The Grand Canyon Education lawsuit landscape splits cleanly in two: the federal government’s cases against Grand Canyon University (GCU) and its service company Grand Canyon Education, Inc. (GCE) have collapsed, while private student class actions remain active in federal court. A record $37.7 million Department of Education fine was rescinded with prejudice in May 2025. The Federal Trade Commission voluntarily dismissed its case in August 2025. The Department of Education formally recognized GCU as a nonprofit in December 2025. Two student class actions — a RICO suit against GCE and an accreditation suit against GCU — are still being litigated.
Smith v. Grand Canyon Education: The Active RICO Class Action
The most significant pending case naming Grand Canyon Education as a defendant is Smith v. Grand Canyon Education, filed in June 2024 in the U.S. District Court for the District of Arizona. Current and former doctoral students, represented by Student Defense and DiCello Levitt, allege violations of the federal Racketeer Influenced and Corrupt Organizations Act along with state consumer protection laws.
The complaint alleges that GCE knowingly promoted false tuition estimates for doctoral programs while executives knew since at least August 2017 that most students would need additional continuation courses to finish their dissertations. Plaintiffs claim GCE built “artificial bottlenecks” into program progression to generate extra tuition revenue, and they estimate collective losses in the tens of millions of dollars.
GCE moved to dismiss, arguing the students had been properly informed about potential additional costs and that the claims amounted to “garden-variety fraud” rather than racketeering. On May 6, 2025, U.S. District Judge Steven Logan denied most of the motion, allowing four of five counts to proceed, including the primary RICO claim. Plaintiffs filed for class certification in February 2026 and submitted a reply brief in May 2026. The case sits in the class certification phase.
Ogdon v. Grand Canyon University: Accreditation and Licensure Claims
A separate class action, filed in May 2020 in federal court in California, raises a different set of allegations. Plaintiff Katie Ogdon claims GCU misled students into enrolling in graduate programs — particularly the Master of Science in Psychology — that are not accredited in their states and do not qualify graduates for professional licensure. The complaint alleges that university counselors were trained to omit accreditation information, leaving graduates with degrees they could not use for the careers they had planned.
GCU argues that its academic catalog explicitly states the psychology degree does not lead to licensure and that students bear responsibility for researching state requirements. At a February 2026 hearing, GCU also contended that Ogdon lacks standing because her federal student loans were forgiven in 2020. Plaintiffs responded that standing extends beyond the named plaintiff’s individual loan situation and that the class seeks injunctive relief to stop ongoing misrepresentations. The case remains pending before U.S. District Judge Douglass Rayes.
The $37.7 Million Department of Education Fine
In October 2023, the Department of Education’s Federal Student Aid office levied a $37.7 million fine against GCU, the largest penalty the agency had ever imposed on a university. The department alleged that GCU had systematically misled doctoral students about the cost of completing their degrees.
According to the department, GCU advertised doctoral program costs between $40,000 and $49,000, figures that covered only the base 60 credit hours of coursework. About 98% of students needed additional continuation courses to finish their dissertations, and 78% of graduates ended up paying $10,000 to $12,000 more than the advertised price. The department said fine-print disclosures buried in enrollment agreements were “insufficient to cure the substantial misrepresentations” and asserted that university leadership had known about the gap since at least January 2017. The fine was calculated at $5,000 per violation across 7,547 students enrolled between November 2018 and October 2023.
GCU called the accusations “unsubstantiated” and “gross mischaracterizations.” The university argued that continuation courses are standard across higher education and that its disclosures exceeded what peer institutions provided. GCU also framed the fine as retaliation for its separate lawsuit challenging the department’s refusal to recognize its nonprofit status.
Rescission With Prejudice
GCU appealed to the department’s Office of Hearings and Appeals. On May 16, 2025, the department rescinded the penalty entirely through a joint stipulation of dismissal issued with prejudice, meaning the case cannot be reopened. The order confirmed there were no findings against GCU or any of its employees, officers, or contractors, and the department stated it had not established that the university violated any Title IV requirements.
A department spokesperson attributed the rescission to a change in enforcement posture, saying: “Unlike the previous Administration, we will not persecute and prosecute colleges and universities based on their religious affiliation.” GCU president Brian Mueller said the facts “clearly support our contention that we were wrongly accused.”
The Goldwater Institute separately filed a Freedom of Information Act lawsuit seeking records about how the $37.7 million penalty had been calculated and whether the department had coordinated with other federal agencies. In March 2026, a federal court ruled the department’s justifications for withholding documents were insufficient and ordered the release of press releases, briefing records, and related materials.
The FTC Lawsuit and Its Dismissal
In late December 2023, the Federal Trade Commission filed its own lawsuit against GCU, GCE, and Mueller personally in the U.S. District Court for the District of Arizona. The FTC alleged that the defendants deceived prospective doctoral students about program costs and course requirements, misrepresented the university’s nonprofit status, and engaged in deceptive telemarketing practices.
The case struggled from the outset. A federal judge dismissed GCU itself on jurisdictional grounds, ruling that the FTC lacked authority under the FTC Act because the university is not a for-profit corporation. Claims against GCE and Mueller survived initial motions but faced continued setbacks.
On August 15, 2025, the FTC voted unanimously to dismiss the entire case. All parties filed a joint stipulation of dismissal with prejudice. FTC Chairman Andrew N. Ferguson said the case had “suffered losses in two motions to dismiss” and that continuing to spend agency resources was “imprudent.” He cited the Ninth Circuit’s ruling in the nonprofit case, the department’s rescission of the $37.7 million fine, and the IRS’s reaffirmation of GCU’s tax-exempt status as developments that had undermined the original premise of the complaint.
The Nonprofit Status Fight
Much of the federal enforcement activity rested on a disputed classification. After a 16-month review, the Department of Education announced in November 2019 that it would continue treating GCU as a for-profit institution for purposes of Title IV federal student aid, even though the IRS, the Higher Learning Commission, Arizona state regulators, and the NCAA all recognized GCU as a nonprofit.
The dispute traced back to July 2018, when a newly created nonprofit purchased GCU from GCE, a publicly traded company, for roughly $875 million. GCE remained GCU’s primary service provider under a 15-year master services agreement covering marketing, enrollment, counseling, financial aid processing, and technology, in exchange for 60% of the university’s tuition and fee revenue. The department argued that the transaction’s primary purpose was to “drive shareholder value,” pointed to the 60% revenue share as disproportionate, noted that GCE stood to receive roughly 95% of the university’s revenues once loan repayments were included, and described GCU as a “captive client” locked into a long-term contract with steep termination penalties.
GCU sued in 2021. The district court granted summary judgment to the government in 2022. On November 8, 2024, a unanimous three-judge panel of the U.S. Court of Appeals for the Ninth Circuit reversed. Writing for the panel, Judge Daniel P. Collins held that the Department of Education had applied the wrong legal standards, borrowing the IRS’s more demanding “operational test” instead of evaluating GCU under the Higher Education Act’s own criteria, which ask whether an institution is “owned and operated” by a nonprofit and whether any net earnings flow to private individuals. The appeals court vacated the denials and sent the matter back to the agency.
On December 15, 2025, the Department of Education formally recognized GCU as a nonprofit institution. The decision followed a four-year IRS audit completed in May 2025 that reaffirmed GCU’s 501(c)(3) tax-exempt status, and a letter from a bipartisan group of ten Arizona members of Congress urging the department to act. Mueller said the recognition resolved “years of confusion created by conflicting classifications” and would cut legal expenses that had cost the university “millions of dollars per year.”
The Brian Mueller Dual-Role Question
Brian Mueller has served simultaneously as GCU’s president and as GCE’s CEO and board chairman, and that dual position sat at the center of most of the disputes. The Department of Education cited it as evidence of “conflicting loyalties” that undermined GCU’s claim to genuine nonprofit independence. The FTC named him personally as a defendant.
GCU has maintained that the two entities have “completely independent governing boards,” that a conflict-of-interest policy prohibits GCU trustees from holding a financial interest in GCE, and that no board member other than Mueller holds a position in both organizations. The Ninth Circuit did not address the dual role directly, deciding the case on the department’s misuse of the legal framework. With the nonprofit recognition granted and the FTC case dismissed, the governance structure has survived its most serious legal challenges. It remains a point of contention in the pending Smith RICO litigation.
Earlier Rulings in Young v. GCU
An earlier student case, Young v. Grand Canyon University, passed through the federal courts twice and produced rulings both sides now cite. In 2020, the Eleventh Circuit reversed a district court order compelling arbitration, holding that federal borrower-defense regulations prohibited GCU from enforcing its pre-dispute arbitration agreement against the student’s claims.
On the merits, in January 2023, the Eleventh Circuit delivered a mixed result. The court rejected the plaintiff’s argument that GCU had contractually guaranteed degree completion within 60 credit hours, finding that program documents described 60 hours as a “potential path to completion” rather than a binding promise. But the court allowed claims about inadequate dissertation faculty support to proceed, reasoning that the “interactive nature” of doctoral work implied a promise to provide the faculty resources needed for students to complete their degrees. Consumer fraud and misrepresentation claims were dismissed for failing to meet the heightened pleading standards that apply to fraud allegations. GCU has cited these rulings as evidence that federal courts have rejected the same cost-misrepresentation theory that underlay the department’s later fine.
Where Things Stand
Two live cases are worth watching. Smith v. Grand Canyon Education is moving through class certification in federal court in Arizona, with the RICO claim intact. Ogdon v. Grand Canyon University is pending in federal court in California on questions of standing and the adequacy of GCU’s licensure disclosures. Everything the federal government brought against GCU, GCE, or Mueller has been dismissed or resolved in the university’s favor.