White House Wants to Close Loophole That Funnels Billions to For-Profit Schools

The University of Phoenix took in nearly $1 billion in GI Bill cash from 2009-2013.

The University of Phoenix took in nearly $1 billion in GI Bill cash from 2009-2013.

The University of Phoenix, the for-profit monster with no sports teams, agreed in 2006 to pay almost $155 million over 20 years for the naming rights to the Arizona stadium where the Super Bowl was held last Sunday.

The Obama Administration now wants to close a college funding loophole that helped the school bankroll a frill afforded only to a flush few atop the pecking order of corporate America.

See also: For-profit colleges swindle students

The White House rolled out its budget earlier this week. It included language that would tighten what's called the 90/10 Rule, which prohibits for-profit schools from getting more than 90 percent of their revenue from federal aid.

For-profit higher ed is currently a $33 billion annual industry. Eighty percent of its cash comes from taxpayers.

The idea behind the 90/10 metric is that a school should have enough street credibility to be able to generate 10 percent of its revenue from students who are actually willing to pay out of their own pockets.

The administration's budget plan would lump GI Bill and Defense Department tuition-assistance programs with other federal student aid, such as Pell Grants, into the 90/10 calculation.

Such a tightening wouldn't bode well for for-profit higher ed. Right now, eight out of the top ten recipients of GI Bill funds are for-profit schools with the University of Phoenix leading the way.

It's at these kind of schools, which spend more on marketing than educating, where fewer than two out of ten students graduate. For those who do, about a quarter can't score a job that earns enough to pay back their student loans.

For years, the University of Phoenix and many other for-profit schools have dangerously hovered just under the 90 percent threshold without counting military-assistance programs. The White House proposal would undoubtedly push many over the edge.

David Halperin, a Washington, D.C.-based lawyer, has covered the for-profit higher ed beat for years. Many of his stories have appeared in The Huffington Post.

Says Halperin, "It's encouraging that the White House wants to close the loophole that has driven predatory for-profit colleges to be particularly abusive of our service members and veterans. I hope Congress will side with our vets, and not with the for-profit colleges that finance their campaigns and then spend millions lobbying them."

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