Veterans Education Success Hails Maryland as the

First State in the Nation to Close the 90/10 Loophole


ANNAPOLIS, MD – As they prepare to adjourn over Coronavirus concerns, lawmakers in Annapolis, MD, unanimously swept through a groundbreaking law to protect veterans from aggressive and deceptive recruiting by for-profit colleges. The Maryland House of Delegates unanimously passed SB 294, the “Veterans Education Act,” which closes the 90/10 loophole for all Maryland private for-profit schools by forbidding schools from enrolling new Maryland residents if the schools are more than 90% reliant on federal funds, thereby posing a risk to students and taxpayers. The bill passed the Maryland Senate unanimously on February 22nd and was originally scheduled to be heard in the House Appropriations Committee on Thursday, March 19th. After the Governor announced this week that Maryland State Assembly will go into early recess beginning March 19th, House leadership fast-tracked SB 294, voting to suspend House rules and passed it out of both the House Appropriations Committee and the full House Floor in the same day, March 17th.

The 90/10 loophole in the federal Higher Education Act has led for-profit colleges to aggressively and deceptively target servicemembers’ and veterans’ education benefits to offset the cap on federal student aid that the schools otherwise face.

“This groundbreaking legislation makes Maryland the first in the nation to stand up for veterans and stop predatory schools from cheating them out of their hard-earned GI Bill,” said Ramond Curtis, State Policy Manager, who worked for two years with Maryland legislators to craft the bill. “Veterans had targets on our backs when we served in uniform; we shouldn’t have to come home and have targets on our backs again from predatory schools.”

37 leading national veterans organizations said closing the 90/10 loophole is “a top priority” in their letter to Congress nearly a year ago. “Maryland’s leadership makes it more clear than ever that Congress must step up and close the 90/10 loophole – otherwise, the burden to protect veterans will fall on the states,” explained Carrie Wofford, President.  “Closing the loophole remains a top priority of veterans organizations, who remain committed to passing the bipartisan Congressional legislation, already endorsed by Senate HELP Committee Chairman Lamar Alexander, to close the loophole, but, in the meantime, we must help states protect veterans.” 

Enacted by Congress as a market-viability test, the 90/10 rule is designed to ensure federal funds are not used to prop up otherwise failing for-profit colleges that are unable to attract private-paying students.  As the U.S. Supreme Court explained in upholding the rule’s precursor, the rule 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…. [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.”

Specifically, the 90/10 rule requires for-profit colleges to obtain at least 10% of their revenues from sources other than federal student aid.  But, due to an oversight in drafting, education benefits from the Departments of Defense and Veterans Affairs, were left out of the calculation.

In 2016, the U.S. Education Department reported that many for-profit colleges were loading up on GI Bill and Defense Department tuition assistance to offset the 90% cap on federal student aid the colleges otherwise face. (Veterans Education Success researchers reported the problem was even worse because the Education Department had failed to factor in the multiple VA streams of education aid, including several versions of the GI Bill and Vocational Rehabilitation for disabled veterans.)

As Holly Petraeus, head of service member affairs at the US Consumer Financial Protection Bureau, wrote in the New York Times, the loophole “gives for-profit colleges an incentive to see service members as nothing more than dollar signs in uniform, and to use aggressive marketing to draw them in.”

Maryland is the first state in the nation to close the loophole at the state level, by forbidding for-profit schools from enrolling new Maryland residents if the schools rely on more than 90% of their revenue from federal funds, which would violate the 90/10 rule as it was originally intended.

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