July 2, 2020
WASHINGTON, DC – Veterans Education Success condemns the Trump Administration’s decision today to ignore federal law in order to protect predatory colleges, when it notified 5 schools at risk of losing eligibility to enroll GI Bill students over deceptive recruiting that their prior resolutions with federal and state law enforcement would suffice. This renders the federal statute governing GI Bill meaningless.
“The only winners today are the schools that used their money and political influence to evade the law and harm veterans,” said Carrie Wofford, President of Veterans Education Success. “The GI Bill statute specifically requires VA to protect student veterans, but the Trump Administration has chosen to defy that law. We do however appreciate the staff at Veterans Benefits Administration who tried to follow the law and protect student veterans,” Wofford said.
The law at issue, 38 U.S.C. 3696, forbids VA from paying GI Bill to schools that utilize deceptive or misleading advertising, sales, or enrollment practices. The statute does not say that a school’s prior resolution of legal trouble with federal or state law enforcement is sufficient. Instead, the law says that if VA becomes aware of deceptive recruiting – including from findings by the U.S. Federal Trade Commission – then “the Secretary shall not approve the enrollment of” a GI Bill student.
The need for VA to obey this law was highlighted when VA’s Inspector General warned in a report that VA would waste $2.3 billion in “improper [GI Bill] payments to ineligible colleges,” particularly those ineligible because of their deceptive marketing.
Dozens of the nation’s leading veterans and military service organizations had urged the Secretary in a 2019 letter and a 2016 letter to comply with 38 U.S.C. 3696.
Timeline of VA’s Action
On March 9th of this year, VA launched an enforcement action under 38 U.S.C. 3696 against the University of Phoenix, Colorado Tech and American Intercontinental University (both owned by Perdoceo, formerly Career Education Corporation), Bellevue University, and Temple University.
VA’s enforcement actions were triggered by the schools’ settlements with law enforcement for deceptive recruiting, including the University of Phoenix’s settlement of nearly $200 million with the US Federal Trade Commission (FTC) and Career Education Corporation’s settlement of nearly $500 million with 49 states and an additional $30 million settlement with FTC for utilizing deceptive websites and lead generation companies. Under 38 USC 3696, VA must act when provided “preliminary findings” by FTC regarding deceptive recruiting.
Veterans organizations thanked the Secretary in a letter on April 9th, and urged him not to reinstate the schools absent serious repercussions, especially schools with a history of run-ins with law enforcement.
On May 8th, career civil servants at VA’s regional processing offices sent guidance to the schools, calling for the schools to not only cease the offending practices, but also “make right” by “rectifying]” losses to VA and the veterans, including:
- Taking steps to prevent future prohibited actions, such as:
- Changes in staff associated with advertising, sales and enrollment,
- Changes in company practices and training regarding the recruiting of new students, and
- Hiring of an independent third-party auditor to routinely review advertising material and recruiting practices.
- Taking action to “cure the negative impacts of the prohibited practices,” especially through refunds to VA and the impacted GI Bill students.
On May 26th, following reports of heavy lobbying by the schools, VA revised its guidance, requiring only that the schools cease prohibited practices and take steps to ensure future compliance with the law.
As our recent factsheet makes clear, the University of Phoenix and the two schools owned by Perdoceo are repeat offenders of federal and state law. Career Education Corporation has been caught multiple times deceiving students, including:
- a 2013 settlement with the New York Attorney General;
- a 2019 settlement with 49 states; and
- a 2019 settlement with the U.S. Federal Trade Commission (FTC) for procuring sales leads from websites that illegally purported to represent the U.S. military.
“Given recent reports of current whistleblowers at Perdoceo who allege ongoing deceptive advertising and recruiting, and given Perdoceo’s long history of run-ins with law enforcement, we are flabbergasted the Trump Administration believes Perdoceo’s promise not to do it again,” said Wofford.
Today’s decision comes in a long line of other moves by the Trump Administration to protect predatory for-profit colleges at the expense of veterans, including eviscerating the gainful employment rule and the President’s veto of the bipartisan joint Congressional resolution calling for a new borrower defense rule, supported by veterans organizations.
“Today’s news is disappointing at best, but not surprising given how much money and political power these schools have,” said Veterans Education Success Vice President Tanya Ang. “Yet again, those who have served our country are denied the protections they deserve.”
School Enrollment and Federal Revenue
The University of Phoenix has received more GI Bill funds than any other college in the country – nearly $2 billion between FY 2009 and 2017 – and Career Education Corporation/Perdoceo was the 5th highest grossing (behind ITT Tech and Education Management Corporation – both of which shuttered).
|School||GI Bill enrollment
|Post-9/11 GI Bill revenue
|Title IV revenue
|Bellevue U., NE||1,566||$7.4||$29.1|
|University of Phoenix||18,767||$151.8||$533.1|
aDirect loans and Pell Grants.
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