Student Veterans and For-Profit Colleges: A Match Made in Hell?

After serving in the Army for 16 years, former Staff Sgt. Jon Elliot wanted to pursue an education and found ATI Career Training Center.

Recruiters falsely assured Elliot that the program was covered under his Post-9/11 GI Bill benefits, so he enrolled. But it wasn’t covered and, four short months later, Elliot dropped out and was hit with a $9,600 tuition bill.

Elected officials say Elliot’s story highlights disturbing new findings revealing how for-profit schools exploit veterans.

Led by Sen. Tom Carper (D-Del.), several members of the Senate addressed the issue during a hearing on the issue Thursday.

The crux of the problem is clear: Many for-profit colleges are aggressively marketing their programs to veterans, who, after paying for the education with funds from the Post-9/11 GI Bill, often discover too late that their education was worthless and their benefits were used up.

(Read More For-Profit Coverage from Campus Progress)

Eight of the top ten recipients of GI Bill dollars were for-profit institutions, Sen. Tom Harkin (D-Iowa) said, with the University of Phoenix leading the pack.

For-profit institutions have significantly higher default and dropout rates than accredited public universities and they often charge several times the tuition. For-profits also received more than a third of all GI Bill benefits—or $1 billion this year—yet only enrolled one-quarter of student veterans.

But why go out of the way to admit veterans?

Simple: Doing so allows predatory for-profit schools to take in more federal money than they’re entitled to.

Colleges operate under the “90-10 Rule,” which says that no more than 90 percent of a school’s funding can come from Title IV federal student aid.

But GI Bill funds don’t count as Title IV funds. That means that for every service member a school enrolls, they can enroll nine others who get federal student aid.

“They have no skin in the game,” said Sen. Tom Carper, nothing that if for-profit colleges can operate on almost all federal funds, they have little to lose.

Those who testified at the hearing of the Homeland Security and Governmental Affairs Subcommittee were quick to note that not all for-profit colleges are predatory—and that many provide valuable services to both veterans and active-duty service members.

As examples of “good” for-profit schools, VetJobs President Ted Daywalt mentioned University of Phoenix and the American Military University. He said they are “not in the same category” as more predatory schools such as Kaplan and the Education Management Corporation, which currently faces a fraud lawsuit from the U.S. Department of Justice.

The recent news, coupled with other documented malpractices in the industry, has prompted many to call for aid to veterans—both from the GI Bill and the Pentagon Tuition Assistance Fund—to count as federal aid.

“I’d even push it higher, to 80-20,” Daywalt said, noting that if for-profit institutions could not generate enough interest in their programs to meet this target, perhaps they deserve to go out of business.

He also recommended that for-profit institutions be restricted to using just 10 percent of their federal funding on marketing. Some currently use up to 50 percent.

But Russell Kitchner, the vice president for regulatory and governmental relations at the American Military University, was on the defense for for-profit colleges.

During the hearing, he said federal funds for veterans should not be included in the 90 percent category because of “possible unforeseen consequences”—namely, that it could unnecessarily increase tuition and reduce access to education options for veterans. Rather, he urged an approach that focused more on evaluating institutional performance.

The Department of Veterans Affairs also took some heat on the issue of oversight. Out of about 6,000 schools eligible to receive GI Bill funds, the department only found one the previous year that had been barred from funding for fraudulent practices.

But, an August 2010 Government Accountability Office report investigating 15 for-profit schools found that all had made deceptive or questionable statements to undercover applicants. Four even encouraged applications to lie on their financial aid forms.

Veterans Affairs representatives Curtis Coy and Keith Wilson admitted that the department has not done an impressive job at the national level, noting compliance information was stored at the state level.

But Sen. Carper told them, “I urge you to look harder” for abuses in the industry.

Wilson said veterans like Jon Elliot could bring their concerns directly to the Department of Veterans Affairs by calling 1-888-GI-BILL-1 or emailing the office directly.

And Gallucci, of the Veterans of Foreign Wars,  argued that state approving agencies, or SAA’s—“the boots on the ground” of verifying compliance among schools—were underfunded and undermanned, often with only one person overseeing operations for an entire state. Veterans Affairs officials said they are revamping the SAA compliance and survey program.

Gallucci also testified about a pilot program at the University of Phoenix that allows students to “try out” a program before making a financial commitment to it. About 20 percent of students walk away after the trial phase, incurring no debt and losing no benefits.

Both senators and experts agreed on the need for quality educational counseling for veterans and that metrics of how a school is performing academically should be more transparent and available to the public.

Emily Crockett is a reporter with Campus Progress. Follow her on Twitter @emilycrockett.

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