to all of your past and current students, or just enrollees going forward?

UPDATE 06-08-16: I still have received no response from the University of Phoenix to my questions about the scope of their commitment regarding forced arbitration. However, for-profit DeVry, which announced last month that it was dropping mandatory arbitration clauses, reached out to me on the issue yesterday, and then answered the same questions:

  • Has committed to "eliminate the use of mandatory arbitration clauses in its students' enrollment agreements."  Will mandatory arbitration also be removed from the school catalogue -- Yes, completed.

  • Will impose any other restrictions on students' legal rights, such as the right to a jury trial, mass action, or class action, or requiring an internal appeal before suing? - No.

  • Will support a federal regulation barring all Title IV recipients from forcing students into arbitration for disputes? - We made a decision consistent with our past practices and in line with our values for student care.  We generally are not opposed to such language, but of course, would need to see the rule before making that decision.

  • Is planning other reforms to improve outcomes for students and accountability for the institution?  - We are committed to continuous improvement in our services and the outcomes of our students.  We launch numerous initiatives each year along these lines.  In the area of accountability reform, we think we have led this discussion with many audiences in the last 7 years and envision continuing to do so going forward.

  • Does the commitment apply to all of your past and current students, or just enrollees going forward? - All
  • This response from DeVry is very positive -- a clear break from past policies, a broad commitment not to limit the legal rights of students.  I have continuing concerns about DeVry's recruiting practices, but the company's new willingness to allow students to sue over grievances is a step in the right direction.

    This article also appears on Republic Report.