May 7, 2020

FOR IMMEDIATE RELEASE

CONTACT: Ramond Curtis, State Policy Manager

(479) 721-8791

 

Veterans Education Success Commends Maryland as the First State to Close the 90/10 Loophole

Advocates and veterans defrauded by for-profit schools react to this historic achievement

Washington, D.C. — Today in Maryland SB 294, the Veterans Education Protection Act, became law. This historic achievement makes Maryland the first state in the nation to protect veterans by closing the 90/10 loophole for all private for-profit schools in the state. The bipartisan bill passed the Maryland Senate unanimously on February 21st and the Maryland House Delegates on Wednesday, March 17th. After the Governor announced that Maryland General Assembly would go into early recess beginning March 19th, House leadership fast-tracked SB 294, voting to suspend House rules and passed it out of the House Appropriations Committee and the full House Floor in the same day.

 Background on the 90/10 Loophole

Due to a loophole in the federal law, businesses in the for-profit education sector are inadvertently incentivized to aggressively target veterans for enrollment. 

The Higher Education Act’s 90/10 rule stipulates that a for-profit education business may derive no more than ninety percent of its revenues from Title IV federal student aid. Congress enacted this rule as a market-viability test:  To ensure federal funds are not used to prop up otherwise failing for-profit companies that are unable to attract private-paying students. The U.S. Supreme Court upheld the rule’s precursor by explaining it is “a device intended by Congress to allow the free market mechanism to operate and weed out those institutions [which] could survive only by the heavy influx of Federal payments” and “a way of protecting [students] by allowing the free market mechanism to operate.”  The Court noted that, “[I]f an institution of higher learning cannot attract sufficient…. nonsubsidized students to its programs, it presents a great potential for abuse of our educational programs.”

But there’s a loophole. There was no robust GI Bill in place at the time, and Congressional authors overlooked the smaller GI Bills and Defense Department funds, so the statute fails to mention GI Bill and Defense Department Tuition Assistance (TA) funds. Through an accounting gimmick widely criticized by two dozen state Attorneys General as violating the intent of the law, for-profit colleges manipulate this to count GI Bill dollars & Defense Department Tuition Assistance as if they were private revenue, to offset the 90% cap on federal student aid the schools otherwise face.

The incentive to do so is glaring; it is more cost-efficient for many for-profit colleges to invest in aggressive marketing campaigns aimed at veterans than it is to invest in additional educational resources. Notably, DeVry University voluntarily closed the 90/10 loophole in its business practices in 2019.  The Veterans Education Protection Act closes the 90/10 loophole in Maryland by requiring that for-profit education businesses receive no more than ninety percent of their revenues from all federal sources, including the GI Bill and Defense Department Tuition Assistance. 

 Maryland Veteran Quotes:

“The Maryland Veterans Protection Act is very important. It will help Maryland veterans by stopping for-profit schools from targeting and taking advantage of them. This would’ve helped me out a great deal. After completing an online degree with American InterContinental University in graphic design, they refused to give me my diploma or transcript for 7 years because of a debt they claimed I owed them. It was impossible for me to get a job in graphic design. By the time I got my diploma I was no longer up to date with the current technology.”

 –    Lycretia Davis, Oxon Hill, MD | Veteran, US Army

 “This will help protect future student veterans from predatory for-profit schools that only see them as a dollar sign. I was lied to and manipulated into using my Post 9/11 GI Bill, and into taking out unnecessary loans, just so Everest could make a profit. I completed their medical assistant program in 2016, and to this day I have not been able to find work in the area that I paid to learn.”

 –    Cynthia Castellon, Lake Ter Rockville, MD | Veteran, US Army

 Quote from Veterans Education Success

“We are thrilled to see Maryland become the first state to close the 90/10 loophole. It is unconscionable that the loophole remains open, allowing private for-profit schools across the country to fleece veterans out of their hard-earned education benefits. As long as the federal government fails to close this loophole, the burden of protecting veterans from predatory for-profit schools will fall on the states.”

 –    Ramond Curtis, Brooklyn, NY | Combat Veteran, US Army National Guard | State Policy Manager for Veterans Education Success

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About Veterans Education Success

Veterans Education Success is a veteran advocacy organization whose mission is to advance higher education success for veterans, service members, and military families, and to protect the integrity and promise of the GI Bill and other federal education programs. The organization offers free legal services, advice, and college and career counseling to service members, veterans, their survivors, and families using federal education benefits – and helps them participate in their democracy by engaging with policymakers. Veterans Education Success also provides policy expertise to federal and state policymakers and conducts non-partisan research on issues of concern to student veterans, including student outcomes and debt levels. Additional information is available at www.vetsedsuccess.org.