Rep. Courtney Highlights Need to Protect Veterans, Servicemembers, and Their Families by Closing 90-10 Loophole
WASHINGTON, DC – Today, at the House Education and Labor Higher Education Subcommittee hearing, “Strengthening Accountability in Higher Education to Better Serve Students and Taxpayers,” Congressman Joe Courtney (CT-02) highlighted the predatory practices of for-profit colleges in their marketing campaigns and aggressive recruitment of veterans, servicemembers, and their families, and emphasized the need to close the “90-10 loophole.” The 90-10 rule states that a for-profit college must receive at least 10% of its revenue from non-federal funding, but allows these institutions to count G.I. Bill benefits and Military Tuition Assistance as part of the non-federal portion. This loophole as created a perverse incentive for for-profit colleges to aggressively recruit beneficiaries of G.I. Bill benefits and Military Tuition Assistance.
Click here to watch Rep. Courtney’s remarks
During his remarks, Courtney harkened back to the January 23, 2012 testimony of Hollister K. Petraeus, then Assistant Director for the Consumer Financial Protection Bureau’s Office of Servicemember Affairs, at Senator Dick Durbin’s For-Profit College Forum in Chicago, IL, in which she stated, “The 90-10 rule has given some for-profit colleges an incentive to see servicemembers as nothing more than dollar signs in uniform.”
"An issue that we struggled with back in 2008 – the last time the Higher Education bill was authorized – was the 90-10 rule, which, again, basically says that at least 10% of the revenue going into for-profit has to be non-Title IV money [like] Stafford loans and Pell Grants,” said Courtney. “However, G.I. Bill benefits were not treated as government funds under that 90-10 rule, which is, again, one of the reasons why I think Mrs. Petraeus noted that the G.I. Bill is like a magnet for for-profit institutions, because that counts towards the 10% in the 90/10 rule. I’d just ask the witnesses to [speak on] whether it’s time to treat those government funds in the post 9/11 G.I. Bill as, in fact, part of the government funding that 90-10 rule was intended [to limit] so there would be actually real private dollars and market-based investment in the for-profit institutions.”
In 1998, the current federal 90-10 rule was established as part of the Higher Education Act Amendments package, which shifted the rule from the previous 85-15 threshold. The rule bars for-profit colleges and universities from deriving more than 90% of their revenue from the U.S. Department of Education’s Title IV federal student aid programs. The other 10% needs to come from non-Title IV education dollars. By definition, for-profit colleges have a fiduciary duty to maximize profits. To ensure that these institutions were still providing a high-quality education to students, Congress implemented this rule to serve as a market-based consumer check on the programs.
Because of the way the rule was written, the unique federal student aid afforded to veterans and active-duty servicemembers – such as G.I. Bill benefits and Military Tuition Assistance – does not currently count toward the 90%. As a result, for-profit educational institutions have been aggressively recruiting and enrolling veterans, service members, and their families to their programs, while still maintaining compliance in the 90-10 rule.