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Are for-profit colleges unfairly ‘targeting’ vets?

Monday, 11 Nov 2013 | 7:51 AM ET
Shady for-profit schools targeting vets
Friday, 8 Nov 2013 | 6:00 PM ET
Herb Weisbaum says veterans need to be careful and ask some specific questions if they're looking at a for-profit school.

America made a commitment to veterans of the wars in Iraq and Afghanistan: In return for their service, the country would help pay for their college education when they came home.

Since the Post-9/11 GI Bill went into effect in August 2009, the federal government has paid more than $30 billion in tuition and benefits, the Department of Veterans Affairs said Friday. The VA said this money has now helped 1 million vets, servicemembers and their families get college degrees or technical training.

Most of this money goes to for-profit colleges and universities. In fact, eight of the 10 schools receiving the most GI Bill dollars are for-profits, according to a 2012 report from the Senate Committee on Health Education Labor and Pensions (HELP).

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The committee's chairman, Sen. Tom Harkin, D-Iowa, accuses some for-profits of using "predatory and deceptive tactics to target servicemembers and veterans for enrollment" in order to tap their federal educational benefits.

Last week, Harkin and Sen. Dick Durbin, D-Ill., introduced the Protecting Our Students and Taxpayers Act (POST), which would reduce the percentage of revenue for-profit schools can earn from federal financial aid to 85 percent, down from the current 90 percent.

Durbin believes too much federal money is going to an industry that "often provides a greater return on taxpayer investment to its administrators and investors than it does to its students."

The for-profit educational industry calls the POST Act unnecessary and warns that it would harm all students looking to get a postsecondary education.

"The industry is not ripping off military students. We have many schools that are supporting military members to get a quality education," said Michael Dakduk, vice president of military and veterans affairs at the Association of Private Sector Colleges and Universities. "There are good and bad actors throughout the entire spectrum of higher education. We want to make sure that veterans, servicemembers and their families have the best education and resources to choose an educational institution. And we're going to continue to work on that to develop best programs and services."

Profit is not a dirty word

There's nothing wrong with an educational institution making money, but there is a growing sense among government regulators that some of these schools take federal money and don't deliver on their promise of providing degrees that lead to good jobs.

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"We are very concerned about false claims about graduation rates, placement rates and possible earnings after graduation," said the Federal Trade Commission's Lois Greisman. "Not only are false claims unacceptable, they're illegal. We're looking into this. It's a top priority for the agency, and if we find schools that are violating the law, we plan to take appropriate action."

Holly Petraeus, who helps run the Office of Servicemember Affairs at the Consumer Financial Protection Bureau, said some for-profit schools serve military students well and give them a good education that can lead to civilian employment.

"But there have definitely been some that see it more as a profit-making exercise," Petraeus said. "They spend a lot more money on recruiting than actual counseling or concern about graduation rates and gainful employment."

A soldier's story

When Mae McGarry left the Army and returned to civilian life in Erie, Pa., she decided to pursue a degree in criminal justice and psychology. She found an online program with a for-profit university that would give her the flexibility she needed to take care of her kids.

After three years, McGarry decided to switch schools when she realized her school did not have the proper accreditation. That meant many potential employers would not accept her degree.

To make things worse, the credits she had earned during those three years could not be transferred to the new school she wanted to attend.

"I'm angry. I'm very angry," she said. "I was basically duped out of my GI benefits."

Having exhausted all of her federal benefits, McGarry had to take out loans to complete her education. She's now $64,000 in debt.

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"They got thousands of dollars that I can't get back, but I have to pay back. I'm very angry to say the least," she told me.

Trying to help

Matthew Boulay, a former Marine who served in Iraq, doesn't like what he sees. He believes some for-profit schools "target" young vets to get their GI benefits.

"It's not just over-promising," Boulay said. "In some cases, it's fraud."

For example, vets who are assured their GI benefits will cover everything may find out after they enroll that those benefits have run out and they will need to take out a sizable loan at a high interest rate.

Boulay runs the Veterans' Student Relief Fund, a new nonprofit that's fighting for more regulation to protect vets who use their GI benefits. Working with the Iraq and Afghanistan Veterans of America, it gives grants of up to $5,000 to vets struggling to pay off the debts they incurred at for-profit schools.

One of those grants went to Jonathan Ngowaki, who served as a Marine Corps radio operator in Afghanistan. When he came home to Beaumont, Calif., in the summer of 2010, he enrolled in a for-profit college. He hoped it would help him land a good job in IT management.

Ngowaki told the school's financial advisor he did not want to take out any loans—just use his GI benefits. But, he wound up with a $15,000 loan. Ngowaki said he was tricked into signing the paperwork.

"I went into the military, so I wouldn't have college debt, but now I have this debt and I have a family and it's taken that money away from my family," he said. "It's all about the money. It's all a money game. It really bothers me."

—By CNBC contributor Herb Weisbaum. Follow him on Facebook and Twitter @TheConsumerman or visit The ConsumerMan website.

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