NEW YORK — Students at The University of Phoenix received $54 million in aid for which they didn't qualify, according to the Department of Education's inspector general.
The Department of Education's audit recommended the university repay $50.6 million in federal loans and $4 million in Pell Grants, money which is given to students to help pay tuition and other expenses, according to a recent New York Times report.
But the school's parent company, the Apollo Group of Phoenix, said there was no statutory or regulatory basis for the auditors' findings when the report was initially released March 31.
School officials called the allegation "ridiculous."
Last week, Apollo Group President Todd S. Nelson said the company settled with the department to save the $3 million to $4 million it would have cost to appeal the case.
"That would be unfair for the students," he said. "We are glad to have this resolved."
At the time the report was released, a Department of Education spokeswoman said that the company had agreed to a $6 million settlement.
That agreement included no admission that there were any issues of non-compliance, according to the school.
"This is basically a disagreement on a technical interpretation of a rule," said senior vice president Craig Swenson, who directs the Northwest region of the university's campuses, including those in Utah.
Between October 1995 and September 1997, the university, which is run as a for-profit business, distributed $339 million in federal loans and nearly $9 million in Pell Grants.
But to qualify for federal funds, students must receive 12 hours of scheduled instruction each week, or 360 instructional hours per academic year.
The audit found that University of Phoenix students received only 180 instructional hours, with the university relying primarily on student study groups instead of classroom time.
The university also included cost-of-living expenses inappropriately when determining the financial need of students enrolled in correspondence courses, the review found.
Swenson says the school has an adult learning model that does not easily compare to standard quarters or semesters of instructional time. The Department of Education's primary concerns related to how the university documents its study groups, he said.
The University of Phoenix enrolls more than 74,000 students at sites in 15 states in undergraduate and graduate degree programs and certificate programs.
Deseret News staff writer Maria Titze contributed to this story.