National Association of Attorneys General
Securing the Higher Education Marketplace For Returning Veterans
The return from active military duty to civilian life can prove to be a daunting transition. In a recent survey over two-thirds of veterans of the Iraq and Afghanistan conflicts reported difficulties reintegrating into civilian life. Predictably, one of the hardest aspects of the transition experienced by veterans is finding a job as a civilian. Although job seekers of all backgrounds are struggling in the down economy, veterans face additional hurdles. In particular, because of their time spent in military service and away from the workforce, veterans often compete with candidates who have more job experience. Similarly, many veterans suffer from a deficit of formal education or training as compared to their civilian contemporaries. Veterans undoubtedly acquire valuable skills during their service, but a majority of veterans�60 percent of those surveyed�report difficulty explaining to potential employers how those skills translate to civilian work.
In short, a significant portion of veterans believe they need additional education or training in order to succeed in today�s workforce. To assist veterans in this regard, the U.S. Department of Veterans Affairs (VA) provides an extremely valuable resource in the form of Post-9/11 GI Bill tuition benefits to veterans who wish to further their education or receive job training. However, some veterans are being deprived of the full benefit of the program by for-profit educational institutions using aggressive and sometimes misleading recruitment tactics while ultimately producing inferior outcomes for students. Fortunately, enforcement actions by the state attorneys general and new regulations advocated by the U.S. Department of Education (DOE) have the potential to secure the higher education marketplace and by extension improve veterans� chances in the workforce.
Inferior Outcomes for Students at For-Profit Colleges
The U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP Committee) recently reported on its two-year investigation of the for-profit college industry. The HELP Committee found that while for-profit colleges play an important role in satisfying demand for higher education among non-traditional students (including military veterans), for-profit colleges often focus more on recruiting students than ensuring they complete their programs. As a result, many students are left with student loan debt but without the increase in earning power that comes from completing a degree. Indeed, the HELP Committee found that over 54 percentof students who enrolled in for-profit colleges in 2008-2009 withdrew without a degree.
The problem of high withdrawal rates is exacerbated when put into context of the high cost of for-profit education. Simply put, programs offered by for-profit colleges are typically more expensive than comparable public university and community college programs. At for-profit colleges, bachelor�s degree programs are on average 20 percent more expensive than analogous programs at flagship public universities, while associate degree and certificate programs are four times as expensive as comparable community college programs.
Due at least in part to the high cost of the programs, 96 percent of students at for-profit colleges take out student loans. This number includes veterans whose military benefits are inadequate to cover the high costs of their programs. Since over half of students withdraw before earning their degree, student loan default rates are high. Indeed, while �[s]tudents at for-profit colleges make up 13 percent of the total higher education population, they account for nearly half of all loan defaults.� Making matters worse, even students who complete their degrees at for-profit colleges are more likely to experience unemployment or underemployment after leaving school.
For-Profit Colleges� Focus on Recruiting & Targeting Veterans
Given the results of the HELP Committee�s investigation, one may wonder what draws students to for-profit colleges in the first place. For-profit schools certainly have their virtues: due to their flexible schedules and online course offerings they can absorb demand for higher education from working adults, active duty military members, veterans, and other non-traditional students who are underserved by traditional colleges and universities.
However, students are also drawn by aggressive and sometimes misleading recruiting practices. The HELP Committee found that the recruiting process at for-profit colleges is essentially a high-pressure sales pitch. The focus on recruiting is borne out in the average for-profit college�s expenses and staff makeup. On average, for-profit colleges employ one recruiter per 53 students and spend almost 23 percent of all revenue on recruiting and advertising. To put this in context, they employ about a third as many support services staff, a tenth as many career services staff, and only a little over 17 percent of their revenues go toward instruction. The HELP Committee also found that in order to convince students to enroll, some for-profit college recruiters mislead prospective students about program costs, the availability of financial aid, the completion rates of other students, job placements rates, the transferability of credits, and the accreditation status of the school.
Veterans in particular are common targets of recruitment efforts. The HELP Committee found that for-profit colleges pay �lead generators� to gather information on veterans interested in pursuing higher education. In pursuing these leads�and in addition to the deceptive tactics previously mentioned�some recruiters attempt to enroll veterans by misleading them about whether their tuition would be fully covered by military benefits and even by targeting particularly vulnerable veterans at Wounded Warrior Centers and veterans hospitals.
Veterans are aggressively targeted due to a loophole in the so-called �90/10 Rule� of the Higher Education Act. On average, nearly 80 percent of for-profit college revenues come from DOE grants, loans, and work study programs (collectively �Title IV Funds�). Under the 90/10 Rule, a for-profit college will lose its eligibility to continue receiving Title IV Funds if more than 90 percent of its revenue consists of Title IV Funds for two consecutive years. However, educational assistance programs for military servicemembers and veterans�such as the U.S. Department of Defense�s Tuition Assistance Program and the VA�s Post-9/11 GI Bill�do not count as Title IV Funds for the purposes of the 90/10 Rule. Thus for every dollar from the Tuition Assistance Program and the Post-9/11 GI Bill that a for-profit college brings in, they can bring in nine dollars of Title IV Funds and still remain in compliance with the 90/10 Rule.
By incentivizing for-profit colleges to disproportionately target veterans, the loophole in the 90/10 Rule puts veterans at heightened risk of suffering the inferior outcomes associated with certain for-profit colleges. Further, it puts them at risk of wasting their hard-earned military benefits.
Securing the Higher Education Marketplace
Not all for-profit colleges are plagued by inferior outcomes for students; many provide quality, worthwhile educational opportunities. Nonetheless, due to the unfortunate frequency of inferior student outcomes in the industry, observers see a need for action to secure the for-profit college marketplace. Two major players in this area are state attorneys general and the DOE.
The attorneys general can and do prosecute for-profit colleges when their practices violate state law, typically Unfair and Deceptive Acts and Practices statutes. In the past two years, for example, the New York Attorney General�s Office settled a case against Career Education Corporation for falsely inflating job placement rates for $10.25 million; the Colorado Attorney General�s Office settled a case against Westwood College for misleading students about job placements and program costs for $4.5 million; and a multi-state suit against for-profit college lead generator QuinStreet, Inc., the former operator of GIBill.com, garnered a $2.5 million settlement which transferred the GIBill.com domain to the VA. The attorneys general are remaining vigilant with several similar cases ongoing.
The DOE is seeking greater regulation of the for-profit college industry. DOE echoed the concerns of the HELP Committee regarding student outcomes in formulating a proposed Gainful Employment Regulation. The Gainful Employment Regulation would condition a program�s eligibility for Title IV Funds on its students� ability to secure gainful employment and pay off student loan debt after completing the program. DOE proposes using a debt-to-earnings rate measure and a program cohort default rate measure to gauge student outcomes. The debt-to-earnings measure would assess how much of a graduate�s discretionary and gross annual income goes toward paying the debt incurred attending a for-profit program. The cohort default rate measure would evaluate the student loan default rate of students formerly enrolled in a for-profit program, regardless of whether they completed the program. A similar Gainful Employment Regulation using a debt repayment measure in lieu of the cohort default rate measure was struck down in 2012 by the D.C. District Court as arbitrary and capricious. Whether the replacement cohort default rate measure will withstand judicial scrutiny remains to be seen.
Since for-profit colleges typically rely heavily on Title IV Funds�recall the HELP Committee�s finding that nearly 80 percent of for-profit college revenues come from Title IV Funds�the Gainful Employment Regulation could potentially put for-profit programs out of business for failing to deliver adequate student outcomes.
Continued enforcement actions by the attorneys general and more stringent regulations from the DOE have the potential to secure the higher education marketplace. Safer educational opportunities will allow veterans returning from active duty to take advantage of their military benefits without worrying about the pitfalls posed by certain for-profit colleges. Securing these opportunities will afford veterans a greater ability to rejoin the workforce and ease the difficult transition from active duty.
 Veterans� Employment Challenges: Perceptions and Experiences of Transitioning from Military to Civilian Life, Prudential, 4 (2012), https://www.prudential.com/documents/public/VeteransEmploymentChallenges.pdf.
 Id., at 4.
 See id.
 The Post-9/11 GI Bill provides up to 36 months� worth of tuition and fee payments to veterans who have served on active duty since Sept. 11, 2001. Post-9/11 GI Bill: It�s Your Future, Veterans Benefits Administration (May 2012), http://www.benefits.va.gov/gibill/docs/pamphlets/ch33_pamphlet.pdf. Veterans may also be eligible for housing assistance and additional stipends under the bill. Education and Training, U.S. Department of Veterans Affairs (Dec. 11, 2013),http://www.benefits.va.gov/gibill/resources/benefits_resources/rates/ch33/Ch33rates080113.asp.
 For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success, U.S. Senate Health, Education, Labor and Pensions Committee, 3-4 (July 20, 2013), http://www.help.senate.gov/imo/media/for_profit_report/PartI-PartIII-SelectedAppendixes.pdf [hereinafter �HELP Report�].
 Id.,at 1.
 Id., at 3.
 Id., at 6.
 See id.,at 55.
 Stephanie Simon & Caitlin Emma, Barack Obama Cracks Down on For-Profit Colleges, Politico (March 13, 2014), http://www.politico.com/story/2014/03/barack-obama-education-for-profit-colleges-104661.html.
 HELP Report, supra note 8, at 120-121.
 Id., at 1.
 Id., at 52.
 Id., at 2, 5.
 Id., at 1, 5.
 Id., at 3-4.
 Id., at 4. These lead generators are websites often featuring military-inspired imagery and language to draw in veterans. They purport to advise veterans on potential educational opportunities, but in reality they are gathering information on users to sell to for-profit colleges for recruitment purposes.
 HELP Report, supra note 8, at 4.
 Id., at 2.
 See Ass'n of Private Colleges & Univs. v. Duncan, 870 F. Supp. 2d 133, 152 (D.D.C. 2012) (explaining 20 U.S.C. � 1094(a)(24)).
 HELP Report, supra note 8, at 8.
 A.G. Schneiderman Announces Groundbreaking $10.25 Million Dollar Settlement With For-Profit Education Company That Inflated Job Placement Rates To Attract Students, New York State Office of the Attorney General (Aug. 19, 2013), http://www.ag.ny.gov/press-release/ag-schneiderman-announces-groundbreaking-1025-million-dollar-settlement-profit.
 Attorney General Announces $4.5 Million Settlement with Westwood College to Address Deceptive Business Practices, State of Colorado Attorney General (March 14, 2012), http://www.coloradoattorneygeneral.gov/press/news/2012/03/14/attorney_general_announces_45_million_settlement_westwood_college_address_dece.
 Attorney General Conway Announces Win for Veterans against Predatory Practices, Kentucky.Gov (June 27, 2013), http://migration.kentucky.gov/newsroom/ag/quinstreetavc.htm.
 See, e.g., For-profit Schools Hit with Lawsuits, Subpoenas, NavyTimes (March 5, 2014), http://www.navytimes.com/article/20140305/EDU03/303050019/For-profit-schools-hit-lawsuits-subpoenas.
 Program Integrity: Gainful Employment, 79 Fed. Reg. 16426 (proposed March 25, 2014). In particular, the DOE cited concerns that some for-profit college programs are not training students in the skills they need to obtain and maintain jobs in the occupation for which the program purports to provide training, are providing training for an occupation for which low wages do not justify program costs, and are experiencing a high number of withdrawals, often leading to default.
 Id., at 16427.
 Id. A program is in failing status when graduates� loan repayments account for over 30% of discretionary earnings or 12% of gross earnings. A program is �in the zone� when graduates� loan repayments account for over 20% but less than 30% of discretionary earnings or over 8% but less than 12% of gross earnings. A program would lose its eligibility for Title IV Funds if it is in failing status for two out of three consecutive years or it is �in the zone� for four consecutive years.
 79 Fed. Reg. at 16427. Under the proposed regulation, a program would lose eligibility for Title IV Funds if its former students default at a rate of 30% or greater for three consecutive years.
 Ass'n of Private Colleges & Univs., 870 F. Supp. 2d at 154 (�The debt repayment standard [. . .] was not based upon any facts at all. No expert study or industry standard suggested that the rate selected by the Department would appropriately measure whether a particular program adequately prepared its students. Instead, the Department simply explained that the chosen rate would identify the worst-performing quarter of programs. Why the bottom quarter? Because failing fewer programs would suggest that the test was not �meaningful� while failing more would make for too large a �subset of programs that could potentially lose eligibility.� [. . .] That this explanation could be used to justify any rate at all demonstrates its arbitrariness.�) (internal citations omitted).