Grand Canyon Sues U.S. Over Nonprofit Status Ruling

Inside Higher Ed

Doug Lederman

January 15, 2021

Arizona university says Education Department’s rejection of its conversion to nonprofit status was “arbitrary and capricious.”

Grand Canyon University, whose bid to be considered a nonprofit rather than for-profit institution for federal financial aid purposes was surprisingly rejected by the U.S. Education Department in 2019, announced Thursday that it would “reluctantly” sue the federal agency over that decision.

“The Department of Education’s refusal to recognize GCU as a nonprofit institution … is clearly arbitrary and capricious,” the university said in its statement. “GCU’s nonprofit status is recognized by the IRS, the State of Arizona, the Higher Learning Commission and every other regulatory body that governs the University … The university cannot sit idly by as the Department of Education refuses to recognize the positive impact GCU’s financial model has had on the GCU community.”

Grand Canyon has over the last decade grown to become one of the country’s largest postsecondary institutions, with about 110,000 students (roughly 20,000 on campus and 90,000 online), and it is among several onetime for-profit institutions that — amid significant regulatory and enrollment headwinds — have sought to operate as nonprofit colleges instead.

The Education Department’s November 2019 decision to reject the university‘s proposed conversion stunned many higher education observers, given the Trump administration’s perceived soft spot for for-profit colleges and its relative dislike of restrictive regulations. The Education Department published an 18-page letter laying out its reasoning for rejecting Grand Canyon’s application, focusing heavily on the relationship of the university to Grand Canyon Education, which was its publicly traded owner and now provides various administrative and other services to the university.

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