University of Phoenix in trouble?

Apollo Group (parent company of U of Phoenix) has recently been sued, which may endanger the companies business model.

Apollo's trouble stems from default rates on its Title IX loans. Title IX loans are federally guaranteed. In order to maintain good standing with the feds, colleges must limit student defaults (the so-called Cohort Default Rate), among other requirements.

The plaintiffs were former UofP students and Title IX loan recipients who dropped out of classes after the deadline for getting all their money back. Instead of receiving payment from the Title IX loan, the UofP returned the money to the feds and sent collection agencies after the students for the money they owed (receivables.)

From the article: Why would the UOP surrender cash in hand that is rightfully theirs, in exchange for a hard-to-collect receivable, plus collection costs and risks? Why would UOP intervene in a lender/borrower relationship that they actually helped facilitate?

Lets get this straight – the action UOP chooses here is financially worse for the company, worse for their students, and better for the US Government... Has anyone ever heard of a company voluntarily giving up money in hand for a questionable receivable?

This lawsuit lays out a rationale... UOP is not only trying to deceive their clients, but more importantly, the Department of Education and investors through manipulation of their reported numbers. By removing these early-withdrawing students from their loan rolls, this lawsuit suggests understatement of Cohort Default Rates...

By returning the money to the government, they are effectively prohibiting that person from being factored in their cohort default rate. This manipulation is a clear violation of the mandates of HEA.

Make no mistake, if Apollo loses its access to Title IX grants, it's done. UofP competes directly with CCs, but we shouldn't relish their possible demise. We are in no condition to enroll their 250,000 students.