Senators Introduce Legislation To Close Federal Funding Loophole Exploited By For-Profit Colleges… Again

Legislators continued their crusade to rein in the abuses of predatory for-profit college institutions by introducing a measure today that would close a funding loophole that often led the schools to target certain consumers in order to pad their bottom line.

The Military and Veterans Education Protection Act of 2015 is a third attempt by legislators to close a loophole in the 90/10 funding rule that allows for-profit colleges to count GI benefits as non-federal funding in their revenue breakdowns.

The new legislation would require schools to count GI Bill benefits and military education benefits toward the 90% limit on the federal share of a school’s revenue.

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 such as the GI Bill for servicemembers and MyCAA for their spouses are not included in the 90/10 calculation. That essentially allows for-profit colleges to count federal funds for 100% of their funding, legislators say.

In the past five years, 40% of Post-9/11 G.I. Bill tuition benefits have gone to the for-profit sector, even as questions continue to be raised about these institutions’ graduation, default, and job placement rates, Senators Tom Carper of Delaware, Dick Durbin of Illinois, and Richard Blumenthal of Connecticut said when introducing [PDF] the new Act.

“This bill is one of many reforms we need to bring greater accountability to a for-profit industry that enrolls 10% of students, but accounts for 20% of Department of Education student financial aid and 44% of all student loan defaults,” Sen. Durbin said in a statement. “It’s time for Congress to get serious about addressing for-profit colleges in our higher education system. We’ve been bystanders for too long as our servicemembers and veterans are taken advantage of as a result of this loophole.”

Sen. Carper, who has introduced a similar bill during two previous legislative sessions, says veterans deserve better treatment than being left open for exploitation by unscrupulous higher-education companies.

“While not every for-profit college is a bad actor, one veteran mistreated is one veteran too many,” he says in a statement. “We need to use common sense here. It doesn’t make sense for taxpayers to send veterans to for-profit schools that can be 100% subsidized using taxpayers’ dollars. Closing the 90/10 loophole is a common sense approach that demonstrates we’re serious about improving education outcomes for our veterans and that we’re serious about protecting taxpayers.”

Introduction of the new bill comes two months after a group of senators asked the Department of Education to take an aggressive stand against for-profit college’s exploitation of servicemembers.

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 pointed out that those figures aren’t going to improve unless changes are made.

The group then cited 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%.