Durbin: Obama Budget Proposal Would Finally Close For-Profit College Loophole, Save Taxpayers Billions

[WASHINGTON, D.C.] - U.S. Senator Dick Durbin (D-IL) applauded the inclusion of a provision in President Obama’s 2016 Budget that would eliminate a loophole that allows for-profit colleges to receive more than 90% of their revenue from the federal government.  This change would help put an end to the for-profit industry’s predatory marketing campaigns and aggressive recruiting of veterans, servicemembers and their families. 

FACT: Forty-four percent of all student loan defaults come from for-profit colleges even though they only enroll 10% of all college students.  That’s compared to 12.9% of all student loan defaults coming from public colleges which enroll roughly 75% of all students.


“The exclusion of billions of dollars from the Departments of Defense and Veterans Affairs in the federal 90/10 rule has led to well-documented cases of exploitation of servicemembers and veterans by for-profit colleges,” said Durbin.  “I have investigated these practices and in my role as Chairman of the Defense Appropriations Committee, I have worked with the Department of Defense to increase protections and bring transparency to this industry.  Closing the 90/10 loophole will put an end to the powerful incentive for-profit colleges currently have to aggressively recruit servicemembers and veterans.”

Durbin has worked for years to pass legislation he authored to close the 90/10 loophole that President Obama identified today in his 2016 Budget.  His Protecting Our Students and Taxpayers (POST) Act - which he plans to reintroduce this Congress - changes the definition of what counts as federal revenue so that it includes all federal funds. 

The current federal 90/10 rule is a provision in the law that bars for-profit colleges and universities from deriving more than 90% of their revenue from the U.S. Department of Education’s federal student aid programs.  The other 10% 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 to be their sole source of revenue. 

Because of the way the legislation was written, veterans’ and active duty service members’ federal student aid – such as GI bill benefits and the Department of Defense’s tuition assistance funds – does not currently count toward the 90%.  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.