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For-Profit Colleges Getting More GI Bill Dollars

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The new Post 9/11 G.I. bill, which substantially boosted education benefits for veterans, has been a windfall for large chains of for-profit colleges, according to figures released Thursday by Senate Democrats arguing for tighter regulation of the sector.

Data on the first two years of the program show large numbers of veterans – and the government dollars that follow them – going to for-profit chains. Of the $4.4 billion the Department of Veterans Affairs disbursed during the 2010-2011 academic year, $1 billion went to just eight for-profit schools. The top seven recipients were all for-profit institutions.

The largest single share went to the University of Phoenix, which collected $210 million through the program, up from $77 million a year ago. G.I. Bill funds for each of the other eight top for-profits also more than doubled from the previous year.

The figures are relatively small in comparison to other government programs like Pell Grants. And they aren't surprising in some respects because the large for-profit chains enroll students across the country and are far bigger than any not-for-profit institutions. Veterans are free to use their benefits at any properly accredited school they choose.

But the G.I. Bill attracts particular scrutiny because of concerns veterans are being aggressively recruited by institutions that generally have higher costs, default rates and dropout rates. For-profits enrolled roughly 25 percent of veterans using the program but received 37 percent of the GI Bill funds.

Overall, though, the main group representing the for-profit industry noted those numbers indicate the sector educated slightly more service member students last year than during the first year of the program, but received the same share of total G.I. bill dollars.

Veterans should be free to use the educational benefits they've earned "to select the postsecondary program that best meets their educational needs and interests," APSCU, the Association of Private Sector Colleges and Universities, said in a statement.

Veterans are particularly attractive to college recruiters because of the benefits they carry but also because of a loophole in the so-called "90-10 rule." That law requires colleges to receive at least 10 percent of their revenue from non-government sources, and is intended to make them prove their value by attracting private dollars. But dollars from military programs like the G.I. Bill don't count as government support under the 90-10 rule, even though they come from taxpayers.

"It's possible that 100 percent of a college's or university's revenue can come from the taxpayers," said Sen. Tom Harkin, D-Iowa, who chairs the committee. "No skin in the game. That's not a good situation for the taxpayers."

Harkin's committee has held multiple hearings over the past year on the for-profits, and a subcommittee of the Senate Committee on Homeland Security and Government Affairs met Thursday for a hearing on improving educational outcomes for the military and veterans. In June, the Obama administration unveiled new "gainful employment" rules that could cut more programs off from government aid if students aren't able to acquire decent-paying jobs.

The for-profit sector says it is taking substantial steps to improve student success rates. Phoenix, for instance, requires some new students to pass a free, three-week orientation program in order to continue. It and other companies have seen substantial drops in new enrollment as they accept fewer academically risky students, and insist they're providing good value to taxpayers.

Indeed, Harkin and Sen. Tom Carper, D-Del., said some for-profits were providing good service to veterans. But they also highlighted the higher dropout rates at many for-profits that leave taxpayers and students on the hook for unfinished degrees.

At the eight for-profit schools collecting the most G.I. Bill funding, more than 400,000 students – around 60 percent – withdrew within one year of enrolling. The figures refer to all students; veteran-specific dropout rates are not available.

"Some of these schools are doing a good job," Harkin said. "But there are some of these, they just want the money."

The Department of Veterans Affairs issued a statement saying it "understands the demand, especially among Veterans, for non-traditional forms of education" but also wants to protect their right to the best education possible. It said changing the 90-10 rule could help with those goals but could also cause some schools to lose their eligibility to participate in federal financial aid, so any change should be implemented carefully.

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Justin Pope covers higher education for the AP. You can reach him at twitter.com/jnn_pope97

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