Dems propose new limits on federal aid to for-profit colleges

Democrats in the House and Senate are proposing legislation that would force for-profit colleges and universities to become less reliant on federal funding.

The Protecting Our Students and Taxpayers (POST) Act, from Senate Majority Whip Dick Durbin (D-Ill.), is aimed at ending what Durbin says are "predatory marketing campaigns" from for-profit schools targeted at veterans and members of the Armed Forces.

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Under current law, for-profit colleges can't get more than 90 percent of their revenue from federal student aid programs, and must look elsewhere for the other 10 percent. But federal student aid for service members is not counted as federal revenue.

Durbin says that loophole has prompted for-profit schools to aggressively recruit members of the military and veterans, which the schools see as an easy way to fill out the 10 percent of their funding that cannot come from federal sources.

Durbin says that dynamic is harming service members and veterans because for-profit schools are giving students a substandard product. Durbin has long criticized for-profit schools and said on Wednesday that these schools have a disproportionate share of students who can't pay back their student loans. He said that's evidence that for-profits are not adequately preparing students for jobs.

"They enroll only about 12 percent of all college students yet account for almost half of all student loan defaults," Durbin said of these schools. He added that the 90-10 rule "allows far too much federal money to funnel to an industry that often provides a greater return on taxpayer investment to its administrators and investors than it does to its students."

Durbin's bill, S. 1659, would reset the for-profit formula to 85-15, which would make them get 15 percent of their funding from non-federal sources. It would also prohibit for-profits from counting educational aid to the military as part of that 15 percent.

"Our service members and veterans deserve better, and this common-sense bill will help protect taxpayer dollars and put the focus back on giving these men and women the degree and skills they need to build a brighter future," said Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-Iowa), the other Senate sponsor of the bill.

Rep. Steve Cohen (D-Tenn.) is expected to introduce the same bill in the House next week. On Wednesday, Cohen agreed with Durbin's assessment that current law is sending too many service members to schools that are substandard.

"This loophole encourages bad behavior that weighs down our nation’s heroes with mountains of debt and few career prospects while lining the pockets of wealthy for-profit investors with taxpayer money," he said. "Simply put, this is unacceptable."