From Kitchen Table to Bankruptcy: How a For-Profit University Promised Dreams and Delivered Debt

National American University (NAU), founded in 1941 as the National School of Business in Rapid City, South Dakota, began as a modest institution offering business training to local women. Under the Buckingham family’s ownership from 1962 onward, it expanded into a multi-campus institution and rebranded in 1997 to reflect its national reach. A pioneer in online education—launching digital programs as early as 1996—NAU positioned itself as a flexible option for working adults, offering degrees from associates to doctorates in fields like business, IT, and healthcare. Its 1985 regional accreditation by the Higher Learning Commission lent credibility, reinforcing its promise of quality education in a 'caring and supportive environment.' However, after going public, NAU became increasingly driven by shareholder demands, leading to aggressive enrollment practices and heavy reliance on federal financial aid, which accounted for nearly 80% of its revenue by 2019. Enrollment peaked at over 9,500 in 2015 but plummeted to under 3,400 by early 2019 due to broader sector declines, regulatory scrutiny, and internal mismanagement. Financial losses mounted, revenue dropped nearly 40% between 2014 and 2018, and by 2019, the company disclosed 'substantial doubt' about its ability to continue operating. The U.S. Department of Education demanded a $7.3 million letter of credit to maintain access to federal aid, a burden that strained its already weak finances. Legal troubles followed: a 2017 whistleblower lawsuit alleged illegal recruitment incentives, misrepresentation of program quality, and violations of federal education rules. Additional student lawsuits accused NAU of fraud, claiming misleading promises about job prospects, credit transferability, and program costs. In response, NAU closed most of its 24 physical campuses in 2019, shifting entirely online—a move that disrupted students and faculty. The company was delisted from Nasdaq and moved to the OTCQB market, signaling financial distress. Despite being operationally prepared for the 2020 pandemic due to its online infrastructure and receiving over $1.4 million in CARES Act funds, NAU’s financial condition worsened. By 2022, it reported liabilities exceeding assets by nearly $8 million and dwindling cash reserves, reaching zero available cash by 2023. A 2021 lawsuit accused the company of hiding assets to avoid rent payments, further undermining its credibility. While some students succeeded and NAU’s early adoption of online learning was innovative, its legacy is overshadowed by allegations of predatory recruitment, financial instability, and broken promises. The case highlights systemic risks in the for-profit education model, where profit motives can compromise educational integrity and student welfare. It underscores the need for stronger oversight, transparency, and accountability to protect vulnerable students from institutions that prioritize growth over genuine educational outcomes. NAU’s story remains a cautionary tale about the fragility of educational trust when business imperatives eclipse mission-driven values.

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