Ed Department warns colleges against misleading veterans

Dive Brief:

  • The U.S. Department of Education warned colleges against deceptive practices Wednesday after seeing complaints from students with military connections who say institutions misrepresented their costs and whether student loans would be necessary to pay for classes.
  • Officials are watching reports from veterans, active service members, and military families, according to an enforcement notice from the Ed Department’s Federal Student Aid office. Those reports include applications under the borrower defense to loan repayment program, which discharges loans for borrowers whose colleges misled them or violated some laws.
  • Students with military connections have reported that when they were enrolling, college representatives suggested their GI Bill benefits would cover the entire cost of their degrees, Ed Department officials said. But those students were later told they would need to take out student loans to complete their programs. Some students said loans were taken out in their names without their knowledge.

Dive Insight:

Federal Student Aid officials issued their warning at a fraught time for some colleges enrolling large numbers of students who aren’t fresh high school graduates, including veterans. The Ed Department is holding negotiated rulemaking sessions this week to shape the future of several regulations that affect career programs and for-profit colleges, such as the gainful employment and 90/10 rules.

Wednesday’s notice didn’t specifically name for-profit colleges, but the sector enrolls a large number of students with military connections and has historically collected a disproportionate share of all GI Bill benefits. The Federal Trade Commission also sent notices to the largest 70 for-profit colleges in October, warning them against unfair and deceptive practices generally.

An advocacy group, Veterans Education Success, has been pushing regulators on issues at the center of the Ed Department’s warning. The group published a report Wednesday highlighting complaints from military veteran students who attended several for-profit universities, both currently operating and closed. Complaints listed included students having loans they never knew of or authorized.

The group said it provided the report to the Ed Department privately in January and that department officials said the research led to them examining the issue. The Ed Department did not respond to a request for comment Wednesday.

Veterans Education Success on Wednesday called the Ed Department’s action a good first step.

“We thank FSA for warning schools to stop tricking veterans into loans they didn’t want or need,” the group’s president, Carrie Wofford, said in a statement. “This is the single top issue we hear about in the thousands of veteran complaints we receive. Veterans who have the GI Bill are understandably angry when they find out that a school took out student loans in their name without their knowledge.”

The group also said the Ed Department should rename master promissory notes — legal documents students sign promising to repay their loans — to make clearer their purpose. It suggested calling them student loan agreements.

A group representing for-profit colleges issued a statement saying institutions must provide accurate information to students.

“All institutions are responsible for providing accurate information to prospective and current students, including military-connected students,” said Jason Altmire, president and CEO of Career Education Colleges and Universities. “When the Department of Education finds that an institution intentionally misleads or commits fraud, we support holding the school accountable through established processes.”

The Federal Student Aid notice listed several types of allegations from students with connections to the military:

  • Students led to think GI Bill benefits would cover all of their educational costs but who then found out they would have to take out loans.
  • Students told to sign paperwork who didn’t realize they were signing up for loans.
  • Students told to fill out loan applications as a backup plan while “being falsely advised” the loans would not be necessary.
  • Students pressed to start classes before their GI Bill benefits were verified.
  • Students told programs qualified for GI Bill benefits that in reality did not qualify.
  • Students told to take out loans to cover costs until their GI Bill benefits were processed, even though they were enrolling in programs not approved for the benefits.
  • Students promised a military discount on tuition that didn’t exist or that wasn’t applied.
  • Students receiving bills for loans for which they didn’t know they had applied.

“FSA’s Office of Enforcement is monitoring for these kind of deceptive practices and will hold offending schools accountable,” the office’s chief operating officer, Richard Cordray, said on Twitter.

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