For-profit colleges seem to make into the news every other week for some reason or another. Some of the most common reasons this year were related to fraudulent and misleading advertising meant to persuade students to attend, but other reasons included violations of Title IX funding requirements. These developments caused some schools to close down such as ITT Tech while others were barred from Federal funding such as the Minnesota School of Business.
The Department of Education announced in a press release that for-profit colleges have been utilizing loopholes in order to “skirt” around 90/10 federal funding limits.
In short, these schools have been actively recruiting military veterans and servicemen who received funding from GI educational benefits via Veteran Affairs (VA) and Department of Defense (DOD) Tuition Assistance programs. Funding from these sources is currently not included in the 90/10 federal funding limit calculation, hence the loophole.
For those unfamiliar with the 90/10 funding limit, colleges must receive no more than 90% of its revenue from federal funding such as Title IX funding. As mentioned previously, VA and DOD funding is not included in this calculation at the moment which was an opportunity that for-profit colleges took advantage of.
To put this in perspective, the 2016 90/10 report found 17 for-profit colleges in violation of the 90/10 rule. If this same report were to incorporate VA and DOD funding, almost 200 for-profit colleges would be in violation of the 90/10 rule. The total amount of revenue through federal funding for these schools would increase by a factor of 100 ($80 million to $8 billion).
This announcement by the Department of Education carries several negative undertones in relation to for-profit colleges. First, it further solidifies the idea that for-profit colleges are organizations repeatedly looking for ways to secure revenue at the expense of the federal government. Second, it vilifies for-profit colleges as organizations that not only target low-income, desperate individuals in need of an education, but view United States servicemen as no more than “dollar signs in uniform.”
Secretary of Education John King weighed in on the situation claiming that these benefits were designed to reward self-sacrifice of service members, not provide “target[s] for predatory businesses.” Other politicians shared the same sentiments, and Under Secretary of Education Ted Mitchell called for “closing the 90/10 loophole.”
A new proposal was made to include all federal funding sources in the next annual 90/10 report. Additionally, a new threshold of 85% as opposed to 90% was proposed. If these stipulations were in effect this year, over 500 schools would have failed accounting for over $12 billion in federal funding.
At any rate, it appears that the government is catching up to businesses that seem to be taking advantage of federal funding through aggressive targeting and advertising. While this statement applies purely to for-profit colleges and higher education aid, it is possibly part of a new trend of stricter budgeting practices overall by the federal government.
One thing to keep in mind is that this development does not guarantee an 85/15 federal funding rule for the next annual report, nor does it guarantee that VA and DOD aid will be incorporated in future calculations. As always, American politicians need to dance through red tape at every step of policy making, so it remains to be seen if the proposals mentioned earlier will stand the test of bureaucracy.