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For-profit colleges still reap millions from veterans GI Bill

Franklin D. Roosevelt, Bennett Clark, Harbin Peterson, A. Leonard Allen, John Rankin, Paul Cunningham, Edith Nourse Rogers, Sullivan, Walter George, John Steele, Robert WagnerFranklin D. Roosevelt, Bennett Clark, Harbin Peterson, A. Leonard Allen, John Rankin, Paul Cunningham, Edith Nourse Rogers, Sullivan, Walter George, John Steele, Robert Wagner
President Franklin D. Roosevelt puts his signature on the G.I. Bill of Rights in 1944.Photograph by AP

Nearly four years ago, the Senate committee on health, education, labor, and pensions made what they considered a concerning discovery: the amount of Veterans Affairs and Department of Defense education benefits going to 20 for-profit colleges had skyrocketed by 683% over a four-year span: from $66.6 million in 2006 to $521.2 million in 2010.

Between 2009 and 2010 alone, revenue from military education benefits at those for-profit schools increased 211%.

The for-profit colleges were raking in large sums of money despite the so-called 90-10 rule, which prohibits for-profit universities from getting more than 90% of their revenue from the government. But the rule, which was enacted in 1992 to prevent schools from being overly reliant on federal money, doesn’t cover GI Bill benefits, making post-9/11 veterans, whose education benefits cover $19,000 in tuition for four years, likely targets for universities looking to capitalize on the loophole. For-profit schools’ recruitment of veterans is a problem not just because these schools often report poor graduation rates, but also because for-profit universities are more expensive for the taxpayers funding the GI Bill—$10,900 per year at a for-profit versus $4,900 at a public school.

A follow-up study issued by the HELP committee found that veterans’ enrollment in for-profit colleges had sharply increased—from 23% of veteran students in 2009 to 31% in 2013—giving such institutions access to $1.7 billion in post-9/11 GI Bill benefits in the 2012-2013 academic year, an increase from $640 million in 2009-2010. For-profit schools hold eight of the top 10 spots for post-9/11 GI Bill benefit recipients even though up to 66% of students enrolled in those for-profit schools withdrew without a degree or diploma. (There is no federal data on how veterans fare, specifically.) Seven of those eight top for-profit benefit recipients were under investigation for deceptive and misleading recruiting or other violations of state and federal law when the report was released in June.

For-profit schools have long been a target of the Obama administration’s regulations, mostly for their contribution to the nation’s mounting student debt. (Eighty-eight percent of students at for-profit colleges held student loans in 2012, compared to 66% of public college students and 75% of students who attended private colleges, according to The Institute for College Access and Success.) Last month, the Education Department announced “gainful employment” rules, which base a program’s access to federal loans on whether the estimated annual loan payment of a typical graduate doesn’t exceed 20% of the student’s discretionary income or 8% of total earnings. The Association of Private Sector Colleges and Universities, a trade group representing for-profit schools, promptly sued to strike down the rule, calling it “unlawful, arbitrary, and irrational.”

The gainful employment proposal—if implemented—could eliminate some for-profit programs, but it doesn’t directly address the problem of for-profit colleges targeting veterans and gaining access to their education benefits.

In fact, action aimed at addressing this problem has come in fits and starts, with very few—if any—tangible results.

In April 2012, President Obama issued an executive order to establish so-called Principles of Excellence for educational institutions that serve veterans and their families. The 2014 HELP committee reports that the executive order aimed to obtain federal data to determine if veterans using post-9/11 benefits to attend college are completing degrees and diplomas. Some for-profit schools, like the University of Phoenix, Strayer, Kaplan, and Bridgepoint, have put in place policies directed at improving graduation rates and graduate employment prospects, but none of the other schools receiving the largest amounts of post-9/11 benefits has followed suit.

In January 2012, Senator Dick Durbin, a Democrat from Illinois, proposed a bill that would alter the way federal funds are allocated to for-profit colleges, shifting the 90-10 rule to an 85-15 ratio. It would also ensure that GI Bill benefits would count toward for-profit schools’ government aid cap. The bill was reintroduced in November 2013 and remains in committee. The Department of Defense Appropriations Act for fiscal year 2015 included language that would count GI Bill benefits as federal funds where the 90-10 rule is concerned. That Act passed the Senate Appropriations Committee in July but nothing more has come from it.

Noah Black, vice president of communications for APSCU, the for-profit college trade group, told Fortune that the 90-10 rule, even as it stands now, increases the risk of low-income students being denied access to postsecondary education. Black also said that the rule may cause some colleges to discriminate against high-risk students. “The 90-10 rule is not a measure of institutional quality, it is a financial calculation that is a measure of the socioeconomic position of the student population served by an institution,” Black said in a statement.

Meanwhile, Matt Randle, chief operating officer for Student Veterans of America, a coalition of student veteran groups on colleges campuses, told Fortune the “the student veteran population is a canary in the coal mine. It’s not just student veterans who are facing issues because of attending for-profit schools.” The problems that stem from for-profit colleges are most identifiable when “those who serve for our freedoms and beliefs are taken advantage of,” he says.

“Unfortunately, you look at the situation and it’s hard to justify why [change] hasn’t happened,” he says. “There have been members of Congress who have been focused on it, but not the groundswell necessary to [bring] change.”