Anger grows over GI Bill profiteers

By David Zucchino and Carla Rivera

July 16, 2012 12 AM PT

WASHINGTON — After Moses Maddox left the Marine Corps in 2006, he took a sales job with the for-profit University of Phoenix, making up to 100 calls a day to persuade veterans to enroll using their GI Bill benefits.

Only after he enrolled himself did the former corporal discover that the state university he wanted to attend didn’t accept the nine course credits he’d earned at Phoenix.

“Basically, I wasted my GI Bill benefits -- just like a lot of other veterans I talk to,” said Maddox, who until recently was a veterans benefits counselor at Palomar College in San Diego County.

Phoenix, a giant among for-profit colleges, says it’s responding to the needs of the veteran workforce, offering practical training and skills.

But Congress, the White House and veterans groups -- spurred by complaints from thousands of veterans like Maddox -- are cracking down on for-profit schools that have raked in hundreds of millions of dollars in GI Bill benefits. They say the schools prey on veterans with misleading ads while selling expensive and woefully inadequate educations.

Since the Post-9/11 GI Bill took effect in 2009, eight of the 10 colleges collecting the most money from the program have been for-profit schools.

The companies earned 86% of their revenue from taxpayer dollars in 2009, mostly GI Bill payments, according to Congress, with the top 20 for-profit education companies receiving $521 million in veterans’ education funds in 2010.

Yet taxpayers spend more than twice as much to educate a veteran at a for-profit school than at a public university. Congressional investigators say for-profit schools have far higher drop-out rates and loan interest and default rates than public universities, and credits earned at many for-profit schools don’t always transfer to public schools.

Veterans’ groups say for-profit schools snare unsuspecting veterans with aggressive marketing, high-pressure sales calls and ads that falsely imply that their schools are exclusively approved for GI Bill benefits.

“What veterans hear is the aggressive marketing that’s selling a product that isn’t real -- and pretty soon their benefits are gone,” said Tom Tarantino, a veteran and GI Bill specialist with the Iraq and Afghanistan Veterans of America, or IAVA.

He acknowledges that some for-profit schools provide excellent educations and job training, but says many others don’t. “These schools spend insane amounts of money on marketing but almost nothing on student services.”

The Military Veterans Education and Reform Act, introduced in Congress in March, would require schools to disclose graduation rates and default rates to prospective students. It also would compel the Pentagon to set up a centralized complaints process to address allegations of fraud or abuse.

Another bill, the GI Educational Freedom Act, would require counseling for veterans who use educational benefits and would establish a tracking system to help ensure that schools provide quality educations.

In April, President Obama issued an executive order requiring the Department of Veterans Affairs to trademark the term “GI Bill” to help prevent uses that deceive veterans. The order requires the 6,000 colleges that receive GI Bill funds to offer veterans “Know Before You Owe” literature that reveals what their educations will cost.

Steve Gunderson, president of the Assn. of Private Sector Colleges and Universities, said that although some for-profit schools might be guilty of abusive marketing, most had been unjustly criticized. He said an industry task force was forming a self-regulating body to investigate allegations of abuse and to develop standards for educating veterans.

“I think we’re reaching an appropriate consensus between our schools, veterans’ service organizations and government agencies,” Gunderson said.

The amount of taxpayer money at stake is enormous. The Pentagon will spend about $9 billion this year to educate some 600,000 veterans. Since 2009, more than 1.1 million veterans have applied to use GI Bill benefits, which cover tuition at public schools and up to $17,500 a year at private schools.

“We cannot simply stand by while our service members and veterans are being targeted and aggressively recruited by for-profit colleges just looking to make a quick buck,” said Sen. Tom Harkin (D-Iowa), a veteran who chairs the Senate Health, Education, Labor and Pensions Committee.

For the last two years, the committee has investigated veterans’ complaints against for-profit schools. Such schools are run by private companies in pursuit of profits; public schools receive state funds and are nonprofit. Among the committee’s findings:

* For-profit schools account for 13% of all college students but receive 38% of GI Bill payments and account for 47% of all student loan defaults.

* Taxpayers paid $4,642 to educate a typical veteran at a public college between 2009 and 2011, versus $10,441 at a for-profit school.

* The two for-profit schools receiving the highest GI Bill payments -- American Public Education and Bridgepoint Education -- earned $133 million and $113 million last year in Pentagon tuition assistance, versus $31 million and $25 million for the top two public schools, the University of Maryland and the University of Texas systems, respectively.

* Bachelor’s degrees at for-profit schools cost far more than at public colleges: $88,000 at for-profit ITT Tech in Indiana versus $39,000 at Indiana University, for instance.

* For-profit schools spend far more on sales, marketing and advertising than on educational support staff.

U.S. Rep. Jackie Speier (D-Hillsborough), who introduced a House companion bill to a Senate measure that would require for-profit schools to reduce their reliance on GI Bill money, said such schools were gaming the system.

“When these for-profits are taking taxpayer funds and attributing 22% to marketing, 37% to profit, and they have an abysmal 60-to-70% dropout rate -- is this a good deal for taxpayers?” Speier asked.

Gunderson acknowledged that for-profit schools spent more on marketing and advertising in order to attract older, nontraditional students. “It’s not the captive student body of a high school counseling office.”

Maddox said he was called an “enrollment counselor” at Phoenix but was basically a telemarketer and recruiter -- “the kind of people I hang up on at night,” he said. “We capitalized on peoples’ fears and lack of knowledge.”

The University of Phoenix earned $196 million in veteran benefit payments from 2009 to 2011, according to Harkin’s committee -- including $45 million in California.

Phoenix does not cold-call veterans or demand quotas from employees, said retired Col. Garland Williams, a Phoenix associate vice president. The company’s “enrollment counselors” are retired military or military spouses who counsel prospective students to develop education plans that lay out costs and course credits, he said.

“The conversation has to do with what are their goals in life, professionally and academically, and we try to see if we’re a good fit for that,” Williams said.

Most Phoenix courses are nationally accredited, Williams said. He added that Phoenix awarded more than 12,000 associate’s, bachelor’s and master’s degrees to active-duty military, veterans and dependents last year through online education and at 200 locations.

Tarantino of the IAVA says some veterans have thought they were earning nursing degrees from for-profit schools but actually received “nursing technology” degrees that employers did not accept.

“One veteran got a degree in ‘finance management theory,’ but it wasn’t the accounting degree he thought. He couldn’t get an accounting job with it,” Tarantino said.

“We have millions of federal dollars going into an industry that largely doesn’t have any control, any regulation and has nothing that helps veterans make solid educational decisions,” he said.

An IAVA website, NewGIBill.org, now warns of predatory tactics by for-profit schools and offers a guide to navigating complex GI Bill regulations.

State lawmakers -- and the courts -- are getting involved too.

In California, public universities are intensifying efforts to recruit veterans. VA teams are assigned, for instance, to each of Cal State’s 23 campuses to coordinate veterans’ financial aid, said Carolina Cardenas, the system’s associate director of academic outreach.

From 2009 to 2011, California received more in VA educational benefits than any other state -- $411 million for 75,000 veterans at 604 institutions.

In June, a marketing company based in California agreed to pay $2.5 million to 20 states and surrender its GIBill.com website to the VA. Attorneys general in the 20 states had accused QuinStreet Inc., based in Foster City, Calif., of steering unsuspecting veterans to its for-profit school clients via websites that appeared to be endorsed by the U.S. government or military.

“These are not the good guys,” Sen. Richard J. Durbin (D-Ill.) said of for-profit schools after the settlement was announced. “What the for-profit schools are doing to students and their families across America is shameful. What they’re doing to veterans is disgraceful.”

Christopher Ford, a former Air Force master sergeant, said he used GI Bill benefits for a $9,000 online engineering course at a for-profit school, only to discover that no employer would accept the training.

“It was heavily marketed, so I took it,” Ford said. “It sounded pretty good, but it turned out to be pretty predatory.”

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BEGIN TEXT OF INFOBOX

13 -- Percentage of all college students who attend for-profit schools

38 -- Percentage of GI Bill payments received by for-profit schools

$4,642 -- What taxpayers paid to educate a typical veteran at a public college*

$10,441 -- What taxpayers paid to educate a typical veteran at a for-profit school*

$9 billion -- What the Pentagon will spend this year to educate some 600,000 veterans*

For years 2009-2011

Source: Los Angeles Times