The Federal Trade Commission has sued Grand Canyon University for allegedly misleading doctoral candidates.
The US Department of Education used the wrong legal standard in rejecting Grand Canyon University’s 2019 nonprofit application, a federal court ruled Friday.
A unanimous decision by a three-judge panel of the US Court of Appeals for the Ninth Circuit overturned a lower court’s 2022 ruling that the Department of Education acted lawfully in denying Arizona Christian University’s request to be considered a private nonprofit institution under Title IV of the Constitution. Higher Education Act.
Grand Canyon had transitioned into a for-profit facility in 2004 amid the financial crisis, and it grew and prospered financially as a benefit of its large online presence. But after years of increased regulation by the Obama administration, they want to return to their nonprofit roots, and the Internal Revenue Service and the university’s receiver signed off on its reform.
But the Department of Education ruled in 2019 that the university’s revenue would benefit the for-profit company that once owned the Grand Canyon. That 2019 decision by the Trump administration, which has traditionally been more supportive of for-profit higher education, also prohibited the university from advertising itself to the public as a nonprofit.
Grand Canyon sued the Department of Education in 2021 and subsequently waged an aggressive public campaign criticizing the Biden administration for what they said was a targeted campaign.
A lower court judge ruled in November 2022 that the Department of Education “has the authority to determine whether an institution qualifies as a nonprofit organization under Title IV,” and that Grand Canyon did not show that the agency’s officials acted in an “arbitrary and unreasonable” manner.
But three judges on the Ninth Circuit panel — two of whom were appointed by President Trump and one by President Biden — reached a different conclusion. They decided that instead of relying on the Higher Education Act’s requirements for evaluating nonprofit institutions, as it should, the Department of Education used the Internal Revenue Service’s more restrictive rules regarding benefits that can be earned by private individuals or shareholders.
“The department…failed to apply [the Higher Education Act’s]private capital requirement,” the Ninth Circuit panel said in its decision. “Instead, the department used the IRS’s ‘performance test,’ where it assessed, not whether ‘net profits’ were included in the private equity.
benefit, but that ‘the main activities of the organization and its income’ are more beneficial to private parties. Because the department failed to apply the proper legal principles, its decisions must be set aside.”
In a statement Friday, Grand Canyon welcomed the appeals court’s decision.
“Today’s decision is a long-awaited correction to the department’s illegal filing of a standard that unfairly denied GCU its nonprofit status, and we are hopeful that the university will soon be certified as a nonprofit institution,” Grand Canyon officials said in a news release. release.
Officials from the Department of Education could not be reached Friday for comment.
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