Federal agency rescinds fine against Grand Canyon University

Phoenix-based Grand Canyon University is no longer on the hook for a multi-million dollar fine levied by the U.S. Department of Education, according to the school.

The federal agency's office of hearings and appeals rescinded a $37.7 million fine imposed on the Christian university in October 2023 and dismissed the department's case with no findings, liabilities, or penalties, a Friday statement from the university said.

The fine, which GCU appealed, was for misleading students about the cost of its doctoral programs.

"The facts clearly support our contention that we were wrongly accused of misleading our doctoral students and we appreciate the recognition that those accusations were without merit," GCU President Brian Mueller said in the statement. "GCU is a leader in innovation, transparency and best practices in higher education and we look forward to working cooperatively with the department in the future ? just as we have with all regulatory agencies."

The federal education department did not immediately respond to a request for information about the dismissal.

GCU's regulatory battles contributed to a negative outlook on its non-investment grade Ba1 rating from Moody's Ratings, which said in November, "the outlook could return to stable with moderation in the university's regulatory and litigation risk exposure, especially if combined with gains in revenue, EBIDA, and unrestricted liquidity."

Last year the university sold $520 million of taxable revenue bonds through the Maricopa County Industrial Development Authority, which were also rated BBB-minus by Fitch Ratings with a stable outlook. The bonds, which were offered in a single 2029 maturity, were priced by Goldman Sachs (GS) with a 7.375% interest rate.

Proceeds were earmarked to refund two cash-collateralized bridge loans the university used to refinance $500 million of Series 2021B bonds that matured on Oct. 1 and pay down a line of credit for capital expenditures from UMB Bank.

The university sold $1.2 billion of taxable revenue bonds in 2021 to refinance the remaining balance of notes it issued in 2018 to fund the purchase of the university's assets from publicly traded Grand Canyon Education (LOPE).

Grand Canyon was a nonprofit from its creation in 1949 until 2004, when it was sold to private investors. It regained its 501(c)(3) status from the Internal Revenue Service in 2018 after its purchase from Grand Canyon Education (LOPE).