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For Veterans Day, Rethink the 90/10 Rule

Adam Rust's picture

Posted November 11, 2015

The GI Bill is one of the ways that our country thanks the individuals who risk their lives in order to protect our freedom. With GI Bill funds, servicemembers can chart a path back to a successful civilian life. Americans often link higher education to a better life. It is a perception that our leaders understand as well: "Going back to school is supposed to be the path to success," said Senator Richard Durbin, "and to more money in your life."

However, a GI Bill award is a one-time opportunity. Once a servicemember has spent those dollars, the chance is gone. This is why the quality of the education they receive should be of significance to the broader public. If there are systematic shortcomings in their educational experiences, then there is a problem. Citing statistics about graduation rates, many would contend that this is what is happening. 

Incentives to Find GI Bill Monies

Post-secondary institutions must find at least ten percent of their tuition revenues from sources outside of federal programs. If more than 90 percent of those programs are paid for by federal grants or loans, then students at those schools may not be able to receive future aid assistance. In a time when the majority of students receive federal loans and grants, this is heavy hammer. 

But under formulas written during the 2008 G.I. Bill, an exception in current policy says that GI Bill monies do not count in the "10." As a result, schools whose tuition revenues approach the ninety percent rule see outreach to the military as a necessary strategy for their status as an ongoing concern. This concern is most prevalent at for-profit schools, where many operate campuses whose federal tuition shares regularly exceed 80 percent.

This loophole is why the websites of so many for-profit schools have special portals for current and former servicemembers. It is also why many hire former service members in their admissions offices. It is why there are schools with names like "American Military University." It is why, until the Department of Defense acted to thwart the practice, the University of Phoenix was going on to military bases to market its programs. It is why online lead generation firms buy domain names like "GIBill.com"

Holly Petraeus, the Assistant Director of the Office of Servicemember Affairs at the CFPB, told Time Magazine that the 90/10 rule "has given to some for-profit colleges an incentive to see service members as nothing more than dollar signs in uniform." 

Certainly, many for-profit schools design curricula that fit well with the kinds of careers that might match well with the skills a person learns while serving in a branch of the military. American Military University, for example, offers scores of programs in criminal justice. But they are not the only schools offering those kinds of opportunities. Many not-for-profit and public universities have programs in similar areas. But while the classes might have similar names, the outcomes can be very different. 

The outcome that the GI Bill is designed to achieve - a degree and a job - is often not realized. Graduation rates at many for-profit schools fall well below twenty percent. It is a shame when this happens. Effectively, the student/servicemember has missed on an opportunity that will not come again. The same cannot be said for the school, however. It still gets to keep the tuition revenue. 

For-profit schools receive $20 billion a year in revenues from the federal government through student disbursements from a variety of grant and loan funds. Senator Durbin says that if those schools were collapsed into their own federal agency, they would become the ninth largest department by expenditures.  Unlike most not-for-profit and public institutions, they are designed to operate with gross margins of twenty or thirty percent. 

Legislation

HR 4055, the Military and Veterans Education Protection Act, would eliminate incentives that encourage some schools to unscrupulously market their degrees to servicemembers.  The bill was introduced by U.S Representative Jackie Speier (D-CA) and is now co-sponsored by one House Republican and seven House Democrats.  

Senator Richard Durbin, a long-time critic of for-profit schools, is familiar with the marketing that some for-profit schools extend to servicemembers. He has said that the schools see some students as "an ATM machine from which they can draw federal dollars." He often relates the story of a family friend, who upon returning from service in the Middle East, sought to find a degree program. Senator Durbin personally cautioned him to avoid a for-profit school. He suggested a program at the University of Maryland. But in spite of his efforts to follow the Senator's advice, he ended up at American Military University. The student thought it was a not-for-profit. 

Durbin says he has met with a number of military leaders who tell him how upset they are about the state of affairs. 

Re-writing the 90/10 rule to include GI Bill funds in the "ninety" is an easy fix. It would also be very effective in rooting out the bad players. If those schools no longer had so much riding on their ability to enroll service members, their marketing efforts would change. Undoubtedly, more students would end up at not-for-profit and public institutions. Most importantly, they would be in environments where graduation is more common.