 The letter calls on Congress to more closely regulate military
education assistance that many for-profit schools have increasingly
used as a revenue source. A loophole in federal regulation has led
to high-pressured recruiting of veterans by for-profit schools in
order to tap into the vast pool of federal dollars coming out of the
GI Bill and the U.S. Department of Defense Tuition Assistance
program.Madigan has been an outspoken critic of the for-profit
schools industry and earlier this year filed a lawsuit against the
national, for-profit Westwood College for engaging in deceptive
practices that left Chicago-area students with up to $70,000 each in
debt for degrees that failed to qualify them for careers in criminal
justice.
Madigan said a U.S. Senate committee study showed that for-profit
colleges' revenue from military education funding has increased by
683 percent in the last four years. In a survey of 20 for-profit
colleges, the committee found military education benefits increased
from $66.6 million in 2006 to a projected $521.2 million in 2010.
"Military service members, veterans and their families have
become rich targets for aggressive for-profit college recruiters
seeking to maximize their revenues, as opposed to their students'
graduation and employment rates," Madigan said. "For-profit colleges
are exploiting service members' education benefits and then
entrapping them in costly private loans in exchange for questionable
degrees that often have very little real-world value."
All colleges and universities nationwide are subject to the
"90/10 rule," which prohibits schools from deriving more than 90
percent of their revenue from U.S. Department of Education funding
sources, or Title IV. However, veterans' education benefits are not
categorized as Title IV funding. Many for-profit colleges have
exploited that exception, allowing them to take in a full 100
percent of their revenues through government funding -- 90 percent
in Title IV funding and 10 percent in veterans' benefits. The
federal pool of education assistance presents an attractive funding
source for many for-profit colleges due to the easy application
process for students, the speed at which funding is received by the
college and the vast amount of dollars available.
Madigan and her counterparts are urging Congress to extend the
Title IV funding definition to encompass veterans' education
benefits. The move would require for-profit schools to obtain at
least 10 percent of their revenue from private sources, as the law
intended.
Congress enacted the 90/10 rule in 1998 to instill more
accountability in the for-profit schools industry, but veterans'
benefits were not yet a substantial source of potential income for
colleges. A decade later, Congress enacted the Post 9/11 GI Bill,
which made billions of dollars available in educational benefits for
service members, veterans and their families. According to a
February 2011 General Accounting Office report, educational benefits
totaling $9 billion were provided to service members and veterans in
fiscal 2010.
[to top of second column] |
The turn to federal education loans by many for-profit schools was
in part fueled by the economic downturn, which caused an exodus of
private lenders from the subprime student loan market due to
excessive student-loan default rates. For-profit colleges largely
depended on these private loans to obtain their 10 percent in
non-federal funds. This exodus of lenders and the veterans' loophole
created a strong incentive to recruit military members, particularly
because for each dollar obtained in veterans' benefits, for-profit
colleges can obtain an additional $9 in Title IV funds.
"It's no longer a secret that the worst actors in the for-profit
college industry are aggressively targeting veterans in order to pad
their company's bottom line," said U.S. Sen. Dick Durbin of
Illinois. "Sen. Harkin and I have a bill -- Protecting Our Students
and Taxpayers (POST) Act -- that would close the outrageous loophole
that allows this to happen. We need Congress to act on it to protect
students and veterans from aggressive recruiting practices and help
ensure taxpayers are getting a return on their investment. The
attorneys general that signed on to today's letter will be important
partners in that effort."
Joining Madigan in sending the letter were attorneys general in
Arizona, Arkansas, California, Connecticut, Delaware, Idaho, Iowa,
Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Nevada,
New Mexico, New York, North Carolina, South Carolina, South Dakota,
Tennessee, West Virginia and Hawaii's Office of Consumer Protection.
The letter to Congress is Attorney General Madigan's latest
effort to crack down on the for-profit college industry. In addition
to her lawsuit against Westwood College, Madigan filed a complaint
in a whistle-blower suit in 2011 against Education Management Corp.
and the Illinois Institutes of Art in Chicago and Schaumburg for
allegedly incentivizing admissions recruiters based on enrollment
numbers and thereby defrauding the state of education grant dollars.
In 2007, Madigan also reached a settlement with Illinois-based DeVry
University and Career Education Corp. concerning student loan
practices involving the schools and lenders. The settlements
required the schools to adopt a "College Code of Conduct" and to
return the money paid by lenders to schools.
[Text from file received from the office
of
Illinois Attorney General Lisa
Madigan] |
