Loophole in federal-aid rule leaves GI Bill money outside the cap on schools’ revenue, putting a premium on service-member recruitment
Jose Diaz-Buttler, a trained mechanic three years removed from the Navy, was seeking steady work in the Bay Area when the 2008 financial crisis hit. After initially contacting Heald College, a nearby for-profit school, to boost his job prospects, he found himself the target of calls every other day from Heald recruiters who promised job leads following graduation.
But those opportunities didn’t materialize after Mr. Diaz-Buttler enrolled and later graduated from its computer-science program with two associate degrees in 2011.
For-profit colleges’ aggressive recruitment of veterans like Mr. Diaz-Buttler, now 37 years old, is partly spurred on by a loophole that exempts GI Bill dollars from a federal funding cap. That loophole is at the heart of a dispute between the industry, which argues that these institutions are often the best option for veterans to obtain degrees, and some lawmakers, who counter that the funding rule leads schools to exploit vulnerable students.
Funding from federal aid at for-profit colleges and universities, which often specialize in career-focused two-year degrees and certificates, is governed by the “90/10 rule,” which caps at 90% the total revenue schools can receive from federal financial aid such as Pell Grants or loans. That rule, created in 1998, was meant to ensure that poor-quality schools wouldn’t be propped up by federal aid dollars.