AG: Close loophole that can target veterans
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May 31, 2012 - 10:04 AM

HARTFORD, CT - Attorney General George Jepsen joined with 21 other states Tuesday in urging Congress to close a loophole in the federal Higher Education Act that can be used to target veterans with high-pressure recruiting tactics in order to maximize federal funding.

The so-called 90/10 rule prohibits for-profit colleges from deriving more than 90 percent of their revenue from U.S. Department of Education (Title IV) funding sources. Currently, for-profit schools can obtain 90 percent funding from Title IV funds and the remaining 10 percent from government veterans’ programs – instead of from non-federal sources, as the law intended.

“The point of the 90/10 rule was to instill greater accountability in the industry,” Attorney General Jepsen said. “Instead of limiting the amount of taxpayer dollars that for-profit colleges can obtain, this loophole has made it possible for proprietary colleges to achieve 100 percent funding from the federal government. Equally troublesome are the alleged recruiting tactics that exploit our veterans and service men and women.”

Federal lawmakers enacted the original 90/10 rule in 1998 following congressional investigations of for-profit colleges. At the time, veterans’ benefits were not a substantial source of potential income for proprietary colleges. However, in 2008, Congress enacted the Post 9/11 GI Bill, making billions in educational benefits available for veterans and their families.

Under current law, for-profit colleges are able to use the military benefits to leverage even more Title IV funds because each dollar obtained from Department of Defense or Veterans’ Affairs can be used by for-profit colleges to obtain an additional nine dollars in Title IV funds.

“The purpose of the 2008 bill was to help returning veterans get the educational benefits they need to return to the workforce, not to enrich for-profit institutions,” Jepsen said.

Assistant Attorney General Phillip Rosario, head of the Consumer Protection Department, is assisting the Attorney General with these efforts.

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