01.23.12

Durbin, Harkin: Congress Must Remove Loophole that Encourages For-profit Colleges to Target Veterans

Senator introduces legislation to increase accountability for taxpayers and remove incentive for schools to target veterans

[CHICAGO, IL] – At a forum examining aggressive recruiting and marketing tactics practiced by some members of the for-profit college industry to target veterans and service members, U.S. Senator Dick Durbin (D-IL) today announced legislation that would further limit federal government subsidies to for-profit colleges and eliminate the incentive for these extremely profitable schools to aggressively target veterans and service members.  The Protecting Our Students and Taxpayers (POST) Act is cosponsored by the Chairman of the Senate Committee on Health Education Labor and Pensions (HELP), U.S. Senator Tom Harkin (D-IA).

 

“By law, for-profit college companies are allowed to receive no more than 90% of their revenue from federal financial aid programs, but there’s a catch.  Money from the new Post 9/11 GI Bill and from Department of Defense tuition assistance programs isn’t considered federal funding," said Durbin.  “This is an outrageous loophole that has led to veterans and service members being heavily recruited for the amount of additional federal money they can bring in to the company.  It’s time the federal government started to better oversee and regulate these heavily subsidized for-profit schools which is why I am joining with Chairman Harkin to introduce the POST Act – a bill to protect students, veterans and service members from aggressive recruiting practices and help ensure taxpayers are getting a return on their investment.” 

                                                                                 

"Over the past year, the HELP Committee has uncovered widespread predatory practices and dismal student outcomes at many for-profit colleges,” said Harkin.  “The legislation we are introducing today is one of many important steps we will take in the coming months toward holding for-profit colleges accountable to the taxpayers who invest 30 billion dollars in their institutions annually.  It will close a loophole that has made veterans and active duty military major targets of deceptive marketing and aggressive recruitment, rather than students treated with the respect their service deserves."

 

At today’s forum, Durbin was joined by Holly Petraeus, the Assistant Director for Service Members Affairs at the Consumer Financial Protection Bureau, who spoke about the need to address inappropriate targeting of military affiliated students by the for-profit college sector.  Also participating in the forum were: two veterans who are former for-profit college students; a current National Guardsman and former for-profit college student; a recruiter for the National Guard who advises Guardsmen on educational opportunities; and Ray Schroeder, Associate Vice Chancellor for Online Learning, University of Illinois Springfield.

 

The current federal 90/10 rule 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.  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 way the legislation was written, veterans’ and active duty service members’ federal student aid – such as G.I. bill benefits and the Department of Defense’s tuition assistance funds – does not currently count toward the 90%.  As a result, for-profit educational institutions have been aggressively recruiting and enrolling veterans, service members and their families to their programs as a way to comply with the 90/10 rule. 

 

The POST Act would re-instate the original ratio of 85/15 (it was loosened to 90/10 in 1998) and change the definition of what counts as federal revenue so that it includes all federal funds.  This new definition would eliminate the powerful incentive for-profit schools to aggressively recruit service members and veterans and ensure that all schools are complying with the law as it was intended.

 

Additionally, the Durbin-Harkin POST Act would:

 

  • Increase penalties for noncompliance with the new 85/15 rule – Under the legislation, for-profit colleges would lose eligibility to participate in federal student aid programs after one year of noncompliance with the new rule (currently, for-profit colleges must be noncompliant for two years before they lose eligibility).

 

  • Eliminate accounting tricks that inflate non-federal funding sources –Currently, for-profit colleges that issue private loans directly to students are allowed to calculate a large portion as revenue for the purposes of 90/10 rule compliance before any of the loan is paid back.  This accounting trick has led to for-profit colleges issuing private loans to students with little expectation of that loan being paid back.  Today’s legislation would only allow actual payments that students make to be counted as revenue.