The current loophole within the Higher Education Act’s Rule incentivizes proprietary schools, or for-profit institutions, to view veterans and servicemembers as merely dollar signs in uniforms. “Our commitment to care for our veterans is a sacred obligation and ensuring their hard-earned GI Bill benefits are safeguarded is part of that sacred obligation.”
With the passage of the Serviceman’s Readjustment Act of 1944 (or “the GI Bill”), many WWII vets were eager to make use of their newly-vested benefits to further their education. However, with this increased demand for higher education, many for-profit schools sought to capitalize on the availability of federally-insured tuition payments. Despite the relative success of the GI Bill program, many dismal and well-documented abuses of these GI benefits took place in the years following the war. Since then, Congress has taken legislative action to prevent taxpayer dollars from lining the pockets of educational entrepreneurs.
In 1992, the HEA was amended to require that for-profit schools receive at least 15% of their revenue from sources other than Title IV funding. This cap on federal funding served as a market viability tool “to weed out institutions that could survive only by a heavy influx of federal payments.” In 1998, this requirement on proprietary schools was lowered to 10%, allowing these schools to receive up to 90% of their revenue from Title IV funding. The 1998 HEA Amendment has come to be known as the Rule. By requiring for-profit schools to obtain at least ten percent of their funding from non-Title IV sources (rather than allow these schools to rely solely on federal funding), the rule serves as a metric for educational quality.
The Loophole refers to the reality that GI benefits and Department of Defense (“DoD”) Tuition Assistance funds do not currently count towards the 90% and are calculated as part of the 10% of revenue that must come from non-Title IV sources. Some argue that counting any federal funding towards the 10% runs afoul of the HEA’s original intent. Sarah Flanagan, the Senate’s federal student aid specialist who helped draft this piece of legislation, stated that “[w]hen the law was enacted, for-profits hadn’t yet moved into the military market, so the legislation’s sponsors weren’t focused on Defense Department tuition assistance.” Yet despite numerous amendments, Congress has repeatedly chosen not to include GI benefits and DoD Tuition Assistance as part of the 90%. That means for every veteran who pays tuition with GI benefits, for-profit schools may enroll nine more students who pay their tuition entirely with Title IV funds.
Accordingly, both present and past members of the US military have targets on their backs in the educational context. Servicemembers and veterans have suffered from aggressive recruiting strategies, false representations regarding post-graduation employment statistics, and high-pressure sales tactics used by proprietary schools that are more interested in their own profit margins than the well-being of our men and women in uniform. For-profit colleges tend to have lower graduation rates and post-graduation employment statistics than their public and non-profit counterparts. Since the Loophole incentivizes proprietary schools to recruit and exploit US military members, this statutory loophole should be closed by requiring GI benefits and DoD Tuition Assistance to count towards the 90%.
In 1965, Congress passed the Higher Education Act (“HEA”) which made low-interest, federal loans available to students, also referred to as Title IV funding
During the 116 th Session of Congress, a bipartisan group of senators introduced the Protect VETS Act of 2019, which would do away with the Loophole. However, not everyone sees the closure of this loophole as something that will benefit these students. Michael Dakduk, the Chair of Veterans for Career Education, expressed his disapproval because doing closing the Loophole would allegedly restrict school choice for servicemembers and veterans. While proprietary schools that fail to comply would certainly be precluded from enrolling these students, many advocacy groups such as Veterans Education Success and Student Veterans of America support the Protect VETS Act and view this legislation as a net-positive for servicemembers and veterans.
Furthermore, loan default rates are disproportionately higher for students attending proprietary schools, representing less than 10% of all students but almost half of all student loan defaults
The swing of the political pendulum in the 2020 elections indicate that the days of the Rule are numbered. Many expect the Biden administration to be less sympathetic to the cause of for-profit schools than the previous (and interested) administration. President Biden promised during his campaign to close the Loophole. Both he and Vice President Harris, during their tenures as state attorneys general, advocated for the closure of the Loophole. Dr. Miguel Cardona, Biden’s Secretary of Education nominee and formerly democrat-appointed official, will likely play a significant role in the efforts to close this statutory loophole. Perhaps most critically, the Democratic control of both the Senate and House signal that GI and DoD funding may soon be prevented from counting towards the 10% requirement of proprietary schools. If the Loophole is closed, servicemembers and veterans will no longer be subjected to the exploitive tactics of for-profit schools seeking to capitalize on their GI benefits and DoD Tuition Assistance.
Press Release, Tom Carper, U.S. Senator for Delaware, Carper, Lankford, Cassidy, Tester Introduce First Ever Bipartisan Senate Bill to Protect Student Veterans by Closing the Loophole, (),
John Bound Sarah Turner, Going to War and Going to College: payday loans Lenoir Did World War II and the G.I. Bill Increase Educational Attainment for Returning Veterans?, 20 J. of Labor Economics 784 (2002).
Marvin Lazerson, The Disappointments of Success: Higher Education After World War II, in The Changing Educational Quality of the Workforce 64-76 (1998).
Cleland v. Nat’l Coll. of Bus., 435 U.S. 213, 216 (1978). “A minimal number of nonveterans were required to find the course worthwhile and valuable or the payment of Federal funds to veterans who enrolled would not be authorized.”
Letter from Jack Conway, Att’y Gen., Commonwealth of Kentucky, to Chairperson and Ranking Member of Senate and House Committee on Veterans’ Affairs (),