The report, released Wednesday, found that because of a controversial “loophole” almost all of those schools are allowed to exceed existing federal funding limits that prohibit schools from deriving more than 90% of their annual revenue from federal aid. Schools are generally required to derive the remaining 10% from private sources, but that limitation—known as the 90/10 rule—does not currently apply to funding from the Department of Veterans Affairs and the Department of Defense. If it did—as the Department of Education has recommended—about 200 for-profit colleges would be out of compliance, the new report found.
The report also found that 17 of the schools were out of compliance with the existing rules.
The Department of Education and other politicians have argued that the loophole has led for-profit colleges to target veterans and servicemembers in order to receive government funding while still meeting the requirements of the 90/10 rule.
“These benefits were created in recognition of the selfless sacrifices made by our veterans and servicemembers, not to make them a target for predatory businesses,” Secretary of Education John King Jr. said in a statement Wednesday.
The Department of Education, under the Obama administration, has cracked down on for-profit colleges. The agency recommended that the funding limit apply to all federal education programs, including veteran aid. It also proposed that the 90% limit be decreased to 85%—a change that would bring the number of out-of-compliance institutions to 563.
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