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Camouflaged dollar signs: for-profit colleges and veterans

With more for-profit colleges coming up short, veterans must figure out where to use their GI Bill funds to get an education, many while also supporting families.

When a service member separates from the military, they must begin anew in the civilian world.  One of the first questions asked is what to do next? Often times this means continuing their education.  This is particularly true to those veterans who do not have a bachelor’s degree. Through the Department of Veterans Affairs the federal government provided the educational grant commonly known as the G.I. Bill.

The Post 9/11 G.I. Bill, passed in 2009, gives the veteran an opportunity to pursue their education at most vocational schools and colleges.

The first G.I. Bill, the Servicemen’s Readjustment Act and the Montgomery G.I. Bill, was passed in 1944.  Today, the Post 9/11 G.I. Bill is the most common option for post service vocational or higher education.  The Post 9/11 G.I. Bill, passed in 2009, gives the veteran an opportunity to pursue their education at most vocational schools and colleges.  The funds granted to individual veterans are based on the amount of active duty service after September 11th, 2001. Not only does the Post 9/11 G.I. Bill give veterans money for tuition but also for books and housing.  It is one of the many services provided to veterans to help them return to civilian life and become a productive member of society.

Enter for-profit colleges.  For-profit colleges are schools owned and operated by a private company.  These schools are attractive due to flexible hours, continuous enrollment, and online courses.  They have the money to advertise often and in many different mediums, from newspaper ads to TV commercials.  Advertisements from these schools frequently show a student or someone acting as a student that has had great job prospects after graduation.

The schools rely on high tuition to make a profit, the same goal as any other private company.

However, for-profit education has recently been accused of misleading students about the quality of education and the total cost of tuition.  Twice as expensive compared to a non-profit college, students often leave these programs with more debt than their non-profit counterparts.  The schools rely on high tuition to make a profit, the same goal as any other private company.  The graduation rate amongst for-profit institutions for first-time, full-time students is only 22 percent. Public non-profit institutions have a 55 percent graduation rate, moreover, private non-profit institutions post 65 percent.

With the rise of for-profit colleges, Congress capped the amount of federal funds these schools could receive.  Currently, for-profit colleges can receive up to 90 percent of their funds from the federal government.  The 90 percent cap is often referred to as the 90/10 rule and is thought to keep a quality control check on the education provided at for-profit schools.  However, the Post 9/11 G.I. Bill, is not included within the 90 percent of federal funds.  The only limitation on the G.I. Bill funds is the Veterans’ Benefits Act of 1992 “…which requires no more than 85% of a program’s students receive VA funding.”  This limitation, unlike the 90/10 rule, is not based on a funds ratio but on a total student body ratio.  With veterans making up only seven percent of the national population, it is unlikely that any school would meet the 85/15 ratio.  Thus, this regulation could encourage for-profit colleges to pursue veteran students.

While the number of overall veterans applicants to public colleges has gone down, veteran applicants to for-profit colleges has increased.

That is the case for many for-profit schools in the nation.  “Eight of the top 10 recipients of Post-9/11 GI Bill benefits are large, publicly-traded companies that operate for-profit colleges.”   Those benefits totaled $2.9 billion between 2010 and 2014.  According to a Senate report on the matter, “Taxpayers are paying twice as much on average to send a veteran to a for-profit college for a year compared to the cost at a public college or university ($7,972 versus $3,914).”  While the number of overall veterans applicants to public colleges has gone down, veteran applicants to for-profit colleges has increased.  For example, Universal Technical Institute (UTI) posted a 61 percent increase in veteran enrollment, while Career Education Corporation, the publicly traded owner of Colorado Technical University and Le Cordon Bleu, saw a 657 percent increase.

This is not a new problem, as the federal government has known since the enactment of the Montgomery Bill in 1944 that for-profit schools are an issue.  As soon as the Montgomery Bill was passed, commercial vocational schools started to pop up and seek out veterans of World War II to come to their schools.  Montgomery Bill funds had no oversight nor any means of instructing veterans on the quality of education provided by such schools.  Veterans were taken advantage of with little to no relief.  Only until recently have several federal agencies taken steps to combat the exploitive nature of for-profit schools.

The Department of Defense banned University of Phoenix (Phoenix) from all military installations for three months last year.  The ban came after Phoenix was accused of using military insignias without permission and not properly notifying military installations of their presence.  A lawsuit filed against Phoenix by former employees shows that Phoenix employees were originally allowed on base to promote jobs at Phoenix but were told by supervisors to encourage military personnel and veterans to enroll in classes.  Today, Phoenix is allowed on military installations but faces scrutiny from both federal and state agencies.  However,  while the Department of Defense and the Department of Veterans Affairs (VA) are similar, often working hand-in-hand, the Post 9/11 G.I. Bill is under the exclusive jurisdiction of the VA, and thus, a decision from the Department of Defense to ban a school is not binding on the VA.

ITT Tech announced bankruptcy following the ban and fines levied against the for-profit college.

“In August, the U.S. Department of Education banned ITT [Tech] from enrolling new students who get federal aid.”  ITT Tech has been investigated and accused of misleading students about the quality of the education and the possibility of employment after graduation.  Students with federal loans can apply for discharge and not repay their debts.  In fact, the Department of Education is requiring ITT Tech to pay $152 million to refund students, in addition to a $44 million demand made in June for the same reasons.  ITT Tech announced bankruptcy following the ban and fines levied against the for-profit college.

The veterans at ITT Tech and similar colleges stand to lose more than other students.  Once G.I. Bill funds are gone they are gone for good.  Even if a veteran were to drop out of a school and go to another, the funds used at the first school would not be credited to the veteran’s account. The credits gained at for-profit colleges are even more difficult to transfer than those at a non-profit college.  If the credits do not transfer, then a whole year of education has become essentially meaningless.

Further, some veterans rely on the housing allowance granted by the G.I. Bill. Without the monthly allowance, they may lose their homes.  Approximately 50,000 veterans are homeless for a total of 8.6% of the homeless population.  This total could increase with some veterans losing the housing allowance for the Post 9/11 G.I. Bill. While the veterans may continue to get Post 9/11 G.I. Bill housing allowances by being accepted at another school, the amount of debt placed on these veterans for attendance at for-profit colleges may dissuade veterans from continuing their education.  Often veterans at for-profit colleges have to take out loans to pay for tuition beyond what the G.I. Bill paid.

So, why has the Department of Veterans Affairs not followed the Department of Defense and Department of Education’s lead in banning Post 9/11 G.I. Bill funds from going to ITT Tech and other similar colleges?  At the moment, the VA simply does not have the ability to refund veterans.  If a school loses accreditation with the VA, then the VA can prevent any Post 9/11 G.I. Bill funds from being used at the school.  However, the VA relies heavily on the decisions from State Approving Agencies (SAA) to decide what an approved college is.  For-profit institutions are not “deemed approved” like public institutions, who do not need additional review from an SAA.  If the for-profit have approval of an SAA, then there is very little stopping the VA from allowing G.I. Bill funds to go to the institution.

The Improving Transparency of Education Opportunities for Veterans Act of 2012 authorized the VA to create a search tool for veterans seeking to higher education.  The G.I. Bill Comparison Tool lists schools by state, type of program, or name.  Information is posted about whether the school is approved by the VA and any other actions taken to help veterans at that school.  Further, statistics showing retention and passing rates are included on the individual school pages.  Veterans and their families may choose the schools that fit their G.I. Bill criteria and financial needs.

The Student Veteran Loan Relief Fund is a non-profit organization dedicated to helping veterans…

Private non-profit organizations have stepped in to help veterans caught in the for-profit trap. Veteran Service Organizations, such as Iraq and Afghanistan Veterans of America, are lobbying Congress to close the loophole in the 90/10 rule.  The Student Veteran Loan Relief Fund is a non-profit organization dedicated to helping veterans who find themselves without a college to go to and lacking funds to continue to a new college.  American Legion and Veterans of Foreign Wars have trained local representatives to assist veterans in finding new schools to attend and what to do with their benefits going forward.

Congress has also tried to help veterans who have lost their benefits.  Legislation was offered in Congress to close the 90/10 Rule loophole for Post 9/11 G.I. Bill funds.  The Military and Veterans Education Protection Act was first introduced in 2012 but failed to pass.  The bill was revived but once again failed in 2015 with Senator Bernie Sanders (I-VT) becoming a co-sponsor of the bill.  Senate Republicans thought the bill was too expensive and instead wanted to scrap the bill for sanctions against Iran and the nuclear deal.  Senator Sanders called out his fellow senators saying, “My hope had been that maybe, just maybe, when you deal with the needs of people who have sacrificed so much for this country and understand what war has done to tens and hundreds of thousands of young men and women in this country, I thought that maybe, maybe just on this issue, this Senate could come together and do the right thing for our veterans.”

An executive order from the Obama Administration states that graduates of for-profit schools must have “gainful employment in a recognized occupation” for for-profits colleges to continue to receive funds.  Gainful employment in a recognized occupation would require for-profit schools to guarantee that their graduates would obtain a job “…[that] the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings.”  Veteran Service Organizations have hailed this requirement as a great step in combating the predatory recruiting of veterans into for-profit programs.

Opponents say that this requirement is too great of a burden on the for-profit institutions.  Some students may not try to get the jobs that meet the requirement or for another reason other education are not able to get the kind of employment needed for “gainful employment in a recognized occupation.”  While there is some responsibility on the part of the veteran in their decision making, these colleges specifically seek out veterans for the Post 9/11 G.I. Bill funds with exaggerated promises of achievement and job opportunities.

In the end, the policy behind the Post 9/11 Bill is opportunity and choice.  The universal opportunity given to all veterans is the chance to continue their careers in the civilian world. Like any other opportunity, it is all based on the individual’s choices.  The consequences of these choices may either help or harm the individual veteran’s future.  Veterans have to make these choices on their own, but when veterans are actively seeking their benefits, they go to the federal government to receive their benefits.  They are trusting the government to have their back, at all times.  Congress’ inability to pass bills and the VA’s failure to protect veterans has betrayed that trust.

Claire Scott
About Claire Scott (12 Articles)
Claire Scott is a third year law student and serves as a Senior Staff Writer for the Campbell Law Observer. Originally from Chesapeake, VA, Claire is a Campbell University alumi. After her 1L summer, she worked in the Harnett County NC District Attorney's Office as well as the District 11A Veteran Treatment Court. Her legal interests include estate planning and veteran law.