Lawmaker: Close GI Bill 'Loophole' that Benefits For-Profit Colleges

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On the 75th anniversary of the GI Bill, freshman U.S. Rep. Donna Shalala, D-Florida, is taking aim at for-profit colleges, introducing a bill Wednesday that would close a loophole she says props up substandard schools that view veterans as "cash cows."

Shalala's proposed "Defending all Veterans in Education Act," or DAVIE, would change what is known as the 90/10 rule, which allows for-profit colleges to receive federal student aid if they generate at least 10% of their revenue from sources other than federal dollars. The bill would change the requirement to an 80/20 ratio.

It also would make schools count GI Bill benefits as federal dollars. Currently, GI Bill payments are not counted as federal monies in the calculations, allowing for-profit schools to include them as contributing to the 10% requirement.

Shalala, a former University of Miami president, said the loophole allows schools to earn nearly all of their revenue from the federal government.

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"We need to ensure veterans and GI Bill recipients do not fall victim to the predatory recruitment tactics of low-quality institutions that see them as little more than the profits they provide," she said in a statement. "My bill protects our veterans from these dishonest schemes."

In the past decade, a number of high-profile, for-profit universities have shuttered their doors unexpectedly, leaving thousands of students, including many veterans, without degrees, in debt or robbed of their GI Bill benefits.

Among the most high-profile closures were Corinthian Colleges and ITT, whose closures in 2015 and 2016 under stricter rules and investigations by the Obama administration left nearly 7,000 veterans in the lurch.

More recently, the shuttering of the Art Institutes and Argosy University affected roughly 1,700 GI Bill recipients, according to Shalala.

While Congress passed legislation in 2017 to restore benefits to many affected veterans, some schools continue to actively recruit military and veterans students for their reliable income streams, Shalala argues.

"Current federal laws permit bad actors in the for-profit education industry to take advantage of our veterans. ... It is unacceptable and un-American that some for-profit institutions continue to use our veterans' hard-earned benefits to line their own pockets," she said.

For-profit universities cater to non-traditional students, the working class or those below the poverty line who need the flexibility provided by many of these institutions, including convenient class times and online courses, as well as professors who work in their respective fields and only teach, not conducting research.

In the past several years, a number of for-profit schools have sought to become nonprofits or have merged with a nonprofit, such as Purdue University's acquisition of Kaplan University to extend the reach of Purdue online and to non-traditional students.

The conversions and mergers can be seen as a way to maintain a system of nontraditional schools to serve students who need them. But increasingly, the strong economy and competition from not-for-profit schools such as Southern New Hampshire University and University of Maryland University College have forced for-profits to adapt.

Michael Dakduk, a former Marine who co-chairs Veterans for Career Education, a group that promotes veterans education benefits for training and education outside traditional college learning, said Shalala's proposal would limit veterans access to higher education.

"The real travesty is how the credentials being earned by veterans at career schools are being labeled worthless as proposals on the 90/10 rule continue to be debated. Fortunately, veterans at career schools are fighting back by telling politicians to respect their choice of school and program of study," Dakduk said in a statement to Military.com.

In announcing her bill, Shalala cited the case of Eric Luongo, a Navy veteran who testified in March that he was left with more than $100,000 in debt and an associate's degree from DeVry University in web graphic design that did not help him get a job.

Luongo said he told a DeVry representative before he enrolled that he wanted to use his GI Bill benefits and grants to pay for school and was assured he could. But during the application process, the school made him complete massive amounts of paperwork, some of which he understood to be loan applications in case they were needed but would never be used.

He began receiving bills from loan companies shortly after graduation.

"I never thought that I would be the subject of such predatory acts like those I experienced with DeVry. It just kind of shows that this really can happen to anybody," he told members of the House Appropriations Labor, Health and Human Services and Education subcommittee March 12.

Shalala's bill would ensure that if a school violated the proposed 80/20 metric, it would be cut off from federal funds immediately and given a year to bring itself back into compliance.

It would also tweak what schools can count as revenue toward the percent of non-federal funds.

A number of veterans organizations, including the Military Officers Association of America (MOAA), the American Legion, the Association of the United States Navy and the Military Child Education Coalition, have come out in support of the bill.

Retired Air Force Lt. Gen. Dana Atkins, president and CEO of MOAA, said closing the 90/10 loophole is one of his organization's top legislative priorities.

"When the rule was enacted, the exclusion of the Defense Department and [Department of Veterans Affairs] education benefits from the definition of federal funds created a financial loophole that predatory institutions use to take advantage of military-connected students," Atkins said. "This has gone on too long."

-- Patricia Kime can be reached at Patricia.Kime@Military.com. Follow her on Twitter at @patriciakime.

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