Joshua Lott / Bloomberg / Getty Images
Joshua Lott / Bloomberg / Getty Images

Profiteering off the GI Bill

How for-profit colleges target veterans as a lucrative funding stream

April 18, 2014 5:45AM ET

The GI Bill, passed in 1944, has played an important role in building the American middle class by giving millions of veterans a chance to attend college. It is a hallowed reminder of policymaking that promotes the public good. But in its most recent incarnation, this piece of legislation has been vulnerable to the abuses of the for-profit education industry: Since the 2008 passage of the Post-9/11 GI Bill, for-profit colleges have increasingly recognized that federal funds for returning servicemen and -women create a vast pool of money that they can tap into.

These for-profits, such as the University of Phoenix and DeVry University, flood the mailboxes of returning veterans with brochures for their programs. And, as Daniel Luzer wrote last year in Washington Monthly, “Online, for-profit colleges do look pretty attractive, for logistical reasons, for veterans who are adults with families and other responsibilities.” Yet, while such programs promise high-paying jobs, their quality tends to be subpar. Too many veterans who enroll end up burdened with huge debts and poor employment prospects.

This situation has created an urgent need for Washington to curb industry practices that treat veterans — and by extension American taxpayers — as little more than nicely fattened cash cows.

Profitable loopholes

The current abuse of federal education funding for veterans was made possible by a loophole in the 2008 reauthorization of the GI Bill. Under that law, Congress greatly increased the amount of benefits for which eligible veterans could qualify. The new law also extended the term of benefits by five years, allowing veterans that much more time to go to school. Furthermore, benefits were made transferable to family members, meaning that veterans could now use them to pay tuition for a child or a spouse.

The act was popular — as a way of both rewarding veterans for their service and boosting military recruitment. The New York Times called it “the biggest expansion of the G.I. Bill in a quarter century.” But the reauthorization also allowed for-profit schools to take advantage of the expanded federal funding without expanded oversight. While other forms of federal education assistance — such as Perkins or Ford preferable-rate loans, and Pell Grants — include caps to prevent for-profit schools from being entirely funded by taxpayer dollars, the Post-9/11 GI Bill did not. The result is that for-profits siphon off resources that once flowed largely to public universities and community colleges. By 2012, a congressional investigation led by Sen. Tom Harkin, D-Iowa, revealed that a quarter of all federal financial aid dollars were going to for-profit universities. And eight of the 10 schools receiving the most GI Bill funding were for-profits.

Harkin’s report also revealed signs that these schools have been more concerned with making money than providing veterans with opportunities. Nearly a quarter — 22.7 percent — of for-profit schools’ revenues were spent on marketing, while nearly a fifth went to pay stockholders, The 30 schools the Harkin report examined devoted more money to pretax profits than they did to instruction for students. At the same time, over 85 percent of their income was coming from taxpayers.

What’s more, taxpayers are now paying for schools that are unregulated and by many measures unsuccessful at actually educating people. A 2011 report on commercial colleges from the National Bureau of Economic Research found that students from for-profits “are more likely to be unemployed and to have experienced substantial unemployment (more than three months) since leaving school.” In addition to finding it more difficult to secure employment, those for-profit graduates who did get jobs earned on average $1,800 to $2,000 less a year than they would have, had they gone to a public school or nonprofit institution.

I felt like I made a horrible, horrible decision.

Jason Longmore

veteran and former Westwood College student

Debt is another major problem. According to the congressional audit, two-year degrees from for-profit schools were four times as expensive as those from comparable community colleges as of 2010. Well over half of students in for-profit schools were dropping out, accounting for almost half of all federal student-loan defaults. Even worse, veterans may not be aware that many for-profit institutions are not accredited. “I was basically duped out of my GI benefits,” Mae McGary, a veteran who dropped out after three years when she discovered her for-profit school was not accredited, told NBC. “I’m angry. I’m very angry.” Because such institutions operate differently from the traditional academy, many course credits from for-profit schools do not transfer to public universities, causing veterans like McGary to take out student loans to make up for the worthless classes. Jason Longmore, a veteran who attended Westwood College, told The New York Times, “I felt like I made a horrible, horrible decision.”

A call to Congress

The solution to this problem is not to cut back the GI Bill, a piece of legislation that is arguably more important than ever. The solution is for Congress to step up and assert greater control of public funds. It will take pressure from voters to call lawmakers’ attention to the problem and provide a counterforce to the for-profit education lobby. And the time to begin building this pressure is now. Until poorly performing institutions can demonstrate that they make good use of taxpayer dollars, elected officials in Washington should subject them to much closer oversight.

Ultimately, the GI bill should be treated as a partnership between government, students and educators. Government is providing funding to recognize veterans for their commitment to the country. Educators should similarly recognize this commitment by agreeing, when they accept GI Bill funding, that their students will not be saddled with debt from further tuition or credits that they cannot transfer to a mainstream university. Moreover, in order to be eligible for funding, they should be obligated to prove that their graduates have prospects for employment comparable to those students who complete training at public institutions.

There have been some promising steps toward greater regulation. For one, former Sen. Jim Webb, D-Va., who initially proposed the Post-9/11 GI Bill, has since come out strongly in favor of closing the public-funding loophole that is being vigorously exploited by the for-profit college industry. Harkin, the senator who led the congressional investigation, has proposed bills to actually close the loophole, most recently in November 2013.

The industry has lobbied hard to prevent regulation. Between 2008 and 2010, one trade group, the Association of Private Sector Colleges, nearly tripled its campaign spending — increasing its giving from $132,000 to $358,000 per election cycle. The recipients of these political contributions, among them Democratic members of Congress such as Rob Andrews and Alcee Hastings, have led efforts to prevent bills like Harkin’s from passing.

Veterans should not be left alone to fight this battle. To re-establish the covenant between government, educators and our veterans, the lobbying power of the for-profit education industry on Capital Hill must be curbed. All Americans should back up our veterans with letters and phone calls of support to members of Congress. Such a public show of support will advance the idea that honoring the GI Bill’s history requires us to protect it from exploitation today.

Amy B. Dean is a fellow of the Century Foundation and a principal of ABD Ventures, a consulting firm that works to develop innovative strategies for organizations devoted to social change. She is a co-author, with David Reynolds, of “A New New Deal: How Regional Activism Will Reshape the American Labor Movement.”

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

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