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Remarks by Hollister K. Petraeus at For-Profit College Forum

Remarks by Hollister K. Petraeus
Assistant Director for the Office of Servicemember Affairs,
Consumer Financial Protection Bureau
For-Profit College Forum
Hosted by U.S. Senator Dick Durbin
Chicago, Illinois

January 23, 2012

Senator Durbin, thank you for the invitation to speak today concerning higher education for servicemembers and their families. The Dodd-Frank Act gives my office at the Consumer Financial Protection Bureau, the Office of Servicemember Affairs, the responsibility to work with Federal and state agencies on consumer protection measures for military families, and I am happy to take part in a dialogue like this one to ensure that military families’ education benefits are well-spent.

Servicemembers, veterans and their families are eager to earn college degrees. And there is an increasing effort by for-profit colleges to enroll them, due in large part to the “90-10 rule” created by the 1998 amendments to the Higher Education Act (HEA). Put simply, the 90-10 rule says that a for-profit college has to obtain at least 10 percent of its revenue from a source other than Title IV federal education funds administered by the Department of Education. Military Tuition Assistance (TA) and the GI Bill are not Title IV funds, which puts them squarely in the 10-percent category of the 90-10 rule.

And that’s a problem. The 90-10 rule has given some for-profit colleges an incentive to see servicemembers as nothing more than dollar signs in uniform, and to use some very aggressive marketing techniques to draw them in. And that marketing is working. Between 2006 and 2010, combined VA and DoD education benefits received by just 20 for-profit education companies increased from $66.6 million in 2006 to an estimated $521.2 million in 2010, a 683 percent increase! But does the quality of these educational programs merit that increase in revenue?

Although there are some for-profit colleges have solid academic credentials and a history of success for their graduates, as a group and compared with other institutions for-profit colleges have higher prices, lower graduation rates and a poor gainful employment history. They also have a higher-than-average student-loan default rate, which can be an indicator that students are being recruited with little concern for their ability to do the coursework. And there are a number of for-profit colleges with questionable academic credentials, with accreditation that is not accepted by other institutions. In fact, we just heard this week about a lawsuit filed by the Illinois Attorney General against a local college that did not have the regional accreditation needed to qualify its graduates for local law enforcement positions.

On my trips to military communities, I’ve heard stories that raise concerns about the practices of some for-profit colleges: marketing is aggressive and relentless; servicemembers are urged to take out private student loans rather than seeking out quality programs whose costs would be covered in full by their military benefits; and poor service and treatment is common at some institutions once servicemembers are enrolled. On recent visits to Kentucky, North Carolina and Montana, I heard from military education counselors that they feel besieged by for-profit colleges desiring access to the troops. I’ve also heard from military families that while colleges tout their accessibility and military-friendly ways, they may provide little in the way of assistance once a student has enrolled.

It’s a real concern that, just as in the days of unchecked payday lending before the implementation of the Military Lending Act, military communities are once again under siege by a group that sees big money to be made off them. The richness of the military education benefits is a big draw, with the 90-10 rule adding a significant extra incentive.

For veterans, the GI Bill should be the opportunity to build a better future. We all want our veterans to become successful, productive contributors to our society. Education can be the key to success, and the wonderful education benefits provided to our military and their families should not be wasted on programs that do not promote – and may even frustrate – this outcome.