Obama targets diploma mills that market to vets

[April 27, 2012]  WASHINGTON (AP) -- The Obama administration wants to trademark the term "GI Bill" in an effort to shield veterans and military families being swindled or misled by schools that target their federal education benefits.

President Barack Obama is signing a wide-ranging order on Friday that partially addresses growing complaints about fraudulent marketing and recruiting practices aimed at military families eligible for federal education loans under the GI Bill.

The president and first lady Michelle Obama were expected to talk to troops at the Fort Stewart Army post in Georgia, where Obama will sign an executive order mandating several new education protections for military service members.

There is little the federal government can do to shut down diploma mills, but the new protections would make it harder for post-secondary and technical schools to misrepresent themselves to military students.

The main target of the White House action is for-profit colleges and universities that market heavily to military families because of the easy availability of federal loan money under the GI Bill.

Some post-secondary schools target current and former military service members using deceptive military-themed websites that appear to be government-run or connected to the GI Bill benefit system, administration officials said.

The financial regulation overhaul that Obama signed in 2010 included the creation of a Consumer Financial Protection Bureau with specific authority to protect members of the military from predatory financial practices.

The law set up an Office of Service Member Affairs to help members of the military and their families "make better informed decisions regarding consumer financial products and services."

Bills pending in Congress, largely backed by Democrats and unlikely to become law soon, would do many of the same things Obama was ordering Friday.

Obama's order will also set a new gauge that potential students can use to calculate how much a school will really cost in tuition and fees. Schools are asked to voluntarily participate in the "Know Before You Owe" system this school year and would be required to do so next year.

Federal money, most of it through the financial aid students receive, accounts for up to 90 percent of for-profit colleges' revenue -- even more if veterans attend the school on the GI Bill.

Some schools spend a quarter or more of their revenue on recruiting, far more than traditional colleges. In some cases, recruiting expenses approach what these institutions spend on instruction.

A recent Senate report on 15 large, publicly traded for-profit education companies said they got 86 percent of their revenue from taxpayers and have spent a combined $3.7 billion annually on marketing and recruiting.

Military veterans are particularly attractive recruiting targets because they come with generous federal tuition support and also don't count toward a limit called the "90/10" rule, which requires colleges to get at least 10 percent of their revenue from nonfederal sources.

The Association of Private Sector Colleges and Universities, which represents for-profits, said in a statement it was "disappointed" that Obama "decided to bypass the Congress" with an executive order.

"Career-oriented institutions proudly serve military and veteran populations, and work with congressional leaders in a bipartisan manner to address concerns about veteran education across all sectors of higher education," the lobbying group said.

Quality at for-profit colleges varies widely, and many are a good fit for students, particularly adult learners looking for flexible scheduling and specialized career training that often requires a certificate but not a degree.

But while comparing graduation rates can be misleading for those reasons, for-profit schools on average have lower success rates than traditional colleges on a variety of measures. The Senate report found that almost 2 million students withdrew from large for-profit colleges over a three-year period. Among those who enrolled at 10 large chains in 2008-2009, 54 percent had quit by the summer of 2010.

Meanwhile, the latest figures from the Education Department put the default rate on federal student loans for students at for-profit colleges at 15 percent, compared with 7.2 percent at public nonprofit universities and 4.6 percent at private nonprofit colleges.

The industry points out that's partly because its schools tend to serve lower-income students. But difficulties transferring credits and having credentials from for-profit colleges rewarded in the job market also play a role.

Unlike many recent trips in which Obama has visited states that are central to his re-election, his visit to Georgia -- a solidly Republican state -- has no obvious political benefit.

The president has, however, focused on initiatives aimed at attracting young voters, and many of the military service members who would benefit from Friday's action fall into that category.

[Associated Press; By ANNE GEARAN]

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