Here’s why Congress must close the ’90/10 loophole’ in veterans’ education

For years, veteran advocates and lawmakers have worked to close the widely-known 90/10 loophole that for-profit schools use to target veterans unethically. This year, 37 veteran service organizations and lawmakers have banded together to make closing the loophole a real possibility. Unfortunately, organizations such as the Reserve Officers Association (ROA) are getting in the way of progress by defending for-profit schools and incorrectly promulgating veteran advocates’ arguments.

ROA claims advocates push to close the 90/10 loophole with interests of curtailing competition between the for-profit and not-for-profit sectors; this is not true. Here is why Congress should close the 90/10 loophole.

Created under the Higher Education Act Amendments of 1998, the 90/10 rule mandated that proprietary institutions must derive 10 percent of their revenue from non-federal sources. The legislative intent was to combat waste and fraud, not default rates. Despite originating from taxpayer pockets, G.I. Bill payments do not count as federal dollars under the rule. Because of this, for-profit schools are incentivized to target veterans and their benefits. 

According to the American Economic Journal, for-profit institution tuition rates often mirror the amount of money they would receive in per-student federal aid subsidies. With tuition set at a profit-maximizing rate, for-profits can “strategically” recruit G.I. Bill-eligible students.

This strategy explains why for-profit schools received the largest amount of G.I. Bill dollars. Between 2009 and 2017, eight of the top 10 recipients of G.I. Bill dollars were for-profit institutions — collecting a whopping $34 billion. Six of those eight schools have come under fire in state and federal lawsuits (most of them multiple times) for predatory recruitment and fraud. 

For example, in 2015, the University of Phoenix (the top recipient of G.I. Bill dollars) was sued by two university employees when they were asked to misrepresent information to recruit veterans. The recruiters claimed they “were trained to lie to students about their future employment prospects.” Unfortunately, similar stories are commonplace. The VA has received 2,000 complaints against for-profit institutions — more than any other type of school. 

Accusations of fraud and recruitment malpractice caused proprietary giants such as ITT Tech and Corinthian College to close their doors permanently — leaving 7,000 student veterans without degrees and G.I. Bill benefits. Fortunately, provisions of the new Forever G.I. Bill restored benefits lost because of school closures. Unfortunately, students exiting the closing for-profit schools were unable to transfer 94 percent of their academic credits.

ROA asserts that loophole-closing legislation would be unfair to the taxpayer. The estimated cost of restoring benefits lost because of school closures is $320 million. In a New York Times opinion piece, student veteran experts highlight for-profits’ propensity to receive improper G.I. Bill payments. The VA internal audit they cite warns the VA will issue $2.3 billion in improper payments if their capacity to exercise oversight is not improved. How is this fair to the taxpayer?  

ROA cites the low graduation rates of three schools (Ashford University, Oklahoma State

University-Oklahoma City, and University of Maryland-University College). Ashford University is a for-profit school and has been a subject in numerous lawsuits, so it seems counterproductive to include this school in their argument. Second, arbitrarily selecting three schools with low graduation rates is a confirmation bias that does not accurately capture the public sector’s performance. The focus should be on educational outcomes, not graduation rates — so how do outcomes differ between the two?   

In two words, plain lousy. 

A study analyzing for-profit school outcomes found that students who graduated from for-profit schools were less employable, and earned 11 percent less than their not-for-profit counterparts. Outcomes and academic preparation were even worse for students attending exclusively online, for-profit institutions. The study underscored crippling for-profit tuition rates, which are five times higher than the average community college. Tuition for certificate programs at for-profit schools is 11 times higher. Unsurprisingly, high tuition costs have led to four times as much student debt, coupled with high student loan default rates for proprietary schools. 

Closing the loophole is common sense and will affect only a small portion of schools. There are 2,829 for-profit schools eligible for federal aid; of those schools eligible, only 112 would be out of compliance. Many vocational training institutions (HVAC, culinary arts, etc.) would be unaffected, because, while still covered under the G.I. Bill, they are ineligible for federal aid. Studies have shown that for-profit institutions ineligible for aid “can survive, and even thrive, alongside their aid-eligible counterparts.” Lastly, reports illustrate that repealing the 90/10 rule would cost taxpayers $2 billion in Pell Grants and increase loan default rates.  

Closing the 90/10 loophole is about eliminating government waste and curtailing unethical behavior — not competition. The rule of law must be upheld, and the original legislation must function as intended. We are tired of for-profit schools lying to veterans about the education they are receiving and the types of jobs in which they will qualify. We are tired of veterans paying ridiculous tuition rates set by profit-maximizing schools — with taxpayers footing the bill. We are tired of veterans working hard for a degree, with nothing to show for it.

The G.I. Bill is one of the most successful social programs in American history. If we want to continue the success of the G.I. Bill, then it is time for lawmakers to step up.  

Wesley Wilson served in the U.S. Army from 2012-2017 as a military police officer. He is an advocacy fellow with High Ground Veterans Advocacy, a research assistant at the Institute for Veterans and Military Families, and a graduate student at the Maxwell School of Citizenship and Public Affairs at Syracuse University. He is the former president of the Fordham Veterans Association.