Obama, Congress Deride For-Profit Schools’ Preying on Veterans

Responding to complaints from thousands of veterans, Congress, the Obama administration and various veterans groups are condemning some of the practices of for-profit schools and colleges that receive hundreds of millions of dollars in GI Bill education benefits.

Critics say too many for-profit schools provided inadequate yet expensive educations to veterans who are lured into matriculation by misleading advertisements, aggressive marketing, high-pressure sales tactics and predatory recruiting practices.

Since 2009, when the Post-9/11 GI Bill took effect, eight of the 10 colleges that collected the most money from the taxpayer supported program were for-profit schools.

The schools earned 86 percent of their revenue from public dollars — mostly from GI Bill payments.

Records show that from 2009 to 2011, the VA paid:

  • $196 million to the University of Phoenix
  • $175 Million to ITT Technical Institute
  • $128 million to DeVry University
  • $50 million to Kaplan University
  • $50 million to The Art Institutes
  • And $28 million to Westwood College.

Taxpayers and Veterans on Losing End

Critics contend that neither the taxpayers, nor the veterans themselves, are getting much bang for their bucks. During those two years, the Veterans Administration paid out $4.4 billion for tuition and fees.

For-profit private schools received 37 percent of the funds but educated just 25 percent of more than one million veterans who applied to use their GI Bill education grants.

In addition, the graduation rate was 28 percent for all students at for-profit private schools, compared to 67 percent at non-profit private schools and 57 percent at public colleges and universities, according to the VA.

Since May, the Senate Health, Education, Labor and Pensions (HELP) Committee, chaired by Sen. Tom Harkin (D-Iowa), has investigated veterans’ complaints against for-profit schools. Among its findings:

  • It costs more than twice as much to educate a veteran at a for-profit school than at a public one – $10,441 versus $4,642, between 2009 and 2011.
  • The two for-profit schools that received the highest GI Bill payments — American Public Education and Bridgepoint Education — earned $133 million and $113 million, respectively, in 2011.
  • For-profit schools spend much more on sales, marketing and advertising than they do on educational support staff.
  • For-profit schools have a loan default rate of 47 percent.

Bills Proposed to Deal with For-Profit Schools

In response, several bills have been offered in Congress. The Military Veterans Education and Reform Act, introduced in the Senate in March, would require schools to disclose graduation and loan default rates to prospective students. It would also require the Pentagon to set up a centralized complaints process to address allegations of fraud. Moreover, a companion bill in the House of Representatives would require for-profit schools to reduce their reliance on GI Bill money.

Another bill, The GI Educational Freedom Act, would require counseling for veterans who use educational benefits and would establish a tracking system to help ensure that schools provide quality educations.

The White House recently accused some for-profit institutions of aggressively recruiting brain damaged veterans, encouraging veterans to take out costly loans, and engaging in misleading enrolling practices at military installations.

In April, President Obama issued an executive order prohibiting these types of activities while also requiring the six thousand colleges that receive GI Bill Funds to offer veterans literature outlining what their educations will ultimately cost.

In response, Steve Gunderson, president and CEO of the Association for Private Sector Colleges and Universities, says that the for-profit schools have been working with Congress and veterans’ organizations “to achieve solutions to the many areas of concern.”

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at bfay@debt.org.

GI Bills and student loans

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    Home > Blog > Obama, Congress Deride For-Profit Schools’ Preying on Veterans

    Sources:

    1. Zucchino, D. & Rivera, C. (2012, July 16). Backlash Builds as For-Profit Schools Rake in GI Bill Funds. The Los Angeles Times. Retrieved July 17, 2012, from http://www.latimes.com/news/nationworld/nation/la-na-vets-colleges-20120716,0,2523844.story
    2. Smith, A. (2012, June 26). For-Profit Schools Cash in on the GI Bill. CNNMoney. Retrieved July 17, 2012, from http://money.cnn.com/2012/06/26/news/economy/veterans-schools/index.htm