America's largest for-profit college was struck a major blow, and the entire industry should be scared

Apollo Education Group, the parent company of The University of Phoenix (UoP), was suspended from recruiting military students by the Department of Defence (DoD) last week.

That’s notable, and likely problematic, for the for-profit university as it pulls in more money than any other US college, public or private, from military students.

But other for-profit colleges aren’t far behind UoP, and the signal from the DoD may be equally worrying to other for-profit schools in the industry as they derive a lot of their funding from the GI Bill.

Last summer, the US Senate, Health, Education, Labour and Pensions Committee
issued a report disparaging the for-profit college sector, and outlining just how much GI Bill money it generates.

The report showed that of the top 10 institutions receiving GI Bill dollars, eight were for-profit schools. (The report was based on 2012-2013 data.)

  1. Apollo Group — $US272 million
  2. EDMC — $US163 million
  3. ITT — $US161 million
  4. DeVry — $US132 million
  5. Career Education — $US79 million
  6. Corinthian Colleges — $US63 million
  7. Strayer University — $US56 million
  8. University of Maryland System (public university) — $US50 million
  9. UTI — $US50 million
  10. Embry-Riddle Aeronautical (private nonprofit school) — $US48 million

Further, the chairman of the committee, Sen. Tom Harkin, accused for-profit colleges of squandering veteran benefits and called for action against the entire industry.

The recent announcement from the DoD that UoP must halt military recruitment appears to have surprised even the university’s administration.

“University representatives had been working closely with DoD leaders and we all expected a different response from DoD,” University of Phoenix President Tim Slottow said in comments provided to Business Insider.

Slottow also said that he intends to continue cooperation with federal and state agencies to respond to their requests.

The impact of the DoD’s action against UoP is not yet readily seen, but Apollo will be forced to discuss the issue for shareholders at its third-quarter earnings release next week.

As for the rest of the for-profit industry, they will likely be carefully monitoring the ongoing investigation to see whether the suspension sticks or is reversed.

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