VA moves to strip California's power in fight over for-profit schools

By ADAM ASHTON | The Sacramento Bee | Published: September 23, 2019

SACRAMENTO, Calif. (Tribune News Service) — The Department of Veterans Affairs intends to strip California of its contract to regulate GI Bill benefits, denying the state a power it has used in the past to investigate alleged abuses by for-profit colleges and to hand down sanctions.

The break between the federal VA and the state-funded California Department of Veterans Affairs highlights a rift between the two organizations over how the state has used its authority to regulate a federal program that sends billions of dollars every year to veterans for career training and higher education.

The VA wants California to catch up on compliance surveys that track whether schools are paid accurately, according to letters it has sent to the state that fault it for failing to conduct enough of them.

The state, meanwhile, wants to focus on visiting campuses to investigate whether institutions are misleading veterans.

In fact, the state earlier this year developed a regulation that alarmed the VA and for-profit schools because they feared it would make many programs ineligible for GI Bill benefits. California has not yet adopted the rule, although it is still under consideration.

“If the regulations become final, student veterans and their families across California would be faced with losing their eligibility to use their benefits and complete their degree programs at schools that produce quality results,” wrote Patrick Sutliff, senior director of veterans military and regulatory affairs for the University of Phoenix in a June 7 letter to state officials.

The VA last year distributed $5.5 billion in GI Bill benefits to cover tuition and fees for some 800,000 veterans. California and other states have a role in the process. So-called approving agencies run by states are tasked with ensuring that education programs are eligible for funding.

California has a reputation as a tough regulator of for-profit colleges that market to veterans with GI Bill benefits.

In August 2014, California suspended Corinthian Colleges from receiving GI Bill benefits because of the state’s concerns about its financial stability. Eight months later, the network of for-profit colleges under the Corinthian banner such as Heald and Wyotech collapsed.

In May 2015, California suspended ITT Educational Services, citing concerns about its financial statements. ITT, which had more than 100 campuses, shut down in September 2016.

GI Bill benefits pay for 36 months of a veteran’s living and education expenses, but they are not limitless, and veterans risk using up the money on programs that don’t prepare them for civilian careers. Veterans can receive up to $25,000 per academic year.

The VA’s decision to end its contract with California’s state approving agency would take the state out of the equation, and shift that responsibility back to the federal government, although California officials in a Sept. 10 notice insist they won’t back down because of the VA’s decision.

The California agency “retains its authority for approval of institutions and programs enrolling California veterans for receipt of GI Bill benefits,” wrote Latanaya Johnson, who manages California’s GI Bill program and is deputy assistant secretary at the California Department of Veterans Affairs.

Suspended for-profit schools

Recently, California’s Department of Veterans Affairs has sought to suspend schools for factors that state officials argue violate federal law.

Last year, California temporarily suspended a group of schools with headquarters in other states. California officials questioned whether the schools’ satellite programs in California met criteria for them to receive GI Bill benefits.

And, California’s state approving agency has refused to declare a for-profit college called Ashford University as eligible to receive GI Bill benefits.

California Attorney General Xavier Becerra filed a lawsuit against the college in 2017 alleging it engaged in unfair business practices and misled students. Becerra’s complaints cites two veterans who felt manipulated by Ashford counselors. The lawsuit is unfolding in San Diego County Superior Court, and the state won’t declare Ashford as eligible for GI Bill benefits until the case is resolved.

The VA’s Sept. 6 letter to California’s state approving agency cites its “failure to act” on the Ashford application as one of the reasons the VA is not renewing its GI Bill contract with California.

Another disagreement between the federal VA and state regulators centers on Thomas Jefferson School of Law in San Diego, which is on notice that it may lose its accreditation from the American Bar Association.

California last year sought to prevent veterans from using the GI Bill there. The VA directed the state to put the law school in good standing, according to letters obtained by The Sacramento Bee.

California has since acted on the law school’s status, and its students can use the GI Bill there.

“It’s hard to argue that the VA has the interests of veterans and taxpayers at heart when it allows things like Thomas Jefferson. Why would they rescind these actions?” said Walter Ochinko, research director for the advocacy group Veterans Education Success.

Johnson from California’s Department of Veterans Affairs told lawmakers at a May hearing that the federal VA did not support the state’s efforts to investigate campuses.

Instead, she said the VA wanted the state to focus on ensuring that the money goes out to campuses correctly.

“What we’re checking is the money, not the quality of education, not the standards of the law, not if they are offering anything remotely close to what they are advertising,” she said. “The goal of the VA’s contract is to monitor and maintain the money.”

A rule that targets ‘false promises’

Johnson told lawmakers the state should create its own regulations to empower California state government to look at other standards in evaluating colleges. That would help the department make its case in court when colleges contest the state’s decision to suspend their GI Bill eligibility, she said.

The proposed rule the department put forward this year would have declared that GI Bill benefits could only be used at schools that qualify for California student aid, such as Cal Grants. In general, Cal Grants go to students who attend California public colleges and universities.

Other criteria would have looked degree completion rates, license passage rates and job-placement rates.

Dozens of representatives from for-profit schools wrote to the state to register their worries, arguing that veterans should not have their choices limited, according to documents obtained by The Sacramento Bee through the California Public Records Act.

“If the proposed regulations are passed, veterans will see their options for education and professional development become extremely limited,” wrote Donna Loraine, president of Carrington College. “Traditional higher education options are not always the best fit for veterans, and it is important that we have the broadest and best available options for their education.”

Scott Hager, dean of admissions at San Joaquin Valley College, wrote, “The veterans that have earned this benefit have served their country and they deserve the right and freedom to choose how and where to utilize their earned benefits.”

The proposed rule also caught the VA’s attention. It wrote an email in May questioning eligibility criteria suggested by the state, such as mandating that “all degree programs have to be accredited.”

The California Department of Veterans Affairs has not adopted the regulation and its draft could be revised, department spokeswoman Lindsey Sin said.

Some advocates wrote to the department to encourage it to enact the rule.

Robert Muth, managing attorney for the University of San Diego Veterans Legal Clinic, described two students who sought his help after enrolling at colleges based on “false promises” from recruiters targeting veterans.

One wound up in debt with credits from a school that lost its accreditation. The other became mired in a program that changed its requirements in such a way that her degree became more expensive and time-consuming.

“You’ve got folks who are trying to do the right thing,” said Muth, a former Marine. “These aren’t people who are being reckless or doing something crazy. They were trying to pursue higher education after serving their country, and then someone jumps in and takes advantage of them.”

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