Durbin, Cohen, Colleagues: Congress Should End Loophole That Encourages For-Profit Colleges To Target Veterans And Service Members

Introduce Bicameral Legislation To Reinstate The 85/15 Rule To Require For-Profit Colleges To Bring In More Revenue From Non-Federal Sources

WASHINGTON – U.S. Senators Dick Durbin (D-IL), Jack Reed (D-RI), Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Tom Carper (D-DE), and Chris Murphy (D-CT) were joined by U.S. Representative Steve Cohen (D-TN-09) today to introduce bicameral legislation that would help put an end to the for-profit college industry’s aggressive recruiting of veterans, service members, and their families.  The Protecting Our Students and Taxpayers (POST) Act would prohibit for-profit colleges and universities from receiving more than 85 percent of their revenue from the federal government and change the calculation of federal revenue to include all federal funds, including Department of Veterans Affairs GI Bill and Department of Defense Tuition Assistance benefits.  

According to data released last year by the U.S. Department of Education – in response to a request by Durbin and 19 other Democratic Senators – because of the loophole, 186 institutions, including some of the largest recipients of GI Bill benefits, received more than 90 percent of their revenue from federal taxpayers – nearly $8 billion cumulatively.  Further, more than 563 institutions received more than 85 percent of their revenue from federal taxpayers – $12.6 billion cumulatively. 

“By law, for-profit colleges are allowed to receive no more than 90 percent of their total revenue from federal taxpayers.  This high threshold allows far too much federal money to funnel to an industry that often provides a greater return on taxpayer investment to its executives and investors than it does to its students.  But there’s a catch,” said Sen. Durbin.  “Money from the GI Bill and Department of Defense Tuition Assistance programs aren’t counted as federal revenue, which leaves billions in taxpayer dollars virtually unregulated.  As a result, these companies can receive an unlimited amount of revenue from federal taxpayers while still complying with the law by aggressively targeting veterans and service members.  We can’t let this invitation to exploit our veterans to continue.” 

“Reinstating the 85/15 rule will help hold for-profit colleges accountable and prevent them from preying on veterans and servicemembers,” said Sen. Reed.  “Too much federal funding has poured into these for profit-college companies without adequate results for veterans or taxpayers.  We need to ensure veterans and taxpayers alike are getting better value for their investment and we can start by closing the 90/10 loophole.”

“Our legislation would close a glaring loophole that allows for-profit college bad actors to treat the men and women who have dedicated their lives to serving our country like nothing more than ATM machines. Shameful recruiting campaigns that target servicemembers and veterans allow for-profit schools to rake in billions of dollars in VA education benefits every year, including Post-9/11 GI Bill benefits. This in unacceptable – for taxpayers and for our men and women in uniform,” said Sen. Blumenthal.

“Shady for-profit colleges shouldn’t get away with cheating students and veterans on the taxpayers’ dime. With some for-profit colleges receiving over 90 percent of their revenue from federal dollars, these schools really don't exist without huge amounts of government support.  It’s time for Congress to end the gravy train,” said Sen. Warren. 

“Our nation’s veterans served our country and earned the right to attain a high-quality, affordable education with the help of the Post-9/11 G.I. Bill,” Sen. Carper said. “Not every for-profit school is a bad actor, but far too many are taking advantage of this loophole and targeting our veterans and their generous G.I. Bill funds. One veteran misled or mistreated by a for-profit school is one veteran too many. Closing this loophole and counting G.I. Bill dollars as federal dollars is a commonsense fix that will help us improve educational outcomes for veterans and protect taxpayers.”

“Too many for-profit colleges are get-rich-quick schemes, cheating students and veterans and defrauding taxpayers along the way. It’s unbelievable that these schools are supported almost entirely by taxpayer money but have very little accountability for the results they produce. For-profit colleges are getting away with skirting the laws by targeting veterans and their hard-earned benefits. Congress needs to step up and crack down on this,” said Sen. Murphy. 

“For-profit colleges can receive overwhelming majorities of their revenue – up to 90% -- from federal financial aid programs, such as student loans,” said Rep. Cohen. “Too often, these schools fail in their duty to sufficiently prepare graduates for jobs that will enable them to repay these loans, leaving taxpayers to foot the bill. Even worse, a loophole in current law allows unscrupulous colleges to receive even more federal funds by enrolling veterans and servicemembers. This loophole encourages bad behavior that weighs down our nation’s heroes with mountains of debt and few career prospects while lining the pockets of wealthy for-profit investors with taxpayer money. This is unacceptable. For-profit colleges should be accountable to both the students they claim to educate as well as to the taxpayers who keep their doors open. I am pleased to be working with Senator Durbin to close this loophole, encourage for-profit colleges to provide better education, and protect American taxpayers.” 

The current federal 90/10 rule is a provision in the law that bars for-profit colleges and universities from deriving more than 90 percent of their revenue from the U.S. Department of Education’s federal student aid programs.  The other 10 percent needs to come from sources other than the federal government.  The purpose of this rule is to ensure that schools are not counting on taxpayer dollars as their sole source of revenue. 

Because of the way the law is written, veterans’ and active duty service members’ federal education benefits – such as G.I. bill education benefits and the Department of Defense’s tuition assistance funds – do not currently count toward the 90 percent.  As a result, for-profit educational institutions have been aggressively recruiting and enrolling veterans, service members, and their families to their programs as a way to comply with the 90/10 rule. 

The POST Act would reinstate the original ratio of 85/15 (it was loosened to 90/10 in 1998) and change the definition of what counts as federal revenue so that it includes all federal funds.  This new definition would eliminate the powerful incentive for-profit schools to aggressively recruit service members and veterans and ensure that all schools are complying with the law as it was intended.  Additionally, the POST Act would count institutional loans (schools can now use Title IV funds from one student to lend to another) in the calculation of federal revenue sources and eliminate a school’s Title IV eligibility after one year of noncompliance instead of the three consecutive years it now takes.

The POST Act is supported by: Student Veterans of America; Military Officers Association of America; Paralyzed Veterans of America; Veterans Education Success; The Education Trust; U.S. PIRG; The Institute for College Access and Success (TICAS); National Association of College Admission Counseling; American Federation of Teachers; American Association of State Colleges and Universities; and Young Invincibles.