For-Profit Colleges Face Aid Cuts Under New Veterans Bill

For-profit colleges could soon be forced to rely on less federal aid under the new veterans bill, which would curb the marketing of degrees to soldiers and veterans.

Senate Democratic leaders are set to introduce the legislation this week. Once in place, the law would see for-profit colleges receive no more than 85 percent of their revenue from federal programs, according to a summary from the office of Illinois Senator and co-sponsor Richard Durbin.

Colleges currently receive as much as 90 percent of their revenue funding from federal aid, but they would be set to lose that if they exceed the cap for one year instead of the current three, writes John Hechinger at Bloomberg.

Senate education committee Chairman and co-sponsor Tom Harkin, said in a statement that for-profit colleges target the military because their government tuition programs are excluded from the cap on federal money.

The legislation "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."

The Senate education committee revealed that there are currently eight for-profit college companies that receive about $626 million in veterans' education benefits in the most recent academic year.

"The eight include Apollo Group Inc. (APOL), which owns University of Phoenix, the largest chain by enrollment; and Education Management Corp. (EDMC), the second-biggest."

Christina Mulka, a spokeswoman for Durbin notes that congress enacted the cap on federal aid to for-profits as an anti-fraud provision so that students — or employers who paid for their continuing education — had "skin in the game," not just the federal government."

For-profit colleges receive almost $32 billion in federal grants and loans in the 2009-10 school year, and currently the sales practices and student-loan default rates are being scrutinizing by Congress, the Education Department, the Justice Department and state attorneys general.

Brian Moran, interim president of the Washington-based Association of Private Sector Colleges and Universities said that the legislation will create "barriers to critical job- training and educational programs for veterans."

The colleges are positioned to lobby against the bill. They did last year, where they managed to successfully push to ease proposed regulations that cut off aid to for-profits whose students struggle the most to repay their loans, Mulka said.

Durbin announced his intention to introduce legislation on the recruiting of the military by for-profits last week. He didn't give details but they are expected to be announced soon.

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