VA allows penalized for-profit schools to enroll GI Bill students;  advocates say move breaks the law

By STEVE BEYNON | STARS AND STRIPES Published: July 2, 2020


This story has been updated.

WASHINGTON — The Department of Veterans Affairs announced Thursday that it will allow five for-profit schools to accept new GI Bill students, after warning to the schools in March that they could lose eligibility after targeting veterans with misleading tactics. Veterans advocates are claiming the move is illegal.

New students using GI Bill benefits can enroll at the University of Phoenix, Colorado Technical University, American InterContinental University, Bellevue University and Temple University, a move worth over $200 million a year total for the schools, which were found to have used questionable recruiting practices.

Veterans Education Success, a veterans’ advocacy group in Washington, says the VA move violates a federal law that forbids the agency  from approving the enrollment of GI Bill students at schools proven to use “advertising, sales, or enrollment practices of any type which are erroneous, deceptive or misleading either by actual statement, omission or intimation.”

“The only winners today are the schools that used their money and political influence to evade the law and harm veterans,” Carrie Wofford, president of Veterans Education Success, said in a statement.

In 2018, a VA Inspector General warned the department could waste $2.3 billion in payments to “ineligible colleges” over the next five academic years. In its report, the IG found 29 of the 35 ineligible or potentially ineligible programs were at for-profit schools. The report did not name any of the schools it investigated.

In March, VA officials notified the five schools that the agency intended to suspend approvals of new GI Bill enrollments. The move came after officials found “sufficient evidence” that each school used “erroneous, deceptive, or misleading” enrollment and advertising practices to recruit veteran students, according to a letter sent to veteran advocacy groups and congressional lawmakers.

In a May 7 letter, the department required the schools to enact reforms to become eligible for GI Bill enrollees again. These reforms included changing staff associated with advertisements, hiring an independent third-party auditor to analyze marketing material, and refunding tuition with prohibited practices.

Two weeks later, on May 26, the department sent a follow-up letter to the schools, softening its approach and rescinding the previous guidance calling for reform, requiring only that schools cease prohibited practices and assure they are in compliance with the law.

“I want to be clear that the University of Phoenix is required only to demonstrate how it satisfied these two requirements in order to avoid suspension of enrollment of new students,” Jason McClellan, director of Muskogee VA Benefits Office wrote to Peter Cohen, University of Phoenix’s president.

McClellan wrote similar letters to each of the schools.

Christina Noel, a VA spokeswoman, said without specifics that after "careful review," the department determined the schools have "taken adequate corrective actions to avoid suspension of new GI Bill student enrollments," which include personnel changes, leadership changes, restitution to impacted students, renewed annual training for school employees and improved oversight.

Veterans’ education advocates say the VA’s move to restore schools’ GI Bill eligibility comes at a time when there is a strong lobbying arm for the for-profit education business.

“Today’s news is disappointing at best, but not surprising given how much money and political power these schools have,” Veterans Education Success Vice President Tanya Ang said in a statement.

For-profit schools have been accused by lawmakers and advocates for practicing in shady business practices to target veterans, largely because of the so-called “90/10 loophole.” For a for-profit school to be eligible to receive federal student assistance, it must get at least 10% of its revenue from sources other than federal aid. However, the GI Bill does not count as federal aid, making veterans even more attractive to schools.

Some for-profit schools have a long track record of targeting service members and veterans. In December, the Federal Trade Commission slapped a $50 million fine on the University of Phoenix and ordered it to forgo $141 million in student debt collection. Investigators said the school ran an advertising campaign targeting veterans featuring Microsoft, Adobe, and Yahoo, falsely implying the university worked with those companies to give students opportunities to work with them.

A spokesman with the University of Phoenix pushed back, saying the school has been vindicated.

“The University has always respected that student veterans have earned the right to choose the institutions that best fit their needs, and this news vindicates that principle,” Matt House, a university spokesman said in a statement.

House said the school complied with over 130 audits from the VA to include reviews of marketing materials in 2017 and 2019. The school says VA found no evidence of deceptive or misleading advertising, despite the settlement with the FTC.

In a letter Thursday, McClellan told the University of Phoenix that the school’s new marketing practices, staff and training practices put it back in VA’s good graces.

McClellan wrote to each school Thursday  informing them that, based on changes, they were now able to accept new GI Bill enrollees.

Bellevue says threats from the VA on its GI eligibility were largely based on an isolated incident involving a few student complaints on their nursing school accreditation over a year ago.

“I'm so relieved [with VA’s decision]. I'm so concerned we would be perceived as bad toward the veterans. We serve veterans with the highest integrity,” Mary Hawkins, president of Bellevue, said in an interview with Stars and Stripes.

After a complaint filed by nine students, Nebraska’s Attorney General sued Bellevue, a nonprofit school, last year, alleging the school made deceptive or misleading statements to prospective and current students. The school is contesting the complaint.

Perdoceo Education Corp., which owns  Colorado Technical University and American InterContinental University, was alleged to have used “illegal and deceptive”  telemarketing schemes to lure customers, according to a letter to the school from Mitzi Marsh, director of the St. Louis VA Regional Office. This included “harassing” people on the National Do Not Call Registry.

The Iowa Attorney General followed complaints and a report by the U.S. Senate and found the company used “emotionally charged language” to pressure students into enrolling. VA said the schools under Perdoceo have ended the predatory behavior.

Pennsylvania Attorney General Josh Shapiro announced a settlement with Temple regarding false reporting by its Fox Business School to garner a No. 1 ranking for its online MBA program. The AG’s office said Temple’s false reporting was done “intentionally and knowingly.” The settlement included $250,000 in new scholarships for students. VA says Temple has taken corrective actions that have been endorsed by the state AG.

The VA’s move and years of controversy regarding mostly for-profit schools have drawn the attention of Capitol Hill.

Rep. Phil Roe, R-Tenn., said he supports the department’s decision and that the schools have allowed thousands of veterans to earn their degrees, but he is building a measure to stomp out bad actors in education.

“While I support this result, getting here wasn’t easy,” Roe said in a statement. “I am working on legislation to better protect students from bad schools and protect good schools from government overreach by creating an objective, transparent and timely process to uncover abusive or misleading marketing and recruiting practices and ensure accountability.”

If VA permanently banned theses universities, it could have had serious financial consequences for each school. No school receives more GI Bill money than the University of Phoenix with 22,780 GI Bill recipients enrolled in 2018, from which the school took in $150,565,041 in revenue, according to the most recent VA data.

In the same year, Colorado Technical University enrolled 5,535 GI Bill students, which generated $45,559,236 in revenue. American InterContinental University’s GI Bill enrollment was 2,025 and its GI Bill revenue was $14,712,534. Bellevue has 1,595 enrollees, which amounted to $7,359,984.

Temple University, which has 986 GI Bill students and garners $12,174,441 in revenue, had only three formal complaints from veterans, compared to the University of Phoenix, which has more than 500.

Twitter: @StevenBeynon