Highlighting Flow of Military Benefits to For-Profits, Senators Seek Changes in Key Rule

Courtesy of Sen. Tom Carper’s office

Witnesses at a Senate oversight panel's hearing included (from left): Theodore L. Daywalt, president of; Ryan Gallucci of the Veterans of Foreign Wars; Russell Kitchner, a vice president of the American Public U. System; and Greg Von Lehmen, provost of the U. of Maryland University College.
September 22, 2011

Democrats continued to build their case for changing a federal regulation known as the 90/10 rule by arguing at a U.S. Senate oversight hearing on Thursday that the current formula encourages for-profit colleges to aggressively recruit military veterans and service members without regard to their educational outcomes.

Under the 90/10 rule, for-profit colleges must receive at least 10 percent of their revenue from nonfederal sources to be eligible to receive federal student aid. But military benefits aren't counted as part of the federal share, so some colleges have courted veterans as a way to ensure their compliance with the rule.

To discourage this practice, Democrats—and many veterans groups—want to include military money on the federal side of the formula. Nearly every witness at Thursday's hearing, held by a subcommittee of the Committee on Homeland Security and Governmental Affairs, endorsed the idea, including a top official from the Department of Veterans Affairs, Curtis Coy.

"Some institutions may be targeting veterans because of the funds they receive," said Mr. Coy, the department's deputy under secretary for economic opportunity. "Veterans should not be aggressively recruited principally because of financial motives."

Theodore L. Daywalt, president of, Inc., suggested that Congress go even further and require for-profit colleges to receive at least 20 percent of their revenue from nonfederal sources.

But for-profit colleges have vigorously fought proposals to tighten the 90/10 rule. Some of those institutions would become ineligible for federal aid if military tuition assistance and veterans benefits were counted as a federal source of revenue in the formula.

During the hearing, Russell Kitchner, vice president for regulatory and governmental relations for the American Public University System, said the proposed change would drive up the cost of programs and do nothing to improve student outcomes. He argued instead for better metrics to measure student success.

"It's important that we focus on the academic dimension of this question, and not simply the economic one," said Mr. Kitchner, the sole representative of the for-profit sector at the hearing.

The American Public University System has built its business (and reputation) around serving members of the military, and Sen. Tom Carper, a Democrat of Delaware who chairs the panel that held Thursday's hearing, was quick to stress that it is not one of the "bad actors" he was worried about.

Instead, he directed most of his skepticism toward the Department of Veterans Affairs, asking whether it was doing enough to protect veterans from deceptive marketing and other abuses by for-profit colleges. Sen. Scott Brown of Massachusetts, the top Republican on the panel, also questioned the department's decision to shift more oversight responsibility onto state approving agencies, which decide whether programs in their state can receive federal veterans benefits.

Such agencies received $19-million from the government last year. But a recent report by the Veterans of Foreign Wars found the agencies "undermanned and undertrained," Sen. Brown said.

Mr. Coy defended the decision to lean more heavily on the agencies, saying that the "vast majority are well trained" and "highly motivated," and adding that the agencies would focus their attention on for-profit colleges.