April 9, 2020

The Honorable Robert Wilkie
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Secretary Wilkie:

Thank you for enforcing 38 U.S.C. § 3696, which is critical in stopping harm to veterans and military-connected students, protecting the GI Bill from fraud, and sending a deterrent message to other potential violators of federal law.  As you know, the harm to our nation’s veterans and military-connected students is compounded by harm to taxpayers, in light of the VA Inspector General’s finding that VA could waste $2.3 billion over five years in improper GI Bill payments to ineligible colleges, especially those that should not be approved for GI Bill under § 3696.[i]

As you decide whether one or more of the schools in violation of § 3696 have demonstrated sufficient “corrective action” to restore GI Bill eligibility, we respectfully recommend the following for your consideration:

  • Has there been sufficient deterrence for future fraud against students and the GI Bill? Fraud against veterans must be met with a repercussion strong enough to send a deterrent message to these and other schools.  It should be commensurate with the breadth and depth of the harm caused, measured, for example, by the number of students enrolled during that period of time, the dollar value of tuition paid during the time of the deceptive practices, or the severity of penalties imposed by law enforcement.
  • Does the school have a history of deceptive recruiting? Some of the schools at issue have faced repeated punitive action by government for defrauding students.[ii] If prior government lawsuits and fines were not sufficient to deter repeat offenses, then any “corrective action” they claim now provides little assurance. 38 USC § 3696 provides a clear ban on such schools’ re-entry into GI Bill eligibility.
  • Can the school verify its recruiting? VA and the State Approving Agencies cannot be expected to bear the burden of verifying the school’s future recruiting.  Schools should pay for a well-respected, independent auditor to verify the schools’ recruiting and advertising practices for some years going forward, as law enforcement and the Education Department often require.[iii] However, any school that has repeatedly verified its recruiting is clean but, at the same time, has been found in violation of federal and state consumer protection laws, cannot be trusted.
  • Has the school removed the offending executives? Schools should repudiate the deceptive practices by requiring the executives who ran or approved the deceptive practices to leave the companies, as law enforcement often requires[iv] and as Temple University already did. This sends a message to all employees that deceptions will not be tolerated and will help prevent a repeat offense.
  • Has the school removed the pressure on recruiters? College recruiters deceive students because they are under boiler-room pressure to enroll new students. Schools should remove recruiters’ enrollment quotas and incentives and voluntarily close the 90/10 loophole (as DeVry did in 2016 following its settlement with the Federal Trade Commission for deceptive advertising).[v]  The 90/10 loophole incentivizes proprietary colleges to see service members as nothing more than dollar signs in uniform, and to use aggressive marketing to draw them in.[vi]
  • Risk-based SAA review.  We recommend that, in addition to any corrective action, each school undergo a careful risk-based review by the relevant State Approving Agencies to ensure these schools are truly worthy of serving VA students.  Does the school offer a quality education?  Are students graduating and obtaining good jobs? Are the faculty qualified?  Is the school engaging in price-gouging in billing VA for tuition that is more than twice what the school spends educating the veteran?  The review should also explore any GI Bill student complaints against the school.

We as a community stand ready and willing to support your leadership and to ensure military-connected students are supported during this time and in the future.

 

[i] VA Office of the Inspector General Audit Report # 16-00862-179 (Dec. 3, 2018).

[ii] Career Education Corporation has undergone a settlement for $500 million with 49 states (2019); False Claims Act settlement for $32 million (2017); New York settlement for $10.25 million (2013); U.S. Securities and Exchange Commission (SEC) investigation (2016); SEC investigation (2013); and U.S. Education Department investigation into misrepresentations to students (2011).  The University of Phoenix has faced a U.S. Defense Department probation for recruiting on military bases (2015); lawsuit by former military recruiters alleging substantial misrepresentations to military and veterans (2015); California investigation related to military marketing (2015); Education Department Inspector General investigation for marketing (2014); False Claims Act lawsuit (2014); U.S. Securities and Exchange Commission investigation (2012); Delaware investigation of deceptive practices (2011);  Massachusetts investigation of deceptive recruitment (2011); Florida investigation of deceptive practices (2010); and False Claims Act settlement of $78.5 million (2004).

[iii] See, e.g., New York settlement with Career Education Corporation (2013); 49 states’ settlement with Career Education Corporation (2019); 39 states’ settlement with Education Management Corporation (2015); Education Department requirement of Zenith Education Group (2015). (Schools that currently do not record their recruiter calls should be required to record them for the auditor review.)

[iv] See New York settlement with Career Education Corporation (2013).

[v] See Danielle Douglas-Gabriel, Washington Post, “DeVry Voluntarily Dials Back Revenue from Federal Student Aid,” (Sept. 20, 2016); DeVry’s voluntary commitments were codified by the U.S. Education Department in its 2018 program participation agreement with DeVry.

[vi] See Hollister K. Petraeus, “For-Profit Colleges, Vulnerable GIs,” New York Times (Sept. 21, 2011).

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Letter to SECVA on 3696 FINAL