Home » Conway, colleagues urge Congress to change for-profit school funding rule

Conway, colleagues urge Congress to change for-profit school funding rule

Kentucky Attorney General Jack Conway

FRANKFORT, Ky. (May 30, 2012) — Attorney General Jack Conway and 21 of his colleagues from other states on Tuesday sent a letter to Congressional leaders urging them to close a loophole in the Higher Education Act that they say is harming American veterans and their families. The attorneys general are asking Congress to require that GI Bill and Veteran’s Assistance educational benefits be subject to the 90/10 rule, which prohibits for-profit colleges from deriving more than 90 percent of their revenue from Department of Education (Title IV) funding sources.

Currently, for-profit schools can derive 90 percent of their funding from public sources (Title IV funds) and then the remaining 10 percent from government veterans’ programs, rather than obtaining at least 10 percent of their revenue from private sources as the law intended.

“In essence, this creates a system where for-profit colleges can derive 100 percent of their funding from the federal government and taxpayers,” Conway alleged. “The loophole is creating high-pressured enrollment tactics that are directly targeting our veterans who are returning from battle and their families. This is unacceptable and unconscionable.”

Federal lawmakers enacted the original 90/10 rule in 1998 following Congressional investigations of for-profit colleges. Congress designed the rule to instill more accountability in the industry, Conway said. At the time, veterans’ benefits were not a substantial source of potential income for proprietary colleges.

“Allowing Department of Veterans’ Affairs (VA) and Department of Defense (DoD) benefits to not count toward the 90 percent government-funding limit violates the intent of the law and harms taxpayers,” Conway said. “The loophole has created a feeding frenzy for proprietary colleges looking to get their hands on veterans’ benefits. Many of our bases are being overrun with for-profit recruiters who are more interested in getting their hands on these benefits than they are in educating our service members.”

In 2008, Congress enacted the Post 9/11 GI Bill making billions of dollars in educational benefits available for veterans and their families. According to a February 2011 General Accounting Office report, $9 billion in educational benefits were provided to service members and veterans in Fiscal Year 2010. Of 20 for-profit colleges analyzed by the U.S. Senate HELP Committee, total military educational benefits increased from $66.6 million in 2006 to a projected $521.2 million in 2010. That is an increase of 683 percent.

Conway is leading a group of 26 state attorneys general who are investigating the student-loan default rates, job-placement claims and deceptive marketing practices at some for-profit colleges. He also testified in front of Congress about the disproportionate number of students at for-profit schools who have private student loans and that those loans do not have the same consumer protections as federally backed loans and are almost impossible to discharge in personal bankruptcy.