Veterans’ GI Bill Benefits are being Picked off by Predatory For-Profit Institutions. Here’s why.

By: House Committee on Veterans’ Affairs Staff

The GI Bill isn’t a giveaway, it’s a benefit veterans have earned for their service to our country and a critical tool to ensure that veterans can pursue higher education and stay competitive with their peers following their service. This helps level the playing field for veterans who gave up pursuits of higher education earlier in life and instead chose to serve their country.

The Problem

In 1965, Congress passed the Higher Education Act which included provisions to cap how much of for-profit schools’ funding could come from federal sources.

Decades later, Congress defined federal funds as those offered by the Department of Education and set percentages limiting for-profit schools' use of federal funds. The resulting percentages were set at 90 and 10 percent in 1998 and came to be known as 90/10.

The 90/10 rule was created with the intent to combat waste, fraud, and abuse of federal education dollars. It allowed for-profit schools to receive 90 percent of their revenue from federal sources but required that they receive 10 percent of their revenue from non-federal funds.

However, under the rule, GI Bill payments and DOD Tuition Assistance funding do not count as federal dollars despite originating from taxpayers’ pockets. Instead, these dollars count toward the 10 percent (non-federal funds) requirement and effectively create a loophole that incentivizes low-quality, for-profit schools to use predatory tactics to target servicemembers and veterans for their benefits.

This 90 percent, 10 percent split or “90/10 loophole” incentivizes low-quality, for-profit schools to use predatory tactics to aggressively recruit servicemembers and veterans for their benefits, and in turn, allows them to enroll more minority students and women using federal funding.

By enrolling more veterans and relying on their GI bill funds, they can meet their required 10 percent threshold — and double dip from two pots of federal funding. For every servicemember, veteran, spouse or child who is enrolled at a for-profit college and paying with the GI Bill or DOD funds, that college can enroll nine others who are using nothing but federal dollars.

Between 2009 and 2017, eight of the top 10 recipients of GI Bill dollars were for-profit institutions — collecting a staggering $34 billion. Six of those eight schools have come under fire in state and federal lawsuits for predatory recruitment and fraud.

When some of these for-profit institutions shut down suddenly (for-profit schools make up about 88% of all school closures), taxpayers are left to foot the bill, and veterans are left with nothing but worthless pieces of paper. What’s worse is that students who attend for-profits are more likely to graduate with large sums of student loan debt they cannot repay and credits they can’t use. When ITT Tech and Corinthian College closed and left 7,000 student veterans without degrees — 94% of the credits earned at those schools couldn’t be transferred. That isn’t veteran choice — it’s veteran abuse.

The Solution

For years, veteran advocates and lawmakers have worked to close the widely known 90/10 loophole that predatory for-profit schools use to target veterans. Chairman Takano has been an outspoken advocate for closing the loophole, protecting student veterans and servicemembers’ education benefits, and holding predatory, for-profit colleges accountable. He first introduced the PRO Students Act in 2015, which would close this loophole and protect students from predatory for-profits. And in 2020, he introduced a bipartisan amendment to the FY 2021 NDAA that would have partially closed the “90/10 loophole” and protected servicemembers’ education benefits from for-profit institutions by making DOD Tuition Assistance count as federal educational assistance funds for the purposes of the 90/10 rule.

Under the leadership of Subcommittee on Economic Opportunity Chair Mike Levin, the House Committee on Veterans’ Affairs held several hearings last year in support of student veterans, including a hearing in Southern California with students impacted by the 90/10 loophole.

Before wrapping up last Congress, the Committee passed significant student veteran protections into law that will improve the quality of education offered to students nationwide, expand benefits for student veterans and their families, and give the State Approving Agencies responsible for approving courses the ability to crack down on poor-performing schools.

In the latest COVID-19 relief package, lawmakers banded together to make closing the 90/10 loophole a real possibility. The American Rescue Plan takes a comprehensive approach to secure the economic future of all Americans as we recover from the pandemic and includes a critical provision to close the 90/10 loophole once and for all.

Why now?

The COVID-19 pandemic has taken a serious economic toll on all Americans — including our veterans. February’s jobs report is further proof that our economic recovery is moving too slow and veteran unemployment has continued to rise. This has real implications for our student veterans.

During the 2009 financial crisis, many students — both veterans and non-veterans — went back to school as unemployment numbers skyrocketed. This created a perverse incentive to create low-quality, for-profit schools that could take advantage of people who couldn’t find jobs. As the economy recovered from the Great Recession and fewer people returned to school, many of these ready-made schools closed, and countless veterans lost their hard-earned benefits. We cannot repeat this scenario.

To help our student veterans recover from this pandemic, we must close the 90/10 loophole and safeguard their benefits now. By making the American Rescue Plan the law of the land, we accomplished this goal.

Chairman Mark Takano | House Committee on Veterans’ Affairs

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