For-Profit Pitfalls

Transitioning veterans have a world of decisions in front of them when they return home from service—one of which may be continuing education or starting down a new path towards a career outside their military occupational specialty. There are many things that one must consider when choosing the right educational institution. Some things to consider include cost, quality, transferability, accreditation, retention and graduation rates, dropout rates, loan default rates, enrollment and admissions criteria, and military friendliness. Not only do you have to make an informed decision on how to best use your GI Benefits, but you must also think about your long-term career goals. This means taking the time to find a school that will be right for you.

There are a variety of colleges and schools to choose from, with the distinction of being either non-profit or for-profit. Though for-profit institutions provide veterans with a service that is not widely available in traditional non-profit universities, they exist to pad the pockets of investors while public and private non-profit institutions focus on education. Another problem with for-profit education is that they have a tendency to prey on veteran’s education benefits.

Unfortunately, it’s difficult to separate the good actors from the bad actors in the for-profit world. Many for-profit schools are excessively expensive, plagued with high drop out rates, leave students with massive debt for worthless degrees and engage in very aggressive and sometimes deceptive marketing and recruiting practices targeted at veterans. This is due to a loophole in what is known as the 90/10 rule. This law was created to allow the free market to regulate for-profit schools by preventing them from being entirely government funded. Essentially weeding out bad schools that can’t attract customers to attend with non-government funds.

The 90-10 rule says that 90% of revenue for a for-profit school can come from government funds. However, due to a loophole in the law, military and veterans benefits fall in the 10% of revenue that is supposed to come from private sources. This puts a target on every veteran’s back. Every veteran that a for-profit school recruits is worth nine more students using federal financial aid. This leads to deceptive and predatory recruitment practices, not to mention a system set up to drive revenue instead of quality education.

This predatory trend has been seen with troop withdrawals and the advent of new GI Bill benefits. Between 2006 and 2010, combined VA and DoD education benefits received by 20 for-profit education companies increased from $66.6 million in 2006 to a projected $521.2 million in 2010, an increase of 683 percent. The expansion of military benefits have made service members, veterans, spouses, and family members highly attractive prospects to for-profit schools seeking to rapidly increase enrollments to satisfy the demands of investors.

This predatory nature isn’t the only issue with for-profit education for veterans. In a study conducted by the U.S. Government Accountability Office, regardless of degree type, tuition was more expensive at for-profit colleges than at public non-profit colleges located in the same geographic area. On average, it cost 6 to 13 times more to attend a for-profit college to obtain the same degree one could get at a public institution. In the first year of the Post-9/11 GI Bill, a Senate HELP report found that the VA spent comparable amounts ($697 million and $640 million respectively) on tuition for students attending public schools and students attending for-profit schools, but the VA funded 203,790 students at public schools compared to only 76,746 at for-profits. Furthermore, the outcomes at for-profit schools receiving the most military education benefit revenue were questionable—reporting the lowest loan repayment rates, the highest loan default rates, and high student withdrawal rates, all while pulling in roughly the same amount in benefits to educate far less than half the student-veteran population. If that wasn’t bad enough, while 13% of students attend for-profit institutions, their students account for almost half of all loan defaults.

For most students, choosing a school is not a data-driven process. This is largely due to the lack of usable consumer information available to prospective students. While schools are required to report a wide range of information to the Department of Education, there is no clear way to synthesize that information into a usable tool to empower consumers to make choices that fit their needs. IAVA continues to advocate for greater transparency and restriction of deceptive and predatory recruitment while providing the most comprehensive tools for making informed decisions about education choices and veterans education benefits. Visit our website at NewGIBill.org to stay up-to-date and learn more about the for-profit landscape.