Senator Durbin Proposes a Fix to the 90/10 Rule

This week, Senator Richard Durbin (D-IL) introduced a bill to cut back on for-profit exploitation of veterans. I wrote about this problem a few months ago, and it’s great to see a high-ranking member of congress taking action on it (Durbin is the #2 Democrat in the Senate). I’m happy to say that Durbin’s proposal closely matches what I had recommended.

Here’s why this is so important: as it stands now, for-profit universities can only get 90% of their funding from the federal government (generally in the form of federal student loans paid as tuition). Now, 90 percent is a lot, of course. It means that these schools are almost entirely dependent on government loans for their funding, but that if students are unable to find jobs after graduation and default on those loans, it’s American taxpayers – not the schools – which get stuck with the tab. For the schools, it’s a relatively risk-free proposal.

Unfortunately, due to a loophole in the 90/10 rule, veterans’ benefits from the Post-9/11 GI Bill count towards the 10 percent, not the 90 percent. That means that for each veteran they sign up at full tuition, schools can also sign up nine non-vets at full tuition, and all of the funding will still be coming from the government.

Durbin’s rule would make two simple adjustments to the law. One, it would change the 90/10 ratio down to 85/15, as it was before 1998. Two, it would close the GI bill loophole by having veterans benefits count on the 85 side, not the 15 side. This would drastically cut down the perverse incentive that for-profits have to seek out and enroll veterans, and incentive which I believe makes it aggressive recruiting and exploitation of our veterans far too attractive to a company trying to make a profit. It would mean that colleges would actually have to look to other sources for 15 percent of their revenue, as the law originally intended.

Whether Senator Durbin’s bill can pass the House and Senate in an incredibly divided election year, I can’t say. It’s certainly a step in the right direction and I hope more members of congress put veterans and educational quality first.

Follow me on twitter for more news from the for-profit college industry: @forprofitwatch

2 thoughts on “Senator Durbin Proposes a Fix to the 90/10 Rule

  1. Unfortunately, 90/10 does nothing to help students and actually causes them great harm. The primary way that colleges conform to this discriminatory rule (non-profits get a free pass) is to increase tuition. Increasing tuition is devastating to students for a myriad of reasons. We should be measuring graduation rates, default rates, and job placement instead of this wrong-headed measurement that sounds good on the surface but harms students. Students NOT having to pay out of pocket is a wonderful thing for students (100%). Thus, it is much better to have a college that offers low tuition so students can attend being fully covered by grants and loans. The solution is quite simply to abolish 90/10. This removes the incentive for proprietary schools to target veterans AND more importantly removes regulation that forces these schools in increase tuition (see Corinthian Colleges et al.). Senators like Harkin who want to destroy and demonize for profits because they compete with state schools turn a blind eye to students because they know what I am saying is the truth but they refuse to talk about it.

    Gainful employment on the other hand is focused on student outcomes. We could strengthen this rule (as long as it get applied to ALL colleges and universities) to force colleges to focus on student outcomes. The removal of 90/10 would provide proprietary colleges the ability to REDUCE (what a concept!) tuition in order to comply with gainful employment. The ignorance around 90/10 needs to stop. It’s true intent is to punish for-profits and to prevent them from under-cutting state schools by offering low tuition. Worse yet, the outcome of 90/10 has been the opposite of it’s public policy objectives because it harms our most vulnerable students (low-income).

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