ITT Educational, for-profit peers reaped $521M from military

Twenty for-profit colleges reaped $521 million in U.S. taxpayer funds in 2010—seven times more than in 2006—by recruiting armed-services members and veterans through misleading marketing, according to a Congressional report released Thursday.

Getting the money from military personnel helped the companies circumvent a cap on the aid they can receive from the Education Department, their main source of income, according to the report from Iowa Democrat Tom Harkin, chairman of the Senate Health, Education, Labor and Pensions committee. Congress should protect veterans and taxpayers from documented abuses by those colleges, the report’s authors said.

The Post-9/11 GI Bill, which Congress passed in 2008, raised educational benefits for almost all military veterans, and in some cases allowed them to pass money for school to spouses and children, according to the report. The colleges made it a priority to recruit military members to exploit the surge in benefits, the authors said.

“Congress may have unintentionally subjected this new generation of veterans to the worst excesses of the for-profit industry: manipulative and misleading marketing campaigns, educational programs far more expensive than comparable public or non-profit programs, and a lack of needed services,” according to the report.

The total of $521 million encompasses both veterans’ benefits from the Department of Veterans Affairs and tuition assistance from the Department of Defense.

Carmel-based ITT Educational Services Inc. scored the biggest windfall, with $79.2 million in Post-9/11 GI Bill revenue. Rounding out the top five were Apollo Group Inc., operator of the University of Phoenix, with $76.9 million; Pittsburgh-based Education Management Corp. with $60.5 million; Hoffman Estates, Ill.-based Career Education Corp. with $58.2 million; and Oakbrook Terrace, Ill.-based DeVry Inc. with $47.9 million, according to the report.

Senator Thomas Carper, a Democrat from Delaware, said he asked the Government Accountability Office to investigate the Defense Department’s ability to guard against waste in its tuition-assistance program. A GAO report in August documented misleading marketing at 15 for-profit colleges.

The Defense Department “has yet to increase oversight of this education program, leaving us with no indication of whether this increased cost to the taxpayers buys our military personnel the kind of high quality education they so richly deserve,” Carper said in an e-mail.

Statistics suggest that the for-profit colleges attended by military members have high dropout rates and poor educational results, according to the report. At four of the five for-profit colleges receiving the most in Post-9/11 GI Bill funding, loan repayment rates were below 37 percent, according to the report.

At the same four schools, 24 percent of the students defaulted on their loans, according to the report. The national rate of student default on government loans was 7 percent in the academic year ended in 2008, the most recent period for which data are available, according to the Education Department. The default rate at U.S. for-profit colleges was 11.6 percent that year, the department said Sept. 13.

Harris Miller, president of the Washington-based Association of Private Sector Colleges & Universities, which represents the industry, didn’t immediately return a call to his office seeking comment.

A 2009 program created by Congress to provide tuition assistance for military spouses cost the Defense Department $250 million in less than a year, according to the report. Forty-six percent of the 136,000 spouses enrolled in the program attend for-profit colleges, according to the report. The program was redesigned with a less-generous benefits package.