Federal, News, Regulation

Loophole in federal law allows for-profit schools to target service members

170px-Seal_of_the_United_States_Senate.svgWitnesses testifying before the Senate Committee on Homeland Security and Governmental Affairs on Tuesday said a loophole in federal law may enable for-profit colleges to unfairly target service members.

Under federal law, for-profit colleges and universities can derive 90 percent of their revenue from federal funding, while at least 10 percent must come from another source other than Title IV federal education funds.

Though the Military Tuition Assistance program, which is designed to help active duty service members pursue education, and GI Bill are federally funded, they are not Title IV funds—meaning that, for every service member using TA or GI Bill funds, for-profit college recruiters can enroll nine other students who use Title IV funds.

“This has given some for-profit colleges an incentive to see servicemembers as nothing more than dollar signs in uniform, and to use some very unscrupulous marketing techniques to draw them in,” Holly Petraeus, the assistant director of the CFPB’s Office of Servicemember Affairs, said.

Petraeus said Congress should re-examine the 90-10 rule because of the increased number of veterans receiving benefits under the GI Bill.

“As long as the 90-10 rule adds a significant extra incentive for for-profit colleges to enroll military students, this concern will remain,” Petraeus said.

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