8 For-Profit Colleges Collect More Than $1-Billion in Veterans' Education Benefits

September 22, 2011

[Update: The Senate Health, Education, Labor, and Pensions Committee announced on November 3 that it had misstated some data in its September 22 report. See a Chronicle article about that November 3 announcement.]

Eight for-profit colleges collected a combined $1.02-billion in veterans' education benefits last year, about 23 percent of all of those benefits disbursed, according to a Senate report released on Thursday.

For those eight colleges, that's a 159-percent increase from the previous academic year.

The report is part of an investigation of for-profit higher-education companies by the Senate Health, Education, Labor, and Pensions Committee. Sen. Tom Harkin, a Democrat of Iowa and the committee's chairman, said at a news conference on Thursday that the for-profit higher-education sector had aggressively recruited veterans and service members eligible for Post-9/11 GI Bill benefits.

"We didn't anticipate that the for-profit sector, eager to please their Wall Street investors, would go after this new funding aggressively," Senator Harkin said. "Military money helps these schools on paper to meet a key statutory requirement that no more than 90 percent of their revenue come from federal financial-aid programs. But because of a technicality in the law, military benefits are not counted on the 90-percent limit."

The Senate report shows that U.S. veterans returning from Iraq and Afghanistan have become frequent recruiting targets of the for-profit colleges' increased marketing efforts, Mr. Harkin said.

He and other committee members aren't the only ones taking shots at for-profit colleges' recruiting of veterans. In an opinion article in The New York Times on Thursday, Hollister K. Petraeus, director of the Better Business Bureau Military Line, wrote that U.S. veterans are "finding themselves under siege from for-profit colleges," adding that the colleges focus on recruiting veterans with "aggressive and often misleading marketing."

However, the large increase in veterans' benefits at for-profit colleges coincided with a similarly large rise in federal spending. The federal government increased eligibility for veteran-education benefits in 2008 and in 2010, a step that raised spending on them from $1.75-billion in 2009-10 to $4.4-billion in 2010-11, a 151-percent jump.

'Educating More Students'

Over all, for-profit colleges garnered a combined $1.63-billion in education benefits last year, about 37 percent of the $4.4-billion distributed. For-profit colleges enrolled 25 percent of all student veterans, the report says. However, those figures aren't changed much from the year before, when for-profit colleges collected 36 percent of education benefits and enrolled 23 percent of student veterans, according to a March 2011 news release from the Association of Private Sector Colleges and Universities, the trade association for for-profit colleges.

"That shows that we're educating more students and taking the same percentage share of the federal spending," said Bob Cohen, a spokesman for the association.

Led by the Apollo Group, the parent company of the University of Phoenix, with $210-million in veterans' benefits, the top 10 recipients included eight for-profit colleges and two public university systems, the University System of Maryland and the University of Texas System, the eighth- and ninth-largest recipients. The Maryland system collected $51-million in 2010-11, a 155-percent increase over the previous year. The Texas system collected $45-million, or 125-percent more. The ITT Technical Institute, the second-largest recipient, brought in $178-million, up from $77-million.

Based on the committee's data, Senator Harkin said he was not convinced that the top eight for-profit colleges were providing a worthwhile education, as their total dropout rates far exceeded the rates at the two public universities. At the University of Phoenix, 50.3 percent of bachelor's students withdrew in the 2008 fiscal year, compared with 13.1 percent at the Maryland system and 26.4 percent at the Texas system, according to the committee's data.

Taxpayer dollars provide $10,875 per student veteran at for-profit colleges, more than twice as much as at public colleges, and up from $8,337 the previous year, according to the committee.