Hearing of the Senate Armed Services Committee - Opening Statement of Sen. Reed, Hearing on Voluntary Education Programs

Hearing

Thank you very much, Mr. Chairman. I'd like to join you in thanking our witnesses for joining us today to provide testimony on the operation of voluntary education programs within the Department of Defense, and the Department's efforts to protect service members, veterans, and their families.

I realize the Chairman's focus is on the University of Phoenix, and the compliance issues they have faced over the past two years. I believe this hearing is especially important, however, to highlight the Department's efforts to ensure consistent and equitably-applied standards are in place to protect service members, veterans, and their families from abusive and deceptive marketing practices by any school, regardless of whether they are for-profit, private not-for-profit, or public institutions. The University of Phoenix example is but one instance of where the Department has acted to ensure educational institutions live up to the standards they agreed to in order to participate in the tuition assistance program. Indeed, as the Department's response to Sen. McCain's questions concerning the University of Phoenix have shown, these rules apply to all schools, and are being enforced against all schools.

The Administration's goals in this area are worthy, and should continue even as a new Administration takes office. By Executive Order 13607, promulgated in 2012, the Administration seeks "to ensure that Federal military and veterans educational benefits programs are providing service members, veterans, spouses, and other family members with the information, support, and protections they deserve." The program does this by requiring participating schools to make a wider array of information available to prospective students, by refraining from abusive and deceptive recruiting practices, and by providing highest-level academic programs and student support systems. I think we can all agree these are worthy goals.

Underlying these issues is a rule that I believe needs to be updated, the so-called 90-10 rule. The rule states that for-profit schools must derive at least 10 percent of their revenue from non-federal student aid sources. Paradoxically, DOD tuition assistance and VA GI Bill programs count as non-federal student aid sources. That means for every dollar of TA or GI Bill funding a for-profit school can acquire, they may receive $9 more in Federal student loans. As Holly Petraeus has testified, that leaves a bulls-eye on the backs of service members, veterans, and their families, which explains why some for-profit educational institutions are desperate to enroll service members. This 90-10 loophole provides a powerful incentive to recruit service members and veterans, even to the exclusion of effective student support programs. As Ms. Petraeus testified in 2013, a school that was guilty of signing up service members with brain injuries to educational programs that they did not need and without their full understanding, employed 1,700 recruiters, and only one full-time employee dedicated to helping students gain employment after completing their studies. This illustrates the perverse incentives this system has created. I agree with what Ms. Petraeus has advocated, which is a statutory change to close this loophole. I have supported legislation to count DOD TA and GI Bill benefits on the student aid side of the equation and to return to the tighter standard of 85-15. This would remove the twisted incentive to recruit service members and veterans for programs they do not need.

Indeed, the collapse of Corinthian College and ITT demonstrates the need for stricter standards and greater transparency. Tens of thousands of students, including servicemembers and veterans have been left in the lurch -- having taken out loans or used their GI Bill benefits with little of marketable value to show for it. The Administration's efforts under Executive Order 13607 are critical to preventing these problems and ensuring that military and veteran students can be confident that all institutions participating in DOD TA and VA education benefit programs adhere to reasonable quality standards and fair practices.

I look forward to hearing from our witnesses about these programs, and how we may strengthen protections for service members, veterans, and their families as they take advantage of these earned, but tantalizingly generous, educational benefits.

I thank you all for your time and your expertise, and look forward to your testimony.

Thank you, Mr. Chairman.

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