U.S. military commanders allowed representatives of the University of Phoenix to erect banners advertising the for-profit college on one of America’s largest military bases and place promotional materials in high-traffic areas. Credit: Adithya Sambamurthy for Reveal

The University of Phoenix, Ashford University and the now-shuttered ITT Tech are among the nearly 200 for-profit colleges that got most of their revenue from taxpayers, according to internal Department of Education data made public by President Barack Obama shortly before he left office.

The proprietary schools – which also include dozens of storefront beauty, computer and culinary operations – would have violated an anti-profiteering law were it not for a loophole that excludes the GI Bill and tuition assistance to active duty military.

All told, 193 for-profit colleges benefitted from the loophole. Their take: $7.9 billion.

Among the takeaways:

  • Taxpayers provided nearly complete subsidies to 21 for-profit colleges that have shut their doors since 2014, closures that left students in the lurch, frequently in deep debt and without transferable credits. Collectively, these schools received $1.4 billion.
  • The University of Phoenix received $3 billion in government cash during the 2013-2014 school year – enough to pay tuition for all 210,000 undergraduates in the University of California system with cash to spare to offer a free ride to the incoming class at Harvard, Princeton, Stanford and Yale. Nearly all – 96 percent – of the University of Phoenix’s revenue came from taxpayers.

The Department of Education released the data in response to a request from 19 U.S. senators – all Democrats – that cited The Center for Investigative Reporting’s publication of a leaked Department of Education analysis, showing 133 for-profit colleges received a near complete subsidy in 2012.  

The latest data covers the 2013-2014 school year.

At issue is a federal law known as the 90/10 rule. It bans for-profit schools from receiving government funding if they draw more than 90 percent of their revenue from federal student aid programs. Veterans groups and consumer advocates have long argued that the loophole encourages predatory institutions to target veterans, and have argued it be closed.

“The concept behind 90/10 is that if no student is willing to put their own money in the game, how good is that education? Why is no one willing to put up their own money?” said Will Hubbard, vice president of government affairs for Student Veterans of America, an advocacy group.

Research conducted by Student Veterans of America found for-profit schools had received 40 percent of GI Bill tuition assistance for Iraq and Afghanistan veterans, but accounted for just 19 percent of degrees.

By contrast, public schools accounted for a third of the GI Bill funds, producing 64 percent of the degrees.

“We are subsidizing failure factories, these are places where people’s dreams are shattered and families are ruined,” said Barmak Nassirian, director of federal policy for the American Association of State Colleges and Universities. “Taxpayers are being fleeced to create tragedy.”

Democratic lawmakers have repeatedly proposed closing the loophole, but have been blocked by Republican committee chairmen in both the House and Senate, who have declined to hold hearings. President Donald Trump has not spoken specifically about the 90/10 rule, but he recently appointed evangelical leader Jerry Falwell Jr., to lead a task force focused on removing existing regulations in higher education.

In December, Trump agreed to pay $25 million to settle multiple cases alleging fraud at his own failed for-profit college: Trump University.

Asked whether the Department of Education would continue to track subsidies to for-profit colleges under Trump, department spokesman Alberto Betancourt demurred. “It’s still early,” he said, noting the new secretary of education, Betsy DeVos, was confirmed Feb. 7.

Neither the University of Phoenix nor for-profit college industry trade group, College Education Colleges and Universities, responded to requests for comment for this story. A spokeswoman for Ashford University, which saw 98 percent of its revenue, $648 million, come from taxpayers, likewise failed to return calls – though the Ashford’s corporate parent, Bridgepoint Education followed this reporter on Twitter shortly after he left a message on her voicemail.

Bridgepoint is currently under investigation by the Securities and Exchange Commission, Consumer Financial Protection Bureau and the attorneys general of five states. The investigations led the Department of Veterans Affairs to issue a caution flag warning students of  “increased regulatory or legal scrutiny of a program of education.”

Aaron Glantz can be reached at aglantz@revealnews.org. Follow him on Twitter: @Aaron_Glantz.

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Aaron Glantz was a senior reporter at Reveal. He is the author of "Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream." Glantz produces journalism with impact. His work has sparked more than a dozen congressional hearings, numerous laws and criminal probes by the Drug Enforcement Administration, FBI, Pentagon and Federal Trade Commission. A two-time Peabody Award winner, finalist for the Pulitzer Prize, multiple Emmy Award nominee and former John S. Knight journalism fellow at Stanford University, Glantz has had his work has appear in The New York Times, Chicago Tribune, NBC Nightly News, Good Morning America and PBS NewsHour. His previous books include "The War Comes Home" and "How America Lost Iraq."