Senators Want To Close Federal Funding Loophole Exploited By For-Profit Colleges

Each year for-profit colleges receive billions of dollars in Post 9/11 GI Bill benefits by exploiting a loophole in the rules that govern how these institutions collect federal funds. Once again, a group of senators has set out to change the way in which these schools count student aid, this time by urging the Department of Education to take an aggressive stand.

A group of 20 U.S. senators sent a letter to Dept. of Education secretary Arne Duncan asking him to assist in closing a loophole that allows for-profit colleges to count GI benefits as non-federal funding in their revenue breakdowns.

“The negative effects of this loophole for students and taxpayers have been well documented in news articles and Congressional investigations and reports. It has led to aggressive marketing and recruitment of servicemembers and veterans,” the senators wrote.

The current federal 90/10 rule – used to cap for-profit colleges’ federal funding – is a provision in the law that bars for-profit colleges and universities from deriving more than 90% of their revenue from the U.S. Department of Education’s federal student aid programs. The other 10% needs to come from sources other than the federal government.

Currently, tuition assistance for servicemembers and MyCAA for their spouses are not included in the 90/10 calculation.

In the letter, the senators express concern over the lack of protection servicemembers and veterans have when it comes to being targeted and exploited by some for-profit colleges because of their access to 9/11 GI Bill funding.

As part of the senators’ quest to better protect servicemembers, the group asked the Dept. to provide public data about how much for-profit colleges truly receive from taxpayers.

Although those figures aren’t currently made public, a report released last summer by now retired Iowa senator Tom Harkin found that during the 2012-13 school year for-profit colleges enrolled a record number of veterans, bringing in more than $1.7 billion in Post 9/11 GI Bill benefits thanks in part to the 90/10 Rule loophole.

The senators point out that those figures aren’t going to improve unless changes are made.

The group then cites a 2013 analysis from the Dept. of Education that found 133 for-profit colleges received more than 90% of their revenues from taxpayers when the Department of Defense and Veterans Administration benefits were counted as federal education assistance, and another 292 institutions received more than 85%.

According to that analysis, obtained by the Center for Investigative Reporting, embattled for-profit chain Corinthian Colleges Inc. – which operates Everest University, Heald College and WyoTech – received $186 million in VA Post-9/11 GI Bill dollars alone.

CCI isn’t the only scrutinized for-profit chain receiving significant funding through veterans’ benefits.

Seven of the eight for-profit college companies currently under investigation by state Attorneys General and federal agencies for deceptive and misleading recruiting or other possible violations of state and federal law are among the top recipients of Post-9/11 GI Bill funds.

The senators, several of whom previously backed legislation last year that would close the 90/10 loophole, say in the letter that they plan to introduce similar measures this year.

And while the group expressed satisfaction with a measure in President Obama’s 2016 proposed budget that would close the loophole in the 90/10 funding rule, they urged the Dept. of Education to take immediate action.

“We ask that the Department include the amount and percentage of institutions’ revenues that are received from all federal educational programs, in addition to calculations required by current law, when it publishes the report required… of the Higher Education Act,” the letter states.

By publishing the information, the senators say the Dept. can provide a more accurate picture of the for-profit industry’s heavy reliance on federal taxpayers for many of their operations.

Senators who signed onto the letter include Dick Durbin (IL), Tom Carper (DE), Barbara Boxer (CA), Sherrod Brown (OH), Richard Blumenthal (CT), Chris Coons (DE), Dianne Feinstein (CA), Al Franken (MN), Mazie Hirono (HI) Ed Markey (MA), Claire McCaskill (MO), Jeff Merkley (OR), Chris Murphy (CT), Patty Murray (WA), Gary Peters (MI), Jack Reed (RI), Bernie Sanders (VT), Brian Schatz (HI) and Elizabeth Warren (MA).

Senators: Education Secretary Must Shine Light On For-Profit College Loophole That Harms Veterans And Military Students And Taxpayers [Sen. Dick Durbin]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.