For-Profit Schools Taking In Millions From GI Bill

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For-Profit Schools Taking In Millions From GI Bill


Back in the spring, close to 50 unemployed young veterans gathered in a state agency building in Richardson to learn how to rework their résumés and make themselves more attractive job candidates.

The first speaker was someone from the University of Phoenix, a mammoth for-profit college that does an overwhelming amount of its educating online, not in classrooms. She passed out brochures, then detailed why the veterans should use their generous education benefits at her school.

Jim DePaolo, laid off just weeks before, was stunned.

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"This person was introduced as 'She has a lot of good and important information, and she will help you be successful,'" DePaolo said. "We were right there in Richardson, just a few miles from [the University of Texas at Dallas]. They weren't there. No other school was. I can't begin to tell you how frustrated I was."

DePaolo, an Air Force veteran, had once been a student at the University of Phoenix, an experience he described as "terrible" and a "wasted" year of hard-earned government benefits. More shocking than the sales pitch, he said, was the perceived endorsement the school received from the Texas Workforce Commission.

Perhaps it shouldn't have been shocking. For-profit universities such as the University of Phoenix, DeVry University, Strayer University, Ashford University and Kaplan University -- typically called "career colleges" -- have marketed themselves to veterans so successfully that they are taking in tens of millions of dollars annually in taxpayer money after the passage of the Post-9-11 GI Bill.

For-profit colleges account for 13 of the 15 universities that have received the most GI Bill money in the last three years.

Critics in the veteran community and in some quarters of Congress and dozens of state attorneys general are wondering what the nation is getting in return for that staggering educational investment.

"Their mission is not to educate," said Tom Tarantino, chief policy director for the Iraq and Afghanistan Veterans of America, a New York-based advocacy organization for young veterans. "Their mission is to make a profit. I've got no problem if they make money as long as they're producing graduates with a quality education. That's not the case."

'Bold legislative reforms'

The industry has responded vigorously, saying the attacks are politically driven by opponents of for-profit education.

For-profit colleges, advocates say, fill a need for nontraditional or working students to obtain a higher education and "a pathway to employment in high-demand occupations."

The colleges are even more important, they say, given the budget-cutting and stretched resources of public higher education.

"Somewhere between 8 [million] and 23 million additional people going into the workforce need to have postsecondary education and skills," said Steve Gunderson, a former Republican congressman who serves as president of the Association of Private Sector Colleges and Universities.

"That's above and beyond what is already in the pipeline. We've got to see an expansion of postsecondary education in this country. I believe the private sector is the only one that can find the resources to expand and meet this need."

The University of Phoenix, which does not belong to the major trade association, has said the entire sector has been painted with a broad brush and suggested that the Veterans of Foreign Wars and the American Legion support the industry.

Of the millions of people now taking college classes, about 13 percent are enrolled at for-profit schools, a steep increase over the small percentage 12 years ago. For-profit colleges, unlike public schools or private nonprofit universities, are often owned by shareholders or private equity firms.

Sen. Tom Harkin, D-Iowa, chairman of the Senate's Health, Education, Labor and Pensions Committee, has hammered the industry for months, releasing an 800-page report this summer that he said he hoped would lead to "bold legislative reforms."

"In this report, you will find overwhelming documentation of overpriced tuition, predatory recruiting practices, sky-high dropout rates, billions of taxpayer dollars spent on aggressive marketing and advertising, and companies gaming regulations to maximize profits," Harkin said. "These practices are not the exception. They are the norm. They are systemic throughout the industry, with very few exceptions."

This summer, 20 state attorneys general, led by Kentucky's, announced a settlement with a company that had set up a website that looked like the official Veterans Affairs site and provided information only on for-profit colleges such as Kaplan, Strayer, DeVry and Phoenix. The colleges were paying the company for leads on prospective students who had checked out the website.

The company had to turn over the website ( and 18 other domain names to the Veterans Affairs Department as part of the settlement.

And last year, the VA and the Texas Veterans Commission yanked Westwood College, which has a Fort Worth campus, from its approved list of colleges for veterans after repeated problems with high-pressure sales tactics and deceptive promises made to potential students.

'Nontraditional' students

The Iraq and Afghanistan Veterans of America set up a website to try to educate veterans on the issue, and the group has been lobbying Congress to change the law to tighten the oversight and accountability of for-profit colleges.

Beyond trying to help its members, Tarantino said, the organization sees a danger if Congress and taxpayers begin questioning what they are getting with the new GI Bill.

"We have already seen that as this fiscal climate grows tighter, people are suggesting subtle changes to reduce the benefit," he said. "If at some point a few years down the line, Congress is looking at the billions of dollars spent on a benefit that is not producing educated graduates, then they're going to cut the program."

Sen. Jim Webb, D-Va., a Vietnam veteran, authored the Post-9-11 GI Bill because the older version neither kept up with the rising cost of college nor provided a monthly stipend for living expenses. For those reasons, many veterans didn't take full advantage of their education benefits.

For veterans who served at least three years on active duty after 9-11, the law covers full tuition and fees for up to four years at the most expensive public institution in each state. It also provides money for books and a monthly housing stipend.

Additionally, many private nonprofit institutions, such as Texas Christian University, Texas Wesleyan University and Southern Methodist University, participate in a VA program in which they discount tuition and fees for student veterans.

Many veterans, though, are attending for-profit schools, and not just for-profit trade schools.

Gunderson, a University of Wisconsin graduate who took over leadership of the for-profit industry's trade group, said 91 percent of students at for-profit schools are "nontraditionals," meaning they are single parents, older adults returning to school, people with jobs and veterans.

"A young person who has deployed to Afghanistan will tell you they don't learn the same way anymore and a traditional college doesn't fit their lives," Gunderson said. "Our schools have a flexible delivery that allows them to work and go to school."

The expense

A chief complaint about for-profit schools is that they are considerably more expensive than public universities and four times as expensive as community colleges.

For instance, the VA paid an average of $26,200 per student at the DeVry campus in Irving, according to data provided by the VA.

Yet the VA paid an average of $12,700 per student at the University of Texas at Arlington and $11,100 per student at the University of North Texas in Denton.

In Austin, where thousands of students take their core classes at Austin Community College, the VA paid an average of $6,500 per student.

"Their pricing isn't based on student outcomes or any other measure collected by public universities," Tarantino said. "It's really driven by how much they can squeeze out of people for their profit margins."

Gunderson, however, said looking only at tuition costs is deceiving. He said the typical student at a public college receives thousands of dollars more in public support than a student at a for-profit school because of state and federal funding of public universities.

"Private-sector colleges have no public support," he said. "A community college has a significant amount of subsidies from the taxpayer. The tuition cost is going to be less."

Credits wouldn't transfer

A veteran with 10 years in the Air Force as an air traffic controller, DePaolo moved to North Texas, holding an undergraduate degree from Park University that he earned while in the service.

He wanted to attend graduate school with his GI Bill benefits. He missed the enrollment deadlines at major universities and stopped in one day at the University of Phoenix campus in north Dallas to find out what programs they offered.

It wasn't too late to enroll in the master's program there, he was told. He was enrolled within the hour that day in January 2010.

"Looking back, my first red flag should have been that they said, 'We can enroll you right now,'" DePaolo said. "They didn't even know if I had a bachelor's degree. They just knew I was a veteran."

DePaolo said he had two major problems with Phoenix -- he wasn't learning as much as he thought he should, and people in his classes were earning the same grades as he was when they didn't even show up.

He stopped attending Phoenix in January 2011 after talking to admissions counselors at UNT. They told him they would not recognize one single credit he had earned at Phoenix.

DePaolo switched to Dallas Baptist University and eventually earned a master's degree in management and found a job in aviation in Gainesville.

Richard Castellano, a spokesman for the University of Phoenix, which is owned by the publicly traded Apollo Group, said that the university's faculty members are required to have at least a master's degree in the field they teach and that Phoenix is "regionally accredited by the Higher Learning Commission."

"The issue of transfer of credits is not an issue specific to the University of Phoenix or the for-profit sector," Castellano said. "Transfer of credits is at the discretion of the institution accepting the credits."

'Heavy marketers'

The Iraq and Afghanistan Veterans of America and others in the military community have also criticized student recruitment tactics.

Holly Petraeus, an assistant director in the Consumer Financial Protection Bureau and the wife of CIA Director David Petraeus, said this summer that one of the issues brought up most often by veterans and military families is the "aggressive pursuit" by for-profit institutions.

She said they "besiege" education service officers at bases and National Guard armories for access and spend millions of dollars on marketing.

"I've even heard about cases where for-profit recruiters have managed to obtain exclusive access to Wounded Warrior Barracks, offering what is presented as biweekly educational counseling," she said.

Gunderson acknowledged that the industry spends more on recruiting than other universities but said it is necessary to reach potential students.

"We're dealing with a different student body," he said. "You can't reach our students through a high school guidance counselor."

The Texas Higher Education Coordinating Board has oversight authority over for-profit institutions that have degree plans, as opposed to trade schools. For-profit institutions had precious little oversight or reporting requirements until recently, though, when the state began requiring more data.

"We told them, 'We want you to start reporting more data to us so we can share it with Texas taxpayers,'" said Dominic Chavez, director of external relations.

"We don't have real robust data yet because it's just ramping up. But the long-term goal is to collect the most relevant data for these institutions so there will be accountability and transparency for the consumer and the taxpayer."

Chavez is familiar with the for-profit industry's military marketing. He saw it firsthand as a soldier in the Army for 10 years.

"They are heavy marketers to military personnel," he said. "Look in any of the Army Times or Air Force Times or publications that cater to military, and you'll see the ads."

For all the criticisms, Tarantino said, there are some quality for-profit schools, in his opinion. He singled out Universal Technical Institute as an example of a for-profit vocational school that is a success.

The problem, he said, is that veterans leave the military with little to help them set aside advertising and marketing and accurately compare schools.

"There's nothing out there to discern what's good or bad," Tarantino said.

By Chris Vaughn
Fort Worth Star-Telegram
September 2, 2012

Keywords: veterans unemployed jobs education schools GIBill
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