Dear Service Members and Veterans,
Since 1944, Congress has offered the promise of educational opportunity to our veterans so that they may successfully transition to civilian service after their military duty is complete. The Post 9/11 G.I. Bill and the Department of Defense's Tuition Assistance Program continue that legacy today by offering grant aid to service members and veterans so that they may pursue a high-quality postsecondary education. Just as they've fulfilled their duty to serve our country, it is our duty to ensure that our nation's service members and veterans can access the best education available from our nation's colleges and universities. We also have a duty to ensure that their aid and their time in postsecondary programs are well spent.
On this Veterans Day, the Obama administration renews its pledge to work with Congress to close a loophole in current law that puts in jeopardy the quality education that these men and women deserve.
The law is known as the 90/10 rule. It requires that a for-profit college must derive at least 10 percent of its revenue from non-federal student aid funds in order to continue participating in the U.S. Department of Education's student loan and grant programs. The intent of the law is simple: Quality for-profit programs should be able to secure funding that is not solely from the federal government.
However, because of a loophole in the law, service members' and veterans' education aid is allowed to count toward the 10 percent, despite the fact that these funds represent federal taxpayers' money. This loophole has created a perverse incentive for some for-profit colleges to seek out and aggressively—and, sometimes, deceptively—enroll service members and veterans to skirt the law.
For every service member, veteran, or their family member (in the case of the post-9/11 G.I. Bill) enrolled at a for-profit college and paying with military education funds, that college can enroll nine other students who rely entirely on federal student aid money—making it an entirely taxpayer-funded enterprise.
Holly Petraeus, the Assistant Director for Service Member Affairs at the Consumer Financial Protection Bureau, described this loophole as causing for-profit colleges to see service members as nothing more than “dollar signs in uniform.”
Unfortunately, this type of bad behavior isn't new. Fly-by-night schools have preyed on veterans since the original G.I. Bill was signed into law. Since then, Congress has put protections in place to ensure that our brave men and women in uniform aren't exploited. Widespread fraud and abuse uncovered by a 1950 federal investigation led to the long-standing rule in the GI Bill that requires program enrollment by VA beneficiaries to not exceed 85 percent. Following several investigations and evidence of extensive fraud and abuse at proprietary schools during the late 1980s and into the 1990s, in 1992 Congress put into effect the 85/15 rule in the Higher Education Act, but then changed it to the 90/10 rule in 1998. With the relaxing of this requirement and in recognition of the increasing pressure some for-profit institutions place on service members and veterans to exploit the loophole, it is clear that we must act to restore the original 85/15 ratio and close the loophole on GI Bill and other federal revenue.
Though the rule has changed over time, the principle that created it holds true today. Colleges and universities should be required to demonstrate their worth to taxpayers and to students. That's why this Administration wants to work with Congress to restore the rule's intent. For-profit schools must be able to show that they are able to bring in paying customers willing to spend their own money. Schools can't just rely on federal aid.
That's why last year, the President called for closing the 90/10 loophole. But we need to go further.
It's time for Congress to step up as it has in the past. This loophole must be fixed. Yesterday, Sen. Durbin introduced the Protecting Our Students and Taxpayers Act of 2015 that would close the loophole, and reinstate the 85/15 ratio. Today, the Administration calls on Congress to take action on this bill quickly.
To be clear, the Administration does not believe that all for-profit colleges are bad actors. Some for-profit colleges provide an education that leads to good-paying jobs. And those colleges should have no problem demonstrating their worth in the marketplace by deriving at least 15 percent of their revenue from non-federal sources.
Our veterans deserve the very best postsecondary education that we can provide. The GI Bill has been instrumental in helping veterans, service members, and their families achieve their education dreams. We owe it to our veterans to make sure that their money is spent at institutions of higher education that provide quality education and training. On this Veterans Day, let us all pledge to protect those dedicated Americans who have protected all of us.
Thank you for your service,
U.S. Under Secretary of Education