Washington Update

Senate Challenges Use of Military Benefits by For-Profit Colleges

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For the second time in two years, Congress is trying to close a loophole critics say is used by for-profit colleges to target veterans and the generous Department of Defense (DOD) tuition grants they receive. Federal law prohibits for-profit colleges from receiving more than 90% of their funding from federal financial aid programs that are part of Title IV of the Higher Education Act. But that figure does not include money from the Post-9/11 GI Bill or DOD tuition assistance programs.

A Senate bill, the Protecting our Students and Taxpayers (POST) Act, and a similar House bill propose to drop the maximum to 85% — its original ratio until 1998 — and change the definition of federal revenue to include not just federal student aid from the Department of Education but all federal funding.

According to Sen. Dick Durbin (D-IL), the second-ranking Democrat in the Senate and a bill sponsor, for-profit colleges received $32 billion in FY12 through Pell Grants and federally backed student loans. “The loophole makes service members and veterans prime targets of for-profit schools,” Durbin said on the Senate floor on November 8, the day he introduced the bill. “They are all over these service members and veterans to sign them up because they bring in more federal dollars,” he added, according to a report in CQ Roll Call.

A two-year investigation by the Senate’s Health, Education, Labor and Pensions Committee found that for-profit colleges and universities sometimes engage in “aggressive” and “deceptive” recruiting practices, and that their students experience inflated tuition prices and high drop-out and default rates on their student loans, according to the CQ article. For-profit colleges enroll only about 12% of all college students yet account for almost half of student loan defaults, Durbin said in a press release issued on the day the bill was introduced.

Supporters of the bill say lowering the maximum amount of federally funded tuition from 90% to 85% will help insure that for-profit colleges retain high enough standards to attract a student body where at least 15% of students cover the costs of tuition out of their own pockets and not through taxpayer-funded federal education grants.

The Association of Private Sector Colleges and Universities, the trade group that represents the for-profit educational sector, says the government is already taking steps to curb predatory marketing to veterans and make sure that they choose schools that fit their needs. The group’s president, former Rep. Steve Gunderson, told a Senate hearing in June 2013 that there were poorly performing universities in every part of higher education, and that Congress was simply demonizing the private sector. The group has also said the change will make it harder for veterans to get the education they deserve.
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