Closing for-profit college loopholes

The coronavirus relief bill on its way through Congress this week would offer colleges and universities billions in extra funding. But in an effort to protect veterans, it takes aim at for-profit institutions’ budgets.

Current law requires for-profit institutions to get no more than 90 percent of their revenue from federal funding. For the other 10 percent, schools must attract students paying their own way or using private scholarships. In theory, this weeds out schools that don’t offer high-quality instruction at competitive prices.

But the so-called 90/10 rule doesn’t count veterans’ GI Bill benefits as federal dollars. Critics say that loophole incentivizes institutions that can’t attract private money to recruit veterans aggressively, wasting their benefits on poor education. Supporters argue it allows more service members to use their benefits at schools with flexible online courses and vocational training.

The relief bill would close this loophole, but not immediately. A bipartisan amendment passed during a marathon session late last week delays the measure for two years. The Education Department must wait to rewrite the 90/10 rule until October of this year and not implement the change until fiscal year 2023. If enacted today, the shift could put 87 institutions out of compliance, according to an American Enterprise Institute study commissioned by the Veterans Education Project.

Lawmakers intend the change to protect veterans from predatory advertising and poor results. In 2019, the for-profit University of Phoenix agreed to pay $191 million to settle a Federal Trade Commission complaint that its advertisements, some targeting service members, exaggerated students’ employment prospects with companies like Microsoft and AT&T. Major for-profit schools including ITT Technical Institutes and Corinthian Colleges have abruptly closed, leaving enrolled veterans stuck with depleted GI Bill benefits and no degrees.

Opponents of the amendment say the change would limit veterans’ education choices and punish low- and high-quality institutions alike. “It is unconscionable to exploit the COVID-19 relief bill as a vehicle to deny veterans and active-duty service members the right to use their earned benefits on the career school of their choice,” Jason Altmire, president of a group representing for-profit institutions, wrote.

The Veterans Education Project study found changing the rule could force some for-profit institutions with good student outcomes to cut military student enrollment, raise prices, or go under.

“I understand that there’s a desire to protect recipients of these benefits from schools with troublesome student outcomes,” study co-author Jason Delisle said. “There are for-profit institutions with really good outcomes … and they’re going to get nailed by these changes.”