The university said it was wrongly accused of misleading students about its nonprofit status.
The U.S. Department of Education has rescinded a record-setting $37.7 million fine against Grand Canyon University (GCU), closing a years-long legal battle over the school’s nonprofit status.
The Phoenix-based university, one of the nation’s largest Christian institutions of higher learning, celebrated the outcome in a
statement on May 17, saying the case was dismissed with “no findings, fines, liabilities or penalties of any kind.”
GCU was founded in 1949 as a nonprofit, but converted to for-profit status in 2004 while on the brink of bankruptcy. The institution flourished financially during its for-profit years, especially through an expansion of online degree programs. In the face of increased regulatory scrutiny under the Obama administration, GCU restructured to return to its nonprofit roots.
While both the state of Arizona and the IRS approved the change, the U.S. Education Department in 2019 denied GCU’s petition to become a nonprofit, arguing that the university’s financial structure continued to benefit its former for-profit owner, and barred GCU from marketing itself as a nonprofit.
In October 2023, GCU filed a lawsuit challenging the Education Department’s decision not to recognize its nonprofit status,
alleging that it had been unfairly targeted. Shortly afterward, the Education Department levied a
$37.7 million fine against GCU for allegedly misleading students about the cost of its graduate programs, which the university denied.
The university also became the subject of a Federal Trade Commission (FTC)
lawsuit, which accused GCU in 2023 of deceptive marketing about its nonprofit status and doctoral program pricing. The FTC cited the Education Department’s analysis as one piece of evidence backing its accusations.
The dismissal came after GCU scored two victories in federal courts. In November 2024, a three-judge panel of the Ninth Circuit Court of Appeals unanimously
found that the Education Department had used the wrong legal standard when it denied GCU’s nonprofit status in 2019.
In March 2025, the U.S. District Court in Arizona
dismissed the FTC lawsuit, ruling that GCU’s revenue growth and expansion alone do not qualify it as a for-profit corporation.
“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,” Brian Mueller, the university’s president, said in a press release.
When Grand Canyon University announced its intention to appeal the $37.7 million fine, Mueller
said the penalty was government overreach and accused the Biden administration of targeting the school because of its Christian identity.
The American Principles Project, a conservative think tank, released a
report last November highlighting what it described as disproportionate enforcement actions against Christian colleges and universities.
These institutions, according to the report, have received the “largest fines” and faced “some of the most aggressive legal harassment” from the Education Department’s Office of Enforcement, a unit created in 2017, disbanded during the first Trump administration, and later revived under President Joe Biden.
The report cited GCU’s now-rescinded fine, as well as the unprecedented
$14 million fine imposed on Liberty University, GCU’s chief rival for the title of the nation’s largest Christian university. That fine stemmed from the department’s findings that Lynchburg, Virginia-based Liberty had failed to comply with a federal campus safety law.
The amount far exceeded previous high-profile penalties under the same law, including a $2.4 million fine levied against Pennsylvania State University in 2016 for its handling of the Jerry Sandusky sexual abuse scandal and the
$4.5 million fine against Michigan State University in 2019 for failures related to athletic team doctor Larry Nassar’s serial abuse of hundreds of gymnasts.
In response to a request for comment, a spokesperson for the Education Department contrasted the agency’s approach under Biden and President Donald Trump.
“Unlike the previous administration, we will not persecute and prosecute colleges and universities based on their religious affiliation,” a spokesperson told The Epoch Times.
“The Trump administration will continue to ensure every institution of higher education is held accountable based on facts, but department enforcement will be for the purpose of serving students, not political bias.”
