Attorneys General Urge Congress to Close Military 'Loophole' at For-Profit Colleges

May 29, 2012

Attorneys general for 21 states have called on Congress to close an "apparent loophole" that they say encourages for-profit colleges to use "high-pressure recruiting tactics" on military veterans.

In a letter sent on Tuesday to leaders of the House and Senate education and veterans-affairs committees, the 21 attorneys general and a chief consumer-affairs official for a 22nd state urge Congress to change the "90/10" rule so that GI Bill and other educational benefits for veterans count toward the 90-percent cap on the amount of annual revenue a for-profit college may receive from federal student-aid programs.

Currently, the 90/10 rule allows colleges to exclude veterans' benefits and military tuition assistance provided by the Defense Department from the 90 percent. Instead, those funds are treated as if they were part of the nonfederal, 10-percent side of the calculation.

Over the past few months, several members of Congress have introduced legislation to tighten the 90/10 rule, with many of the bills specifically aimed at how the rule treats veterans' benefits.

The 90/10 rule was intended to ensure greater accountability in the for-profit sector, and it is unpopular both in the sector,which contends it is an ill-conceived proxy for quality, and among critics of the sector, who say it is too easily "gamed."

In their letter the attorneys general say allowing for-profit colleges to count hundreds of millions of dollars in veterans' benefits as nonfederal funds "not only undermines the balance Congress established, it has created a harmful incentive for these businesses, and they are businesses, to target service members."

The attorneys general, including Jack Conway of Kentucky and several others who have opened consumer-fraud investigations into for-profit colleges in their states, say the current treatment under the 90/10 rule compounds the colleges' reliance on federal student aid, known as Title IV for the section of the Higher Education Act that created them.

"Perversely," the letter asserts, "schools are actually using the military benefits to leverage even more Title IV funds, since each $1 they obtain from DoD or VA sources allows them to obtain an additional $9 in Title IV funding."

Officials at for-profit colleges oppose the change, arguing that GI Bill and tuition assistance should be treated differently than federal student-aid funds because they have been earned by the veterans and members of the armed services.

In addition to Mr. Conway, the following attorneys general signed the letter: Thomas C. Horne of Arizona, Dustin McDaniel of Arkansas, Kamala D. Harris of California, George Jepsen of Connecticut, Joseph R. (Beau) Biden III of Delaware, Lawrence Wasden of Idaho, Lisa Madigan of Illinois, Thomas J. Miller of Iowa, Douglas F. Gansler of Maryland, Martha Coakley of Massachusetts, Bill Schuette of Michigan, Jim Hood of Mississippi, Catherine Cortez Masto of Nevada, Gary King of New Mexico, Eric T. Schneiderman of New York, Roy A. Cooper of North Carolina, Alan Wilson of South Carolina, Marty J. Jackley of South Dakota, Robert E. Cooper Jr. of Tennessee, and Darrell McGraw of West Virginia. The chief consumer-affairs officer of Hawaii, who is not an attorney general, Bruce B. Kim, also signed.

Correction (5/31/2012, 6:56 a.m.): This article originally misstated the name of South Dakota's attorney general. He is Marty J. Jackley, not Mary. The article has been updated to reflect this correction.