By Tamara Hiler & Michael Itzkowitz
If there are two things Members of Congress love, it’s protecting our veterans and not wasting limited taxpayer dollars. Which is why it is unconscionable that over the past few decades, Congress has kept in place a well-known loophole that has allowed some proprietary institutions to aggressively and deceptively recruit veterans and the hard-earned GI bill money that comes along with them — wasting both valuable taxpayer funds and jeopardizing veterans’ ability to receive the high-quality postsecondary education they’ve rightfully earned.
In what represents a landmark agreement to reverse course and shield veterans and taxpayers from predatory schools, Senators Tom Carper (D-DE), Bill Cassidy (R-LA), James Lankford (R-OK), and Jon Tester (D-MT) introduced the “Protect Veterans Education and Taxpayer Spending Act of 2019” (Protect VETS Act) this week, marking the first time ever that a serious bipartisan effort has been made to close what is more commonly referred to as the “90/10 loophole” once and for all.
For years, predatory schools have skirted a federal law designed to prevent the flow of taxpayer dollars to low-value for-profit institutions eager to take advantage of the billions of federal dollars allotted to veterans’ postsecondary education following the creation of the GI Bill. Specifically, Congress put in place a market-based test known as the 90/10 rule requiring proprietary institutions to receive at least 10% of their revenue from non-federal funds as a way to prove an institution’s value in the marketplace outside of federal subsidies in the form of grants and loans.
However, a big caveat in that federal law exists: grant funds that student veterans receive through Veterans Affairs (VA) or the Department of Defense (DoD) as part of their GI Bill benefits — which sometimes reach into the tens of millions per year at certain institutions — are counted in the 10% part of the ratio, rather than 90%.
This gaping loophole has opened the door for a number of predatory institutions with no market value to aggressively recruit student veterans as a way to skirt 90/10 requirements, wasting valuable taxpayer funds that provide little return on investment and, even worse, veterans’ hard earned GI Bill money on schools that may not pay off or find themselves on the brink of financial failure.
Which is where the bipartisan Protect VETS Act comes in. First, this bill sews shut the 90/10 loophole by counting funds that for-profit institutions receive from VA and DoD as part of the “90%” in the 90/10 ratio in an effort to stop low-value for-profit institutions from aggressively recruiting student veterans and their hard-earned GI bill dollars. For-profit schools will have three years to comply with this new law, meaning that schools will have until the 2022–2023 school year — an ample runway of time — to ensure that up to 10% of their revenue comes from sources outside of federal aid.
If a school is unable to meet this threshold by that time, the bill puts in place a set of cascading sanctions that moves the law away from its current “two strikes and you’re out” policy, to one that escalates over a series of three consecutive years. If an institution fails the 90/10 test in the first year, it would not be able to enroll any new GI Bill beneficiaries; by year two, the bill puts a cap on total enrollment at the institution as a way to prevent schools from growing their student bodies further without coming into compliance; and, only by year three would a school lose its ability to access federal funds altogether for two years — ensuring that no further taxpayer dollars are at risk until a school comes back into compliance with the 90/10 law.
Lastly, this bill also takes big strides towards increasing transparency around bad actors to prevent student veterans from using up their limited GI Bill benefits at financially unstable or harmful institutions in the first place. Not only does it require for-profit schools to provide Congress with updated data on where its revenue is coming from using the new 90/10 calculation, it also puts warning flags next to the names of institutions in violation of the rule on the GI Bill comparison tool. This way, servicemembers and veterans researching where to spend their hard-earned GI Bill money won’t waste it at schools that clearly haven’t shown their value in today’s marketplace.
For too long, Congress has been more worried about protecting the interests of bad-acting proprietary schools than the needs of veterans who have protected this country. The Protect VETS Act makes thoughtful and reasonable updates to the 90/10 law to ensure that critical federal education benefits subsidized by taxpayers actually go to institutions that have proven their value in the higher education market. Closing the loophole is an important first step towards making sure we count veterans benefits the way they should be — so that we can help our higher education system better serve the needs of those who’ve served us.