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For-profit colleges aggressively target veterans for enrollment. These Democrats want it to stop.

Senate Democrats want to close a loophole that has encouraged for-profit colleges to go after veterans for enrollment. (Simon Lim/AFP/Getty Images)

When it comes to enrolling veterans and their families, there is only upside for for-profit colleges. Men and women who serve in the military receive federal education funding that has become a stable source of revenue for many of the schools. And that money is exempt from a key federal rule that governs the way for-profit colleges are funded.

But a group of Senate Democrats are ready to put an end to that. Sens. Dick Durbin (D-Ill.), Tom Carper (D-Del.) and Richard Blumenthal (D-Conn.) introduced legislation Wednesday to close a loophole in the so-called 90/10 rule, which prohibits for-profit colleges from getting more than 90 percent of their operating revenue from federal student aid funding. Money from the G.I. Bill, which provides veterans and their families with funding for college, does not count toward that threshold despite being federal aid.

As a result, lawmakers and consumer advocates say for-profit colleges aggressively recruit members of the military. About 40 percent of G.I. Bill tuition benefits have gone to for-profit schools in the past five years. Corinthian Colleges, the for-profit giant that filed for bankruptcy last month amid allegations of predatory lending and lying to the government about its programs, received $186 million in military tuition funding.

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“While not every for-profit college is a bad actor, one veteran mistreated is one veteran too many," Carper said, in a statement. "We need to use common sense here. It doesn’t make sense for taxpayers to send veterans to for-profit schools that can be 100 percent subsidized using taxpayers’ dollars.”

Congress first capped the amount of taxpayer dollars for-profit colleges could receive at 85 percent in 1992 to crack down on fly-by-night schools making money from student aid programs. The government figured a for-profit school with quality programs should have no trouble deriving at least 15 percent of its revenue from students willing to put up their own money. The for-profit industry fought tirelessly against the rule, which was relaxed six years later as the cap was raised to 90 percent, and military education benefits were exempted.

"These for-profit colleges charge twice as much as regular schools. Students give their Pell Grants, their G.I. Bill benefits and student loans to these schools...more than 90 percent of their revenue comes right out of the federal treasury," Durbin, who plans to introduce separate legislation to reinstitute the 85/15 rule, said in a news conference Wednesday. "It's a little hard to defend."

Industry groups take issue with the senator's characterization of for-profit colleges and argue that veterans choose their schools because of the service they provide.

"The only effect that the proposed changes will have will be limiting access to education for the students who need it most," said Noah Black of the Association of Private Sector Colleges and Universities, which represents for-profit schools.

The aggressive recruitment practices of for-profit colleges came to light in a 2012 Senate investigation, which found evidence of schools deploying teams at veterans hospitals and wounded warrior centers to enroll students. Investigators said recruiters misled or lied to service members about their military benefits covering the full cost of tuition.

Despite the widespread attention the Senate investigation received, it failed to galvanize Congress to stop abuses in the for-profit industry. A series of bills to close the funding loophole since 2012 have failed to gain enough support to pass, and there is little indication that this latest attempt will have greater success. There is not a single Republican among the bill's 21 co-sponsors.

Even with the stunning collapse of Corinthian that left taxpayers on the hook for hundreds of millions of dollars in student debt forgiveness, Republicans are standing firmly behind the for-profit industry. A Republican spending plan released last week is seeking to prevent the Obama administration from moving forward with new regulations limiting the amount of debt students can carry in career-training programs, a rule that largely impacts for-profit schools.

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Still, the for-profit industry is in turmoil. Just this week, a federal judge delivered a blow to the industry by denying a challenge to that same Obama administration rule on career-training programs. And mounting government lawsuits, regulatory scrutiny and depressed student enrollment has kneecapped some big names in the sector.

Education Management Corp. is closing 15 Art Institute campuses, while Career Education Corp. said it would shut down all 14 of its Sanford-Brown schools. Meanwhile, ITT Education Services, its chief executive Kevin Modany and chief financial officer Daniel Fitzpatrick are all being being sued by the Securities and Exchange Commission for fraud.

“From the collapse of Corinthian to the fraudulent behavior of ITT Tech, we have seen growing evidence of the widespread deception and reprehensible practices conducted by bad actors in the for-profit college industry – practices that prey upon service members and veterans,” Blumenthal said. “It is past time that we close this glaring loophole and stop for-profit schools from conducting shameful recruitment campaigns that target and take advantage of our nation’s service members and veterans.”

Want to learn more about for-profit colleges, check out these stories:

For-profit colleges lose bid to scuttle government rules

SEC charges executives at for-profit college ITT with fraud

How dozens of failing for-profit schools found an unlikely savior: a debt collector