The U.S. Department of Education is trying to force the University of Arizona to pay back loan debt amassed by students who attended the for-profit, online Ashford University, which it acquired in 2020, Axios has learned.
Why it matters: The university is already facing a $177 million shortfall due to budgeting issues and revenue declines. Officials have told staff to prepare for layoffs.
The university has been under scrutiny for ignoring other red flags about Ashford's finances, and this new development adds more questions about its due diligence.
Catch up quick: UofA acquired Ashford and renamed the online school University of Arizona Global Campus (UAGC) in 2020.
University leaders "were intrigued by the possibility of acquiring an established all-online institution" to expand the university's demographic and geographic reach and build a new revenue stream, according to a report sent to the state last month.
UofA officials acknowledged in last month's report that they knew Ashford and its parent company, Zovio, were under federal and state investigation when they decided to buy it.
Flashback: The U.S. Department of Education announced last summer it would clear $72 million of student debt for 2,300 former students "cheated by Ashford."
Driving the news: A Department of Education spokesperson told Axios Phoenix late last week it is in the process of initiating a recoupment action against UAGC for the cost.
It did not say whether it will ask UofA to repay the entire $72 million.
What they're saying: "The University of Arizona is not responsible for the actions of Ashford University," UofA spokesperson Pam Scott told Axios in a statement.
"While the Department has not indicated a timeline on recoupment, we remain encouraged that we will achieve an outcome that is best for the students of UAGC and the taxpayers of Arizona."
Inside the room: Top UofA officials, including president Robert Robbins, met with members of Arizona's congressional delegation in D.C. last fall to share concerns about the Department of Education's likely recoupment plan.
Scott told Axios the meetings were to ensure the delegation knew the government's issues with Ashford occurred prior to Arizona's acquisition.
Yes, but: Those meetings don't appear to have spared the university from critique.
Rep. Raul Grijalva called UofA's decision to purchase Ashford "questionable" and told Axios he supports the Department of Education's effort to relieve students of their debt.
He said he trusted the department would work with UofA on a "fair solution."
Hobbs' spokesperson, Christian Slater, told us the governor's office is in communication with UofA and other stakeholders about the student loan issue, which is "of concern to the governor."
Hobbs is meeting with UofA and ABOR officials this week.
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