For-Profit Schools: A Warning for Veterans

Access to education benefits like the G.I. Bill makes military personnel and veterans an enticing target for colleges that are for-profit institutions.

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Advancing your education and preparing for a career after your military service should be part of the plan for anyone who signs up to serve their country. Whether it’s the G.I. Bill for veterans or Defense Department Tuition Assistance for those on active duty, there are a range of education benefits designed to help you advance on that next stage of your life and career.

But not all choices for higher learning were created equally, and some can actually hold you back from your next career, leave you in heaps of debt, and even drain your hard-earned G.I. Bill funds.

For-profit colleges and universities may market themselves like traditional schools of higher learning but they operate with the goal of generating revenue and rewarding their investors, shareholders and owners. These schools are known to target veterans and active-duty personnel as a source of stable and reliable tuition money. Some even use aggressive and shady recruiting tactics to lure veterans.

So, what’s the difference between a nonprofit school and a for-profit school and how can you tell the difference? And why are these sketchy for-profit schools targeting military personnel?

What Is a For-Profit School?

Unlike nonprofit institutions, for-profit colleges operate with the goal of generating revenue and profit and directing that money toward non-education expenses and directly to their investors and stakeholders. For-profit schools do offer training and education programs, most of which are typically career-oriented. Revenues and profits are generated by tuition and fees paid by students, some of which can be significantly more expensive than a traditional school.

Differences Between For-Profit and Nonprofit Schools

So, what’s the difference between a for-profit and a nonprofit school or university? For starters, a traditional nonprofit school, whether it be a community college, state college or university, or a private school, all receive support from state and federal governments, endowments, and donations. What’s more, nonprofit institutions direct all money received through tuition and fees back into the institution, either to pay expenses or as an investment for future activities. By comparison, excess funds generated by for-profit schools go directly to investors and owners, meaning there’s a drive to ensure, protect and grow earnings and revenue.

Despite the promises made on slick TV and online promotions or by aggressive recruiters, there will also be differences in the quality of training and education from that offered by a traditional school. In fact, many for-profit colleges sometimes use exaggerated or false promises to lure new enrollees. Some advertise a faster path to graduation, more flexible and accessible learning options, and the promise of a lucrative career. However, the credits you earn may not be transferable to other institutions, and some employers regard for-profit institutions as less reputable than their nonprofit counterparts, so securing a job after graduation could be challenging or even impossible.

There are also some boundaries in place from the federal government on for-profit schools that don’t apply to nonprofit schools, specifically the 90/10 rule in the federal government’s Higher Education Act. This federal mandate requires for-profit schools to take in at least 10% of their overall revenue from funding other than federal education aid, thus demonstrating they can attract other sources of support for their services. But, until recently, there was a significant loophole in this rule that made servicemembers and their G.I. Bill and Defense Department Tuition Assistance benefits an enticing target of for-profit institutions.

The so-called 90/10 Loophole allowed for-profit colleges to count the G.I. Bill and military tuition assistance as private, non-federal dollars, meaning these funds would not count against the 90% federal cap. That turned veterans and service members into “dollar signs in uniform,” in the words of Hollister Petraeus, the former head of service member affairs at the Consumer Financial Protection Bureau. Because of the loophole, many for-profit schools engaged in aggressive and deceptive marketing in order to register as many service members and veterans as possible.

This loophole and its headaches for veterans may be somewhat resolved as of March 2021 after lawmakers rewrote the 90/10 rule as part of an emergency COVID relief package, reclassifying G.I. Bill and military tuition assistance funds as federal dollars. This change is scheduled to go into effect in 2023.

Deceptive Tactics from For-Profit Schools

The known list of deceptive tactics used by for-profit schools is long and troubling and touches on about every aspect of what’s being offered: the actual cost of tuition, terms and fees of private loans, qualification of instructors, lessons, accreditation and transferability of training and credits, job placement rates, career assistance, and much more. According to a U.S. Senate report, some for-profits promise students careers in fields that require a license, but students learn after graduation that the college is not properly accredited and graduates are not eligible to test for or obtain licenses required for the career. Others offer accreditation or degrees for industries where a license or degree is not required for employment.

For-profit college salesmen are known to recruit on military bases and at VA facilities and hospitals. In one case, the Federal Trade Commission charged one school with recruiting prospective students using marketers who falsely claimed to be affiliated with the U.S. military, “tricking students who were looking to serve their country.”

Regulations to Prevent Deceptive Marketing

Despite the change to the Higher Education Act and the impending closure of the 90/10 Loophole, for-profit schools are still using aggressive and shady recruiting tactics to lure vets and active-duty service members and their family members. These tactics spurred a warning in October 2021 from the Federal Trade Commission in the form of a notice to 70 of the largest for-profit colleges with threats of large fines and other penalties.

Protect Your Education Benefits

There are many tools and resources for service members, veterans and their family members to navigate the education marketplace.

Do your research before you contact a school or enroll in classes. At a minimum, try a web search and look for news stories of students who are talking to the media about negative experiences at your prospective school. Visit the Department of Veterans Affairs website and compare G.I. Bill benefits by school. The Federal Trade Commission also flags for-profit schools known to target veterans or to use shady or deceptive marketing.

And no matter what, remember that there are no short cuts to higher education or a lucrative career and to protect the education benefits you worked so hard and sacrificed so much to earn.

If you have already taken on substantial debt while trying to pursue your education and feel like you may need help, it could be time to contact a nonprofit credit counseling agency, like InCharge Debt Solutions. Their counselors are certified and required to offer advice that’s in your best interest, meaning you will see all the best options for working through your debt and straightening out your finances.

About The Author

Craig Richardson

Craig Richardson is a military veteran who started his journalism career while serving in the Navy. Following overseas deployments to the Med and Middle East, including service in Operation Desert Storm, he left for the private sector but continued with journalism. He has worked for several publishers and news organizations over nearly 30 years and continued to cover stories with ties to veterans and military affairs throughout his career.

Sources:

  1. Kando-Pineda, C. (2021, October 6) For-profit colleges on notice. Retrieved from https://www.consumer.ftc.gov/blog/2021/10/profit-colleges-notice
  2. Cowley, S. (2021, March 11) Congress Closes Loophole That Made Veterans a Target of For-Profit Schools. Retrieved from https://www.nytimes.com/2021/03/11/business/veterans-for-profit-schools-gi-bill.html
  3. Shane III, L. (2021, Oct. 7) Feds threaten big fines against for-profits schools that dupe troops, veterans. Retrieved from https://www.militarytimes.com/education-transition/2021/10/07/feds-threaten-big-fines-against-for-profits-schools-that-dupe-troops-veterans
  4. TBS Staff (2022, January 20) For-Profit Colleges vs. Nonprofit Colleges. Retrieved from https://thebestschools.org/resources/for-profit-vs-nonprofit-colleges
  5. N.A. (ND) Why For-Profit Schools are Targeting Veterans Education Benefits. Retrieved from https://vetsedsuccess.org/why-for-profit-institutions-are-targeting-veterans-education-benefits
  6. Shane III, L. (2021, March 20) GI Bill vets may be less attractive to for-profit schools under new law. Retrieved from https://www.militarytimes.com/education-transition/2021/03/10/gi-bill-vets-may-be-less-attractive-to-for-profit-schools-under-new-law