Editor’s Note: The article has been updated. A source in the story requested anonymity, citing fear of retaliation for speaking to Military Times. Additionally, a paragraph that appeared in the print version of this story did not appear in the original online version because of a technical glitch. It has been added back to the story.
“It’s time for a regulatory reset.”
With six words last June, Betsy DeVos, President Trump’s education secretary, ushered in a new era for schools that operate as businesses, putting a pause — and, some fear, an end — to Obama-era measures that held for-profit schools more accountable for student outcomes.
That matters, advocates on both sides say, because for-profit schools educate tens of thousands of military students each year, and research shows students with military ties are more likely to go to for-profit colleges than civilians.
While some considered the regulations an unfair attack on for-profit colleges, a sector plagued by a reputation of high student debt and poor outcomes, others worry DeVos’ actions are an early indication that the Trump administration plans to undo everything they’ve worked for — unless a Republican Congress takes up their fight.
New Rules Suspended
“I actually wasn’t surprised,” said Will Hubbard, vice president of government affairs for Student Veterans of America, a nonprofit with around 600,000 members. “We were just surprised it was happening so quickly,” he said.
DeVos had been on the job four months when she made the announcement that she was delaying enforcement of a borrower defense rule that clarified how students left in the lurch by schools could seek loan forgiveness. She also announced delayed enforcement of gainful employment standards put in place by her predecessors.
The latter evaluated whether most for-profit programs and other certificate programs led to gainful employment for alumni, meaning annual loan payments did not exceed 20 percent of their discretionary income. At the time, Obama officials said about 1,400 programs serving 840,000 students – 99 percent of whom attended for-profit institutions – would not pass these accountability standards.
Borrower defense rules were finalized last October, following the abrupt school closures of national for-profit college chains Corinthian Colleges and ITT Technical Institute. Their demise, which left thousands of students stranded with substantial student debt and credits that other schools may not recognize, became the impetus for a provision in the new Forever GI Bill law that restores education benefits to such veterans.
SVA was one of dozens of military-oriented organizations that signed a letter to the Education Department in September asking DeVos to reconsider her plans for a reset, saying service members, veterans and their families are often targets of “unscrupulous colleges” because of their education benefits.
Education Department Press Secretary Liz Hill said in an email the department’s aim is to protect students from predatory practices, but the Obama administration’s rulemaking had “led to a cumbersome and confusing process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”
In her June statement, DeVos said schools of all types had raised concerns about the regulations and announced she would put together negotiated rulemaking committees “to develop fair, effective and improved regulations.”
Hill said representatives of veteran service organizations were invited to serve on those committees, and Hubbard confirmed in October he had been tapped to participate.
The military for-profit footprint
Half of the top 10 schools educating GI Bill users in fiscal 2016 were for-profits, including the No. 1 most common veteran destination, University of Phoenix, according to a Military Times analysis of federal data. These types of schools are also among the most popular enrollers of active-duty service members using Defense Department tuition assistance benefits — a list topped by for-profit American Military University, which stands behind DeVos’ decision to review existing regulations, said Wally Boston, CEO of the school’s parent company.
Many of these schools offer a slew of online programs, including majors in military-related fields, which come with more flexibility than brick-and-mortar class schedules.
And because they’re privately owned and run, they also have more freedom to innovate than their more traditional counterparts, said Steve Gunderson, president and CEO of Career Education Colleges and Universities, a trade group representing for-profit schools.
“What we offer that the others do not is we offer a set of very focused career education programs in a way that is accelerated to help a student, let’s say, move from the military into the workplace as fast as they possibly can,” said Gunderson.
Under Obama, these schools shed more than a million students and hundreds of campuses. The Education Department also stopped recognizing the sector’s largest accreditor, the Accrediting Council for Independent Colleges and Schools.
“The important difference between now and in the past, there is not an ideological assault on the sector’s very existence,” Gunderson said.
“There is an ability to engage in ... constructive conversations that seek some equity and fairness.”
Aside from DeVos’ announcement, there are other early indications that this administration will bring relief for the for-profit sector.
For one thing, Trump, a longtime businessman, once owned a for-profit seminar program that was called Trump University, despite being unaccredited and not offering academic degrees. He recently paid $25 million to settle fraud claims in lawsuits by former students.
Also, in September, Secretary of Veterans Affairs David Shulkin proposed — though later rescinded — a rule change that would have made it easier for VA employees to work for, financially benefit from, or enroll as students in for-profit colleges.
Additionally, DeVos’ senior counselor at the Department, Robert Eitel, and Chief Enforcement Officer Julian Schmoke both have ties to the for-profit sector.
Student experiences vary
These changes have raised eyebrows in the veteran advocacy community, where those seeking more oversight of the for-profit sector worry about what the next four years will mean for veterans, who they say are often aggressively recruited by for-profit schools because of a loophole in a federal law.
The law, commonly referred to as the 90-10 rule, prohibits for-profit institutions from getting more than 90 percent of their revenue from federal financial aid. Doing so could lead to loss of eligibility to receive those funds.
However, because GI Bill and DoD education benefits come from outside the Education Department, those funds are not counted toward the 90 percent, meaning schools could technically get all of their revenue from taxpayer dollars.
A recent analysis by higher education finance researcher Robert Kelchen of Seton Hall University found very few for-profit schools crossed over the 90 percent threshold between the 2007-08 and 2014-15 school years. But if military tuition benefits were counted in the mix, many more would.
Carrie Wofford, president of Veterans Education Success, a nonprofit that provides free legal and counseling services to veterans and family members who have been defrauded by schools, said most of the 4,000 individuals the organization has helped are from for-profit institutions.
“There’s no question the worst fraud comes from predatory for-profit colleges that target the GI Bill because of the 90-10 loophole,” she said in an email.
An Army and Navy veteran from Michigan, who asked to remain anonymous for this article, has experienced school fraud — and the change in administrations — firsthand.
A 2014 graduate of the now-bankrupt ITT Tech, the veteran said school representatives lied to him about the school’s accreditation status and steered him toward taking out private loans after he used up his GI Bill benefits. He ended up $100,000 in debt.
At one point in the enrollment process, he said he unknowingly waived his right to sue in court when he discovered a document he’d been given was missing a page with an arbitration clause.
“When you sign a [lease] or something like that, most people understand that this is a contract,” he said. “I should’ve (known) better, but this is school. I didn’t think this was like a business contract, and I didn’t have to worry about getting screwed over.”
The veteran said he has dreams of becoming a lawyer, but has yet to find a job or another school that will recognize his bachelor’s degree in criminal justice. He applied for borrower defense around the time of the inauguration and said he had a feeling the rules were about to change.
“I asked the lady on the borrower’s defense hotline if that would be the case, and she said, ‘Oh no, that shouldn’t be a problem.’”
He called again on Oct. 12 and said he was told it could be two years before the Department of Education processed his claim.
The veteran said he’s not surprised, adding, “Trump is a businessman. Trump had Trump University that allegedly defrauded students just like Corinthian Colleges and ITT Tech…. He was under fire for his own scandal for the exact same thing.”
Ashford University student Jescha McIntosh, 40, has had a vastly different experience with the for-profit sector. She said she was drawn to Ashford University for a degree in organizational management in 2014, largely because of the school’s online offerings.
McIntosh, who works in finance at Vandenberg Air Force Base in California and is using her husband’s transferred GI Bill benefits to earn a bachelor’s degree, was one of nearly 8,000 GI Bill users enrolled at the school last year.
There have been a few months of insecurity for McIntosh, as Ashford is in danger of losing its eligibility to accept GI Bill funds in an ongoing search for state-level approval recognized by the VA. But besides that, she feels she has been shielded from the kinds of negative experiences she hears about the for-profit sector, including about Ashford. The school’s parent company, Bridgepoint Education, was ordered by the Consumer Financial Protection Bureau last year to refund approximately $5 million to student borrowers and forgive $18.5 million in outstanding loans for misleading students about the loans’ real cost.
But McIntosh’s personal experience has been “really good,” she said, despite what she’s heard. The school knew exactly how to handle her GI Bill benefits when she enrolled and has made it easy to transfer credits from a nearby community college, where seemingly no one knew how her military benefits worked. And maybe that’s where the for-profit angle comes in, she said.
“I know to make a business work, you need to know what the customer wants,” she said. “If you don’t know what the customer wants, they’re going to walk away from you.”
McIntosh hopes to graduate next April and said from a student perspective, she hasn’t noticed any changes to her education under the new presidential administration.
“Same old, same old,” she said. “I haven’t felt anything.”
The future outlook
The Education Department’s Borrower Defense Committee, which includes the Financial Responsibility Subcommittee, got underway this week, and meetings will continue through February. Committee reviews of the gainful employment rule will happen in December, February and March.
The Department plans to publish its final regulations by Oct. 31, 2018.
With those regulations in a holding pattern, advocates like Wofford and Hubbard are hopeful they won’t have to wait the length of a presidency to see reforms.
“I think there’s a lot of energy and interest on the Hill to address (the 90-10 rule), and it’s something that we’ve looked at for a long time,” Hubbard said. “I don’t think it’s a silver bullet, but I think it’s a major component of the overall solution.”
Other VSOs, including American Legion, have also thrown their support behind a rule change.
Hubbard said he’s met with lawmakers on both sides of the aisle who are concerned that some for-profit colleges are taking advantage of veteran students, but he acknowledged that the fight for reforms in a Republican-controlled Congress could be an “uphill battle.”
“I think everybody, including – and maybe even especially – this administration is very, very committed to ensuring good outcomes for the veteran population,” he said. “I think there’s widespread agreement that something needs to be done. I think how that is done is where the disagreement comes in.”
Just last week, Democratic senators introduced legislation to close the 90-10 loophole. And in October, Sen. Dick Durbin, D-Illinois, reintroduced the Protecting Our Students and Taxpayers Act, which would include GI Bill and active-duty tuition assistance benefits as federal financial aid funding in the revenue calculation and reduce the 90-10 percent ratio to an 85-15 breakdown.
“Congress has a responsibility to ensure that those who serve our country are not being exploited and that federal taxpayer investments in education are not wasted – ending up in the pockets of greedy executives and investors of predatory for-profit schools,” Durbin said in an email.
While Democratic lawmakers like Durbin have been the most vocal supporters of further regulating for-profit schools, earlier efforts to reform the 90-10 rule had Republican backing in Congress, and Republican state attorneys general have been among those investigating fraud in the industry.
The 90-10 rule was also a discussion point during House committee hearings on the Forever GI Bill earlier this year, and Senate Democrats have shown support for the initiative before. In a letter to the Education Department last year, Durbin and 30 other senators wrote, “It is critical that we take active steps to rein in those institutions that are avoiding the intent of our federal protections for students and take away the incentive to use deceptive practices that target veterans and members of our military.”
But the Education Department’s Hill said that’s a matter for Congress to determine, not the department.