Attorney General Dustin McDaniel and 21 other attorneys general recently asked
Congressional leaders to fix a loophole in federal law that allows for-profit
colleges to operate solely on taxpayer funds and opens the door for the colleges
to target our nation’s veterans and their families.
Federal law prohibits for-profit colleges from deriving
more than 90 percent of their revenue from federal Department of Education
sources, including federally-guaranteed student loans. However, federal funding
from GI Bill and Veteran’s Assistance educational benefits are not subject to
the “90/10 rule.” As a result, for-profit colleges can derive the remaining 10
percent of their funding from government veterans’ programs, rather than
obtaining the 10 percent from private sources, as the law intended.
McDaniel and his colleagues urged Congress to amend the
Higher Education Act to include veterans’ benefits under the 90/10
rule.
“Some for-profit colleges are actively pursuing our
returning veterans and their families and are looking to cash in on the benefits
that our veterans truly deserve,” McDaniel said. “Rather than have a real
interest in improving the lives of those who serve our country, their interest
is in collecting government money to sustain their proprietary
enterprise.”
Previously, for-profit colleges depended on
privately-issued student loans to obtain their 10 percent funding under than
90/10 rule. The exodus of private lenders during the economic downturn, coupled
with the veterans’ loophole in the law, created a strong incentive for the
colleges to recruit members of the military. Of 20 for-profit colleges analyzed
in a Congressional report last year, total military educational benefits
increased from $66.6 million in 2006 to a projected $521.2 million in 2010, a
683 percent increase.
Holly Petraeus, the assistant director for service
member affairs at the federal Consumer Financial Protection Bureau, said last
year that the loophole “gives for-profit colleges an incentive to see service
members as nothing more than dollar signs in uniform … As long as military
education funds are on the 10 percent side of the 90-10 rule, service members
will be a lucrative target for exploitation.”
Other states whose attorneys general signed the letter
were: Arizona, California, Connecticut, Delaware, Hawaii, Idaho, Illinois, Iowa,
Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Nevada, New Mexico,
New York, North Carolina, South Carolina, South Dakota, Tennessee and West
Virginia.
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