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Military Spending Becomes Latest Battleground of For-Profit Colleges

Already in the crosshairs of the Obama administration, for-profit colleges are facing a new challenge from congressional Democrats. Some lawmakers are asking questions about the steep rise in military tuition benefits going to high-cost proprietary schools.

In 2010, the nation’s top 20 for-profit colleges reaped $521 million in tuition through defense and veterans benefit programs, up from just $66 million in 2006, says Sen. Tom Harkin, D-Iowa, chairman of the Senate’s education committee. More than $280 million came from veterans benefits alone, including those available under the 2008 GI Bill that expanded educational benefits for active-duty military.

While the post-9/11 Veterans Educational Assistance Act of 2008 opened new benefits for service members, their spouses and children, Harkin says, “Serious questions have emerged about the share of the benefit pool going to for-profit schools with questionable outcomes.”

The military focus opens a new front in the debate over the for-profit sector, whose critics want to reform an industry that relies heavily on federal student aid for revenue. The Association of Private Sector Colleges and Universities denies that for-profit colleges are targeting service members and veterans, but it asserts that such schools offer appealing features for these individuals.

“Demand for private sector colleges and universities by members of the military has grown because of flexible and accelerated schedules, targeted programs and a focus on educating adults for specific careers,” says APSCU President Harris Miller.

Critics, however, say the sizable increase in defense dollars flowing to for-profits adds substantial additional cost to government while providing few benefits to the students. According to Harkin, 54 percent of for-profit students in 2008-09 left school without a degree within a year. At individual schools, withdrawal rates reach as high as 84 percent. For-profit schools also have the highest student loan default rates in the higher education industry.

Recent reports from Harkin’s committee have asserted that some for-profits engage in high-pressure marketing and recruiting tactics. He says questionable practices also may be taking place in recruiting military members.

“Our military bases are by no means safe havens from these types of aggressive and misleading recruitment practices,” he says, citing a Bloomberg news article that found some for-profit schools recruiting on a military base without permission. In another instance, Bloomberg said a recruiter was found in a barracks for wounded Marines after getting permission only to meet with prospective students at the base education center.

Under the new GI Bill, almost all service members, including most reservists, qualify for educational benefits that can last up to 36 months at an average of $458 per credit hour. Service members also can use benefits for spouses and children.

Lawmakers also are concerned that military education benefits do not count as federal aid when calculating whether for-profit colleges rely too heavily on revenue from government sources. Under the so-called 90/10 rule, for-profit colleges can derive 90 percent of their revenue from federal sources but still must get at least 10 percent of their funds from outside government. Schools that fail to meet that requirement lose access to federal student aid programs.

Under a little-known interpretation of that rule, however, tuition benefits for current and former military members through the GI Bill do not count as “federal aid,” thereby allowing the colleges to count it toward the 10 percent non-federal requirement.

According to Harkin, the 15 publicly traded for-profit colleges identified in a scathing Government Accountability Office study rely overwhelmingly on federal aid, accounting for 86 percent of all revenue.

Counting defense and veterans benefits as federal funding could push many institutions above the 90 percent threshold. APSCU has noted, however, that current enforcement mechanisms are extensive and sufficient to effectively monitor the for-profit sector.

“Our schools are subject to and welcome appropriate regulatory oversight that enables us to ensure a quality career education to military personnel, veterans, and millions of students across the country,” Miller says. “To the extent that a limited number of problems exist, better enforcement is the solution.”

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