What’s Next for the Post 9/11 GI Bill After the Closure of the 90/10 Loophole?
In 2008, Congress passed the Post 9/11 GI Bill and it has become one of the largest expansions of financial aid in our country’s history. This iteration of the GI Bill replaced the Montgomery GI Bill and expanded veteran benefits by including housing and cost of living benefits, introducing the option to transfer benefits to a spouse or dependent, and removing the requirement to contribute financially to the GI Bill while serving. In 2022, 564,501 veterans received around $8 billion of assistance through the Post 9/11 GI Bill, making it a critical source of college funding for servicemembers and a key recruiting tool for America’s military.
However, until recently, a loophole in a U.S. Department of Education rule known as “90/10,” caused concern by generating incentives for for-profit colleges to enroll veterans to attract GI Bill dollars. While the loophole has recently been closed, questions remain about value and accountability in GI Bill-funded programs. The U.S. Department of Education’s 90/10 rule limits a for-profit college’s revenues to a maximum of ninety percent from federal student aid programs under Title IV of the Higher Education Act, such as Pell Grants and Direct Loans.
The goal of the 90/10 rule was to serve as a market-based test of for-profit college’s value, by ensuring that 10 percent of funding came from individuals paying out-of-pocket. However, a critical loophole allowed for-profit colleges to count GI Bill and Department of Defense sponsored tuition assistance towards the 10 percent, rather than the 90. The loophole allowed a forprofit institution to accept nine dollars of additional federal funding if they recruit one dollar of veteran benefit. This loophole created a strong incentive for for-profit colleges to recruit veterans and use their benefits on credentials of questionable value.
In 2021, as part of the American Rescue Plan, Congress authorized the Biden administration to draft rules to close the 90/10 loophole. In late 2022, the Department of Education finalized regulations that require for-profit colleges to count veterans benefits as federal funds in the 90 percent—in the same way as Title IV financial aid programs. While these new regulations should dissuade institutions from disproportionately recruiting veterans, challenges remain for veterans seeking to use their GI Bill funds at U.S. colleges: some lose their benefits when colleges close, others enroll in high-cost programs that yield little return, and the closing of the loophole may generate new incentives for for-profit institutions to create low-value programs geared toward veterans.
This brief proposes three ideas for improving accountability for programs and institutions that receive GI Bill benefits. First, the Department of Education should streamline the process for veterans to apply to have the Departments of Education and Veterans Affairs reimburse them for lost funds. Second, the Department of Veterans Affairs should consider instituting a meaningful earnings threshold to measure the gainful employment of veterans, given their age and military experience. Third, the Department of Education should consider imposing a 90/10 style rule for non-Title IV programs.
