For Immediate Release - May 29, 2012

AG Coakley and 21 Attorneys General Ask Congress to Protect Veterans’ Benefits by Closing For-Profit College Loophole

Military Educational Benefits Received by For-Profit Colleges Increased by More Than $454 Million Between FY 2006 - 2010

BOSTONIn a letter to Congress sent today, pdf format of 20120529115032889.pdf
Attorney General Martha Coakley and 21 attorneys general urged congressional leaders to close a loophole in the Higher Education Act that can harm American veterans and their families. The letter encourages Congress to subject the GI Bill and Veterans’ Assistance educational programs to the 90/10 rule that prohibits for-profit colleges from deriving more than 90 percent of their revenue from the Department of Education (Title IV) funding sources.

Currently, for-profit schools can take up to 90 percent of their funding from Title IV funding and the remaining 10 percent from government veterans’ programs instead of private sources as the law intends. 

“It is important that our military and veterans get the best education they can for their GI Bill dollars because they are a finite resource, once they are used the veteran does not get them back,” AG Coakley said. “Veterans and servicemen are being targeted by for-profit recruiters and we need to make sure that they and the veterans’ benefits are being protected.”       

Federal lawmakers enacted the original 90/10 rule in 1998 following congressional investigations of for-profit colleges. Congress designed the rule to instill more accountability in the industry. At the time, veterans’ benefits were not a substantial source of potential income for proprietary colleges.

In 2008, Congress enacted the Post 9/11 GI Bill making billions of dollars in educational benefits available for veterans and their families. According to a February 2011 Government Accountability Office report, $9 billion in educational benefits were provided to service members and veterans in Fiscal Year 2010. Of 20 for-profit colleges analyzed by the U.S. Senate Health, Education, Labor and Pensions Committee (HELP), the total military educational benefits received by the schools increased from $66.6 million in 2006 to a projected $521.2 million in 2010 equaling a 683 percent increase.

It is well-documented that the economic downturn resulted in an exodus of private lenders from the subprime student loan market, also suffering from very high student-loan default rates. For-profit colleges largely depended on these private loans to obtain their 10 percent in non-federal funds. The exodus of lenders and the veterans’ loophole created a strong incentive to recruit military members. Schools are also using the military benefits to leverage even more Title IV funds, since each dollar they obtain from the Department of Defense or Veterans’ Affairs allows them to obtain an additional nine dollars in Title IV funds.

For-profit schools are at the center of numerous controversies regarding the status and future of post-high school education in America.

The AG’s Office is working cooperatively with a group of other states to review these issues, and is currently involved in a major review of for-profit marketing and related lending activities here in the Commonwealth. The for-profit issues are being handled by the AG’s Insurance and Financial Services Division.

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