House Subcommittee Debates Funding Restrictions for For-Profit Colleges Enrolling Veterans

By Joelle Fredman, NASFAA Staff Reporter

A House subcommittee on veterans affairs held a hearing Wednesday to discuss 18 draft bills related to education—including legislation that would impose new funding restrictions on for-profit colleges enrolling veterans.   

For-profit institutions are prohibited from collecting more than 90% of their revenue from federal aid programs, otherwise known as the “90/10” rule. Currently, GI Bill benefits are not defined as federal student aid for this purpose, and are therefore considered private sources of revenue and contribute to an institution's 10% of the ratio. Reps. Mike Levin (D-CA), chairman of the subcommittee, and Mark Takano (D-CA) proposed legislation to discontinue what they dubbed “this 90/10 loophole.” 

“This loophole makes veterans a target for low-quality institutions that are unable to attract non-federal sources of funding,” Levin told the committee. “These institutions often use deceptive marketing techniques and are financially unstable, placing veterans at risk of losing their invested time, effort, and benefits due to a closure.”

Levin said that officials from the Department of Veteran Affairs (VA) told the committee in previous hearings that VA does not have the authority to mandate that institutions count GI Bill benefits as federal funds. His proposed legislation grants VA this oversight ability. 

Ranking member Rep. Gus Bilirakis (R-FL), however, said during the hearing that he was concerned that this bill would have unintended consequences, and that it “needlessly imposes partisan ideas that would limit a veteran’s choice on how to use their earned benefit to our bipartisan subcommittee.”

Charmain Bogue, representing the Veterans Benefits Administration (VBA), testified before the committee and said that while VA is willing to work with lawmakers on the bill, it has “significant concerns” with the current draft. She added that VA calculated that 133 schools and 60,000 students would be immediately impacted by this rule. 

Bogue suggested that a waiver be included in the rule to allow VA flexibility to exclude schools under certain circumstances, such as those offering proven, high-quality programs. Levin said he was concerned, however, that this flexibility may invite more loopholes. 

Bogue also proposed that the bill allow for a window of 30 or 60 days for schools to either notify students that they may be closing or unable to accept more federal funds due to this issue, or to remedy their funding ratio to comply with the 90/10 rule. Alternatively, she said, the bill should focus only on new students that for-profit schools are enrolling after the bill is signed into law. 

Timothy McMan, president of Triangle Tech, a technical school in Pennsylvania, told committee members that this bill would cause more schools to close “unnecessarily,” and argued that schools such as his are not “aggressively targeting” and defrauding veterans. Levin responded that to deny that schools are “poaching” veterans for their military benefits “completely dismisses the voices of countless veterans.”

“We’ve got to move forward [on this issue],” Levin said. “... You know we can do better than what we are doing today for our veterans.”

NASFAA facilitated a group of higher education professionals last year—the Higher Education Committee of 50—to think through how best to help students succeed in higher education. This past spring, the group published its recommendations for Congress, which included returning the 90/10 rule ratio to 85/15—as it was when the rule was first established in the early 1990s—and including military tuition assistance benefits and VA benefits as part of the calculation of federal revenue. During the hearing, Bogue mentioned that VA was willing to discuss an 85/15 ratio as it worked with lawmakers on the draft bill. 

Other draft bills discussed during the hearing include those focused on allowing student veterans to use housing allowances for online classes, and ensuring that they are able to have some of their education benefits restored in the event of a school closure, among other issues.


Publication Date: 7/18/2019

Jennifer S | 7/18/2019 3:9:39 PM

What am I missing, here? How does lessening the incentive to prey on veterans "...limit a veteran’s choice on how to use their earned benefit...” Would 60,000 students be impacted because the 133 schools would immediately close? If they really cannot get 10% of their total revenue from non-federal sources, the idea is that there's a problem with the product. Hence, the rule.

If you want to argue whether or not the rule has merit, that's another thing. But to have a rule with such a ridiculous "out" makes no sense. Easing it in with only new students should give institutions time to find ways to avoid closure.

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