Carper, Coons: Education Secretary Must Shine a Light On For-Profit College Loophole That Harms Veteran And Military Students and Taxpayers

WASHINGTON – Among the top for-profit recipients of Post-9/11 GI Bill funds, seven of the eight companies are currently under investigation for deceptive and misleading recruiting or other possible violations of state and federal law.  Yet, as U.S. Senators Tom Carper and Chris Coons, along with 18 of their colleagues pointed out today in a letter to Education Secretary Arne Duncan, there are no limits on the amount of federal funding that for-profit colleges can receive thanks to the 90/10 loophole, nor is there public data available on how much for-profit colleges truly receive from taxpayers. 

Today’s letter, organized by Sens. Carper and Dick Durbin (D-IL), was signed by: Sens. Coons, Barbara Boxer (D-CA), Sherrod Brown (D-OH), Richard Blumenthal (D-CT), Dianne Feinstein (D-CA), Al Franken (D-MN), Mazie Hirono (D-HI) Ed Markey (D-MA), Claire McCaskill (D-MO), Jeff Merkley (D-OR), Chris Murphy (D-CT), Patty Murray (D-WA), Gary Peters (D-MI), Jack Reed (D-RI), Bernie Sanders (I-VT), Brian Schatz (D-HI) and Elizabeth Warren (D-MA).

“We write to ask you to better protect servicemembers and veterans from being targeted and exploited by some for-profit colleges by publishing the amount and percentage of revenue received by these institutions from all federal educational programs,” wrote the Senators.  “According to 2013 analysis from the Department of Education obtained by the Center for Investigative reporting, 133 for-profit colleges received more than 90 percent of their revenues from taxpayers when DOD and VA benefits were counted as federal education assistance, and another 292 institutions received more than 85 percent.  The now-collapsed Corinthian Colleges chain received $186 million in VA Post-9/11 GI Bill dollars alone.”

The current federal 90/10 rule 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%  must come from sources other than the federal government. The purpose of this rule is to ensure that schools are not counting on taxpayer dollars to be their sole source of revenue.

Because of the 90/10 loophole, veteran and military educational benefits – such as Post-9/11 G.I. Bill benefits and the Department of Defense’s Tuition Assistance funds – do not currently count toward the 90 percent cap on federal dollars. As a result, some for-profit education companies have been found to aggressively recruit and enroll veterans, service members, and their families as a way to evade the 90/10 rule.

“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. 

Text of today’s letter is below:

Dear Secretary Duncan:

            We write to ask you to better protect servicemembers and veterans from being targeted and exploited by some for-profit colleges by publishing the amount and percentage of revenue received by these institutions from all federal educational programs.

            As you know, a loophole in federal law currently allows for-profit colleges to exceed the 90 percent federal revenue cap, known as the 90/10 rule, by enrolling servicemembers and veterans who have access to additional, non-Title IV federal educational assistance, including Department of Defense (DOD) Tuition Assistance and Department of Veterans Affairs (VA) Post-9/11 GI Bill Benefits.  Together, these programs account for billions of dollars a year.  According to 2013 analysis from the Department of Education obtained by the Center for Investigative reporting, 133 for-profit colleges received more than 90 percent of their revenues from taxpayers when DOD and VA benefits were counted as federal education assistance, and another 292 institutions received more than 85 percent.  The now-collapsed Corinthian Colleges chain received $186 million in VA Post-9/11 GI Bill dollars alone.

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.  Among the top for-profit recipients of Post-9/11 GI Bill funds, seven of the eight companies are currently under investigation for deceptive and misleading recruiting or other possible violations of state and federal law.  Investigations are being undertaken by state Attorneys General and by federal agencies including the Department of Justice, the Securities and Exchange Commission, the Federal Trade Commission, and the Consumer Financial Protection Bureau.

We were pleased that President Obama’s Fiscal Year 2016 Budget proposed closing the 90/10 loophole by ensuring that all forms of federal education assistance fall under the statutory federal revenue cap.  We plan to continue legislative efforts during the 114^th Congress to accomplish this goal.  But in the meantime, 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 by Section 487(d)(4) of the Higher Education Act. 

Publishing this information will move toward the President’s stated policy objective and provide a more accurate picture of the for-profit industry’s heavy reliance on federal taxpayers for many of their operations.  Publishing this data will also help inform debate in Congress as we continue to grapple with budgetary challenges and decisions on where we should be spending precious federal education assistance.  Most importantly, it will help our servicemembers and veterans make more informed decisions when choosing where to go to college.

Thank you for your prompt reply.
 

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