Addressing the 90/10 Loophole in Veterans Education

I watched this morning’s Congressional hearing on improving education outcomes for US military veterans. The hearing was held by the Senate’s committee on Homeland Security and Governmental Affairs.

The hearing centered on a law known as the 90/10 rule, which prohibits for-profit educational institutions from deriving more than 90% of their revenue from federal financial aid. The 90/10 rule was enacted to defeat predatory for-profit entities that vacuumed up federal aid from vulnerable students in exchange for classes of such dismal educational value that no rational consumer would pay for them.  One of the law’s quirks is that GI Bill benefits are not counted as a source of federal revenue. As a result, for-profit institutions hovering around the 90% mark are incentivized to accept veterans over other students. This might seem like affirmative action policy for veterans, but the law applies specifically to for-profit institutions because such schools have been implicated in past predatory business practices that target veterans.

One such practice touched upon in the hearing is the misrepresentation of a school’s accreditation: Veterans tend to be both goal-directed and underinformed about the higher education system. As such, they’re vulnerable to deceptive advertisements suggesting that for-profit degrees will make them employable when in fact these degrees are not recognized by the regional accreditation bodies that oversee most well-respected programs. Speaking as a panel witness, Sergeant Christopher J. Pantzke, USA, Ret. recounted for the Committee how he was saddled with over $90,000 in debt and a “useless” photography degree that employers later told him was not well-received by the professional photography community.

Senator Tom Coburn, Ranking Republican-in-more-than-name-only from Oklahoma, identified the problem with a Barry Goldwater quote, probably paranoid-sounding when the National Defense Education Act was being debated in 1958 and certainly not very instructive today, warning against the “inception of aid, supervision, and ultimately the control of higher education in this country by federal authorities.” Senator Coburn then likened the 90/10 rule to the “government picking winners and losers among colleges that have already proven themselves,” conveniently forgetting the fact that the 90/10 rule was implemented to protect the public from colleges that had already proven themselves to be predatory leeches. Senator Coburn did make a decent point that schools misrepresenting their accreditation may be investigated by DOJ for fraud within broadly accepted free-market principles.

On the panel, Senator Coburn’s reflexive private-sector deference was matched by that of former Congressman Steven C. Gunderson, President and CEO of the Association of Private Sector Colleges and Universities, who disrespectfully spoke over Senator Claire McCaskill and freely ignored the substance of her questions. Congressman Gunderson emphasized that for-profit universities provide rural low income students the opportunity to pursue distance education when they might not be able to afford to travel to a brick-and-mortar university. He expressed willingness to abide by the same restrictions as non-profit universities but decried the 90/10 rule as a discriminatory measure against low-income students since some students who rely on federal aid may be forced out or rejected by a school that is close to the 90% threshold.

The crux of the issue is in Senator Coburn’s insistence that outcome-based measures such as a school’s rates of retention, graduation, and employment be the only measures on which punitive government responses hinge. Logically, outcome-based measures are ideal for a system that rewards best educational practice. In practice, it is extremely difficult to measure the contribution of one’s education to one’s workplace performance (and one’s other contributions to society). Among other complications, the lag time between education and later employment (ideally, one would want to observe employment across several years to get a solid picture) means that external variables may contribute to employment in ways that are impossible to disentangle from the prior effect of education.

Nor is it entirely clear which educational outcomes should be measured. In the case of predatory practice, rewarding high graduation rates might perversely incentivize predatory institutions to make their poorly-respected classes easier so that students graduate more often by virtue of needing to learn less. Education studies have had difficulty identifying a suitable regime of outcome-based measurement and reward. Instead, policymakers have relied on proxy measures like the willingness of informed consumers to pay market price for the education. It’s only reasonable to acknowledge the possibility that universities close to the 90% threshold will deny access to some low-income students in order to avoid taking in an unlawful proportion of federal aid. The logic behind the proxy is that, whatever number of low-income students are denied access, many more will be protected from predators who create diploma mills solely to soak up federal aid while providing as little value to students as possible.

For ideologues who show up to hearings with a manifesto full of solutions to the only problem they believe in, a discussion of the difficulty of getting education right isn’t especially relevant. Personally, I don’t have the information in front of me to know whether closing the 90/10 loophole would protect more veterans than it would hurt low-income students. But loophole closure seems like an adequate fix in the absence of a resoundingly win-win solution to this fairly mundane issue.

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