Education Department Closes Loophole Advocates Say Some Colleges Used to Scam Veterans

Military can help fund service members' education
Military members wishing to continue their education can find that there are a variety of financial assistance programs to help fund their endeavors. (Master Sgt. William Wiseman/Iowa Air National Guard)

The federal government has taken the final step to formally close a loophole in education funding rules that advocates say for-profit colleges have used to take advantage of veterans.

On Thursday, the Department of Education published in the Federal Register its final rule on how GI Bill benefits are classified in calculations for colleges' federal funding, closing what's referred to as the "90/10 loophole."

"Veterans and their families deserve the very best education America has to offer," Department of Veterans Affairs Secretary Denis McDonough said in a statement included in a Department of Education news release. "It's our job at VA and across the federal government to deliver on that promise, making sure that veterans and their families not only have access to affordable education through the GI Bill -- but also that they are protected from education fraud and abuse."

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By law, for-profit schools can get no more than 90% of their revenue from federal sources, with the other 10% supposed to come from student tuition or other non-government sources.

The idea is that by forcing schools to find at least some students willing to pay for their education out of their own pockets, the federal government could avoid paying schools that provide no educational value to students.

But in the past, GI Bill benefits weren't counted against the 90%. Veterans advocates say that led shady for-profit schools to target veterans with deceptive recruiting practices so they could get more than 90% of their revenue from federal student aid while failing to deliver on promised job prospects.

Last year, after years of lobbying by advocacy groups, Congress passed a law mandating the loophole be closed, and Thursday's Department of Education action formally implements the law.

The new rules stipulate that all federal funds, including GI Bill benefits and the Department of Defense Tuition Assistance program, be counted on the "90 side of the 90/10 calculation."

"Under the final 90/10 regulations, military-connected students will benefit as proprietary institutions' incentive to aggressively recruit GI Bill and Department of Defense (DOD) Tuition Assistance recipients is greatly reduced because federal assistance for those students will be treated the same as [other federal financial aid] in the 90/10 revenue calculation," the Education Department wrote in the rule.

The new regulation takes effect Jan. 1, though schools that are in the middle of their fiscal year at that point have until their new fiscal year starts to follow the rule.

Veterans advocates who have pushed for years to close the loophole applauded the Department of Education's move.

"After years of harassment by deceptive and aggressive for-profit college recruiters, veterans, service members, and their families will no longer be viewed as nothing more than dollar signs in uniform," Veterans Education Success President Carrie Wofford said in a statement.

-- Rebecca Kheel can be reached at Follow her on Twitter @reporterkheel.

Related: New Law Finally Closes GI Bill Loophole Allegedly Used to Scam Veterans

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