The U.S. Department of Education sets tough conditions on the $1.1 billion private equity bid for the owner of the University of Phoenix for the school's sale to Wall Street investors including Apollo Global Management LLC that is not related to Apollo Educational Group, the university's owner. Stumping up a $385.6 million letter of credit and prohibiting enrollment expansion are taken as a way for Barack Obama's administration to walk away from the agreement.
Michael Frola, an Education Department official, explains in a letter to the university's president about the risk that the school faces due to the decline in enrollment, government investigations, and the alleged inexperience of the buyers in operating an educational establishment such as Phoenix University. It can end up leaving the financial burden to taxpayers. Department spokeswoman Kelly Leon refrains from giving reactions to the statement.
Over $2.4 billion students' aid received over the past two academic years. The federal debt outstanding is the highest among its peers as per the 2014 study co-authored by Adam Looney, deputy assistant secretary for tax analysis. The University of Phoenix has been affected by the decline of enrollment and higher costs like many other schools due to government scrutiny and economic rebound.
The annual revenue at Apollo Education's revenue has been reduced half way since 2012, to $2.1 billion as per the updated annual report. Its $91 million loss is alarming given that $417 million profit was recorded just four years prior, says the International Business Times.
Career Education Colleges and Universities has claimed that the Obama administration has been indifferent to the sector following ideological grounds for a long time.In February, Apollo Global Management formed a joint venture with investors, including former Obama administration officials, to purchase University of Phoenix and other overseas schools.
Tony Miller, chief operating officer of Vistria Group and a former deputy education secretary, and Martin Nesbitt, a close friend of President Barack Obama are two of the investors. The Education Department's deadline for the requirements is by June 2018. iN 45 days, Donald Trump Takes over as U.S. president. Republicans, who support profit colleges, will control Congress, also. Perhaps, the dealings with the buyer by then will be more manageable, according to Bloomberg.
