A Christian university in Arizona is no longer on the hook for a $37.7 million federal fine, believed to be the largest-ever financial penalty imposed on a school.

Grand Canyon University (GCU), said that on May 16, the U.S. Department of Education (ED) rescinded the massive penalty proposed for the Phoenix-based school in 2023.

Federal officials had claimed GCU had “substantially misrepresented” the total cost of doctoral programs to prospective students, violating Title IV of the Higher Education Act of 1965 (HEA), which governs federal financial aid.

“GCU lied about the cost of its doctoral programs to attract students to enroll,” said Richard Cordray, at the time COO of the department’s Office of Federal Student Aid (FSA), in a news release since deleted from ED’s website.

Last week ED officials said “there are no findings against GCU, or any of its employees, officers, agents, or contractors” relating to alleged overcharging.

“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 a statement. “GCU is a leader in innovation, transparency and best practices in higher education.”

The fine levied on the interdenominational Christian school, was dismissed “with prejudice,” a GCU news release stated, denoting the action is permanent and cannot be refiled.

Separately, the Internal Revenue Service (IRS) reaffirmed GCU’s 501(c)(3) tax-exempt status as an Arizona nonprofit institution on Tuesday, following a comprehensive four-year audit.

The IRS decision, which included a site visit and review of thousands of documents from 2014 to 2019, concluded that GCU “meets all requirements of a 501(c)(3) organization and has a charitable educational purpose worthy of tax-exempt status.”

Regarding the IRS audit, GCU’s Mueller added, “We greatly appreciate the comprehensive and thoughtful process in which the IRS re-examined the structures of our operations. It was a very detailed and cooperative process to ensure we check all the boxes required of a 501(c)(3) tax-exempt entity.”

GCU maintained that its disclosures, which provide detailed information about time, cost, and credits needed for doctoral degrees, are “robust and thorough,” a characterization affirmed by the Higher Learning Commission, a Chicago-based accreditor, in its 2021 review.

The Arizona State Approving Agency of the Department of Veterans Affairs also found “no substantiated findings” in its 2024 audit of GCU’s disclosure processes. Additionally, two federal courts—the 11th Circuit Court of Appeals and the U.S. District Court for the Northern District of Georgia in Young v. GCU—rejected similar allegations.

The IRS’s reaffirmation of GCU’s nonprofit status further bolsters the university’s position against what it describes as “regulatory weaponization and lawfare” by Biden administration officials. The audit, prompted by GCU’s 2018 return to nonprofit status, involved interviews with university leaders and an extensive document review, the school said. The IRS issued an acknowledgment letter stating, “We have completed the examination for the issue and dates above and closed the examination with no change.”

In November 2024, a unanimous three-judge panel of the Ninth Circuit Court of Appeals in Grand Canyon University v. Cardona ruled that ED exceeded its authority by refusing to acknowledge GCU’s nonprofit status, remanding the case for further review. Ten of Arizona’s Congressional members sent a bipartisan letter supporting GCU’s nonprofit status.

In March 2025, when the U.S. District Court of Arizona dismissed a Federal Trade Commission (FTC) lawsuit against GCU, ruling that the FTC lacked jurisdiction because Grand Canyon University is not a corporation “operating for its own profit or that of its members.” The FTC’s lawsuit, which continues against Grand Canyon Education and Mueller, reiterates claims about nonprofit status and doctoral disclosures that courts and agencies have repeatedly dismissed.

Founded in 1949, the university began as a Southern Baptist-affiliated college for 35 years before transitioning to being self-owned by a board of trustees in 1984. It offers 349 academic programs and is accredited by the Higher Learning Commission.

ED spokeswoman Ellen Keast underscored the shift in approach, issued this statement: “Unlike the previous administration, we will not persecute and prosecute colleges and universities based on their religious affiliation. 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.”

Mark A. Kellner is a reporter based in Mesquite, Nevada. He most recently covered statewide elections for the Correo de Nueva York and was for three years the Faith & Family Reporter for el tiempo de washington. Mark is a graduate of the University of the Cumberlands and also attended Boston University’s College of Communication.