Obama Orders For-Profit Schools to Stop Scamming Our Troops

College military
College military

Last week, President Barack Obama signed an executive order to protect veterans, current members of the military, and their families from deceptive marketing practices that some for-profit schools are using to target them for their military benefits.

In his speech, Obama promised to put an end to recruiting strategies that he said "swindle and hoodwink" our troops and their families into making decisions against their best interests.

Let's take a look at some of the shady behaviors that set him off, and how the new executive order targets them.

Swindles and Hoodwinks

Here are a few of the shady recruiting habits Obama highlighted in his speech:

  • "They'll say you don't have to pay a dime for your degree, but once you register, they'll suddenly make you sign up for a high-interest student loan."

  • "They'll say that if you transfer schools, you can transfer credits. But when you try to actually do that, you suddenly find out that you can't."

  • "They'll say they've got a job placement program when, in fact, they don't."

Obama's speech also highlighted a particularly egregious case: "One of the worst examples of this is a college recruiter who had the nerve to visit a barracks at Camp Lejeune and enroll Marines with brain injuries -- just for the money. These Marines had injuries so severe some of them couldn't recall what courses the recruiter had signed them up for."

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Other scandals involve for-profit schools that have apparently used dishonest tactics to lure troops and veterans. The Student Veterans of America recently discovered that, in an effort to appear "veteran friendly," several schools may have established fake SVA chapters that were run by school administrators. This violates the SVA's rule requiring SVA-chartered chapters to be established and run by student veterans.

SVA Executive Director Michael Dakduk lamented, "It appears that some for-profit schools do not understand our model, or worse -- they understand our model and they choose to exploit it for personal gain." Among the schools for which the SVA revoked chapter membership were institutions connected with Education Management (EDMC), ITT Educational Services (ESI), and DeVry (DV).

Obama suggested that it is time to put an end to scams and to follow through on the promise to give troops "an America that will forever fight for you, just as you fought for us."

Making Scammers' Lives Harder

Obama's executive order contains provisions that strive to make it harder for recruiters to scam veterans. The order:

  • Requires schools that receive money from the Tuition Assistance Program for active-duty service members to provide students with a "Know Before You Owe" form that outlines details about tuition, fees, student-loan debt, qualifications for financial aid, and graduation rates.

  • Specifies that the same regulations apply to military education benefits as apply to other student-aid programs.

  • Orders the Department of Veterans Affairs to trademark the term "GI Bill" to strengthen the government's ability to crack down on fraudulent and otherwise deceptive uses of the term.

  • Directs the Defense, Education, and Veterans Affairs departments to consult with the Consumer Financial Protection Bureau and Department of Justice to develop a centralized complaint system. It also calls for the Departments of Defense and Veterans Affairs to strengthen their enforcement and compliance functions so they can carry out effective responses to complaints.

  • Requires the Department of Defense to create a set of rules to regulate the way in which educational institutions can access military installations. The ultimate goal is to keep out "bad actors."

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Obama's executive order has not received universal approval. Steve Gunderson, former congressman and current CEO of the Association of Private Sector Colleges and Universities, expressed disappointment that Obama bypassed Congress' current bipartisan efforts to reach a compromise on these issues.

Others are worried that the order doesn't go far enough to address the fundamental problems in for-profit education. For example, current regulations still allow veterans' benefits to count toward the 10% of revenue they are required to get from sources other than federal student aid.

No one wants for-profit schools taking advantage of American troops. But the question remains: What is the best way to achieve that goal?

Motley Fool contributor M. Joy Hayes, Ph.D., is the principal at ethics consulting firm Courageous Ethics. She doesn't own shares of any of the companies mentioned. Follow @JoyofEthics on Twitter.

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