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For-Profit College Military Aid Needs Oversight, GAO Says

March 1 (Bloomberg) -- A U.S. military program that paid $175 million to for-profit colleges for active-duty service members’ tuition in 2009 may be wasting money because of insufficient oversight, government investigators said.

The Defense Department grants tuition assistance without having a system to track complaints, and it reviewed less than a third of the courses offered by nonprofit and for-profit colleges, according to a Government Accountability Office study obtained by Bloomberg News. Institutions that provide online courses, especially for-profit colleges, targeted the federal funds, according Senator Thomas Carper, who requested the study.

“It’s just wrong to say to people who serve our country that we’re not going to make sure you have the best preparation to be successful in the military and afterward,” Carper, a Delaware Democrat who is a U.S. Navy veteran, said yesterday in a telephone interview. “We can’t afford it as a country.”

Congress and the Department of Veterans Affairs are investigating colleges that market educational services to current and former military members. The Defense Department paid $517 million to all colleges for service members’ tuition in the year ended Sept. 30, 2009. About $175 million of that went to for-profit colleges, according to a December report by Senator Tom Harkin, the Iowa Democrat who has been investigating student-recruitment at for-profit colleges.

Harkin to Testify

Carper, chairman of the Senate subcommittee on federal financial management, invited Harkin to testify tomorrow at a hearing in Washington on the military benefits program.

The lack of monitoring leaves military members vulnerable to recruitment abuses, according to a report released today by the GAO, Congress’s investigative arm. Defense Department officials who were interviewed for the report said that while they don’t keep official records of complaints about such abuses, they recalled that most were related to for-profit schools, the GAO said.

In one case, for-profit college recruiters called and e-mailed a service member day and night after he elected not to sign up for classes, according to the report. In another case, a for-profit college was charging higher tuition rates to service members than civilians, while offering the service members gas cards for completing courses, the report said. The report didn’t name specific schools involved in abuses.

‘Inadequate Oversight’

Harkin, chairman of the Senate education committee, requested a separate GAO probe -- whose findings were originally released in August and revised in November -- that found recruiters at 15 for-profit colleges made misleading statements to agents posing as applicants. Harkin has also investigated for-profit colleges’ use of military funds, along with withdrawal and student-loan default rates among their students.

“I am deeply concerned that there is inadequate oversight of our nearly $30 billion in federal aid to for-profit schools,” Harkin said yesterday in an e-mailed statement. “This report by the GAO confirms my concerns.”

GAO made “broad extrapolations” from the recruiting abuses it reported in August, said Harris Miller, president of the Association of Private Sector Colleges & Universities, a Washington-based trade group.

“I hope that isn’t the situation here,” he said in a telephone interview. “Students like our schools and are pleased with their educations. We’re going to continue to offer them quality education because they seem to value it.”

Job Training

For-profit colleges offer educations and job training for military members, said Penny Lee, managing director of the Coalition for Educational Success, an industry group based in Chicago.

The schools “increase the readiness and efficiency of the armed forces; aid veterans in their adjustment back to civilian life; and increase their opportunity to obtain an education and well-paid, rewarding employment,” she said in an e-mailed statement.

The Defense Department monitors the quality of college courses that are taught on military bases, or about 29 percent of all courses that were eligible for tuition assistance in 2009. About 71 percent of the courses that got funds in 2009 were conducted online and weren’t subject to review, the GAO said in the report.

Online Oversight

The Defense Department was preparing a policy that would initiate oversight of online courses, Robert Gordon, deputy undersecretary of defense for military community and family policy, said in September at a House of Representatives hearing held by the Armed Services Subcommittee on Oversight and Investigations. Gordon is scheduled to testify tomorrow at the Senate hearing.

The American Council on Education, a Washington-based association of colleges and universities, held a 4-year, $3.7 million contract to monitor course quality for the Defense Department through the end of 2010. No reviews will be conducted this year because the contract expired, according to the report. While the department is seeking a new contractor to monitor college-course quality, it hasn’t explained the one-year lapse in monitoring, the report said.

Year Without Reviews

“The idea that we’re going a whole year without quality reviews when we know we have a problem strikes me as penny-wise and pound-foolish,” Carper said. “When I hear us saying we’ll get around to this next year, I think we have a problem.”

The Defense Department has been working since 2004 on developing a policy for reviewing online courses, said Susan Aldridge, president of University of Maryland University College, in Adelphi, Maryland, who has been involved in the process. Her college provides courses for active-duty personnel on military bases, and several installations are normally reviewed each year, she said.

“Our only frustration is that many educational programs have been funded without oversight or accountability for all these years,” Aldridge said in a telephone interview.

A new set of rules for colleges that receive tuition assistance funds is in the “final stages” of approval, Major Monica Matoush, a Defense Department spokeswoman, said in an e-mail. The rules go into effect Jan. 1, Matoush said. She declined to comment specifically on the GAO report before its formal release.

Different Standards

The Defense Department doesn’t hold schools to the same standards used by the Education Department, which also provides grants and loans for college students, according to the GAO report. The Education Department limits the amount of revenue for-profit colleges get from its grants and loans, and bars all colleges from misleading applicants about programs and paying recruiters on the basis of the number of students signed up.

The Education Department is preparing to issue additional regulation of for-profit colleges that will tie their eligibility for government grants and loans to students’ incomes and graduation rates. Education companies are lobbying against the regulations, and the House passed a measure, sponsored by Representative John Kline of Minnesota, that would block them. Kline, a Republican, is chairman of the House education committee.

Related News and Information: For education news: {NI EDU BN <GO>} Stories on U.S. stocks: {NI USS <GO>} Top political stories: {NI POL <GO>} Global market map: {MMAP <GO>} Menu of education organizations: {EDOR <GO>} Index of For-Profit College Stocks: {USEDU <Index> MRR1 <GO>}

To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net

To contact the editor responsible for this story: Jonathan Kaufman at jkaufman17@bloomberg.net

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