Obama to Crack Down on Deceptive Practices by Colleges That Recruit Veterans

April 27, 2012

President Obama will issue an executive order today that is designed to protect veterans, servicemembers, and their families from deceptive marketing practices by educational institutions that target them for their federal education benefits, the White House announced.

The executive order, which Mr. Obama will announce during a visit to Fort Stewart, in Georgia, contains new rules for how institutions receiving military and veteran education benefits recruit students, disclose financial information, and track student outcomes.

The order mandates that more information be made available for veterans and servicemembers, and that the government take steps to stop deceptive marketing and recruiting practices by institutions that are eligible to receive military education benefits.

Those benefits are available under programs like the Post-9/11 GI Bill, which is for veterans who have served after September 10, 2001; the Pentagon's Tuition Assistance Program, for active-duty servicemembers; and the Military Spouse Career Advancement Account Program.

Fraudulent and aggressive practices by institutions that target veterans and servicemembers have increasingly caught the attention of lawmakers. Though the administration says it is not singling out one group of colleges, for-profit colleges enroll far greater proportions of military and veteran students than do nonprofit institutions, and tend to be among the largest recipients of military education benefits. Of the $4.4-billion in Post-9/11 GI Bill dollars paid to colleges and universities from 2009 to 2011, more than one-third, about $1.65-billion, went to for-profit colleges, according to a report released last fall by a U.S. Senate committee.

The executive order that Mr. Obama will release today calls for changes in a number of areas, according to a senior administration official who briefed reporters on Thursday evening. Following are summaries of some of those changes.

Increased Transparency. The order will require that all of the nearly 2,000 institutions participating in the Tuition Assistance Program for active-duty servicemembers provide students with a "Know Before You Owe" form, which discloses information about tuition, fees, financial aid, student-loan debt, and graduation rates. The roughly 6,000 institutions that enroll students through the GI Bill program will be encouraged—but not required—to provide veterans with the same information. The Department of Veterans Administration will immediately begin posting names of the institutions that agree to follow the executive order, according to a senior administration official. The government will also develop national-level reporting of student outcomes and graduation rates specific to veterans and servicemembers.

Abusive Marketing Practices. The order will make educational benefits that are administered through the Veterans Administration and Defense Departments subject to the same regulations governing misleading and deceptive practices that the Department of Education already has in place for institutions that receive federal funds under student-aid programs it administers, like Pell Grants and subsidized student loans. The order also directs the Department of Veterans Administration to begin the process to trademark the term "GI Bill," as a means of cracking down on fraudulent and deceptive Web sites. Registering the term as a trademark will give the department greater power to go after companies that deceptively market benefit-related services to veterans or set up fraudulent Web sites that resemble official government pages.

Centralized Complaint System. Under the order, the Departments of Defense, Education, and Veterans Affairs, in consultation with the Consumer Financial Protection Bureau and Department of Justice, will create a centralized complaint system for students receiving military and veterans' educational benefits. The order calls for strengthening enforcement and compliance functions within the Defense and Veterans Affairs Departments in order to effectively act on complaints of improper activity.

Access to Veterans and Servicemembers. The order directs the Defense Department to develop a uniform set of rules about how educational institutions can access military installations, with the goal of keeping "bad actors" off of military installations. One of the most egregious abuses has involved payments by educational institutions to the commanders of military bases, or recruiters affiliated with a base, to attract students and steer them to a particular institution, the senior administration official said. The executive order will direct the Defense Department to issue rules about those incentive payments, the official said.

While the order calls for more financial transparency, it does not make any changes to the a federal regulation known as the 90/10 rule, under which for-profit colleges can get no more than 90 percent of their revenue from federal student-aid programs administered by the Department of Education. Military education benefits are not counted under the federal portion of the formula, and some institutions have come under criticism for aggressively recruiting servicemembers and veterans for those benefits.

While several members of Congress have called for changing how veterans' benefits figure into 90/10 calculations, the Obama administration has not endorsed any particular piece of legislation, but it is "open to legislation that would improve the 90/10 rule," a senior administration official said.

Still, there is a provision in the executive order that allows the government to collect more complete data about how much colleges are receiving from veterans' programs specifically, the official said. The order will allow the government to see a breakdown of how much of an institution's tuition revenue is coming from the GI Bill, for instance.

Michael Dakduk, executive director of Student Veterans of America praised the executive order. "It sounds like a wish list of what we've been wanting," he said. "We're very happy with this."

Mr. Dakduk said that the biggest challenge will be following through on the administration's plan to collect more data about veterans' educational experiences because it will involve multiple agencies across the government. But, tracking this data is "absolutely important to supporting the GI Bill and to the American taxpayer," he said.

Steve Gunderson, chief executive the Association of Private Sector Colleges and Universities, a trade association that represents for-profit colleges, said in a statement that private-sector colleges "have long taken great pride in serving our nation's military personnel," and that his organization had joined with veterans' groups in urging Congress to set up programs to address some of the issues raised in Mr. Obama's executive order.

Mr. Gunderson, a former Republican congressman, said the association was "disappointed that in the midst of these discussions, the president decided to bypass the Congress to address these issues with an executive order." Private-sector colleges "work with Congressional leaders in a bipartisan manner to address concerns about veteran education across all sectors of higher education," he said.

Despite the president's action, he added, the institutions remain committed to working with government and veterans' groups "toward the improvement of military- and veteran-education."