For-profit colleges stand to lose funding
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Legislation introduced in the Senate last week would eliminate what Sen. Dick Durbin, D-Ill., called "the powerful incentive" for-profit colleges have to recruit veterans and military service members -- a demographic that has become a lucrative source of federal funds for Downtown-based Education Management Corp.
EDMC -- which enrolls 151,000 students in a system of colleges and universities that includes The Art Institutes, Argosy University, Brown Mackie College and South University -- was the third-highest recipient of post-9/11 GI Bill benefits during the 2009-11 award years. According to an analysis of Veterans Affairs data conducted by the Senate Health, Education, Labor and Pensions Committee and released in September 2011, EDMC took in $173 million in post-9/11 GI benefits in that span.
The Senate HELP committee, chaired by Sen. Tom Harkin, D-Iowa, has been investigating the practices of for-profit colleges for a year and a half. Members have questioned outcomes for students enrolled at these schools, saying they have high student withdrawal and low student loan repayment rates.
The new legislation, which Mr. Harkin has co-sponsored, is "one of many important steps" the government plans to take to hold for-profit colleges accountable to taxpayers, he said.
"It will close a loophole that has made veterans and active duty military major targets of deceptive marketing and aggressive recruitment, rather than students treated with the respect their service deserves," he said.
Under federal law, for-profit colleges and universities may not receive more than 90 percent of their revenue from the U.S. Department of Education's student aid programs. The other 10 percent must come from sources outside the federal government.
But federal student aid for veterans and active-duty service members, such as GI Bill funds and Department of Defense tuition assistance funds, does not count toward the 90 percent figure -- a provision that the senators have said makes GI bill funding enticing to schools.
The Protecting Our Students and Taxpayers Act -- which was introduced last week and referred to the Senate HELP committee -- would count military-related financial aid programs as federal aid and return the 90-10 federal aid ratio to 85-15, which was the ratio until 1998.
A statement released by the Washington, D.C.-based Association of Private Sector Colleges and Universities said the legislation will cut off veterans' access to education and job placement support.
Military money going to for-profit schools has spiked in the years following the 2008 passage of the Post-9/11 GI Bill, which gives up to 36 months of education benefits to most military members, and often their spouses, who have served since Sept. 11, 2001. Of the top 10 recipients of post-9/11 GI Bill benefits, eight, including EDMC, were for-profit schools. The other two were the University of Maryland and University of Texas systems.
A spokeswoman for EDMC said the company is still reviewing the legislation and couldn't comment yet. According to EDMC, more than 8 percent of its students are active-duty military or veterans, and about 4 percent of its revenue is from military-related financial aid programs as of October 2011.
First Published January 31, 2012 12:00 am
