The Trump Administration Is Canceling California's GI Bill Approval Power, But The State Is Fighting Back

File: California Attorney General Kamala Harris points to a map as she speaks during a 2013 news conference announcing a lawsuit against the for-profit Corinthian Colleges and its subsidiaries for alleged false advertising, securities fraud, intentional misrepresentations to students and the unlawful use of military insignias in advertisements. (Justin Sullivan/Getty Images)

There's a knock-down, drag-out brawl being waged right now in the world of college financing. On the surface, it's about the future of veterans' education and which schools are allowed to accept valuable GI Bill payments. On a deeper level, this is a fight for the survival and prosperity of the troubled for-profit college industry.

It's a complicated situation, so buckle up.

WHO ARE THE PLAYERS?

California has an office that works to protect military veterans from predatory for-profit colleges that leave students with junk diplomas and a mountain of debt. It's called the California State Approving Agency for Veterans Education, or CSAAVE, part of the California Department of Veterans Affairs — aka CalVet.

But the U.S. Department of Veterans Affairs, under the Trump Administration, is suspending the state's authority, and says it plans to take over the job of regulating California schools that accept GI Bill payments starting Oct. 1.

WHAT'S THE DISAGREEMENT HERE?

Last week, the feds announced they were canceling the state's 'Cooperative Agreement' that gives California the right to approve which colleges can use GI Bill funding.

Why? According to Charmain Bogue, executive director of the VA branch that oversees the GI Bill, California's veterans agency is falling down on the job. CSAAVE's performance "has significantly declined to an unacceptable level, impacting the trust of Veterans in the GI Bill approval process," Bogue said, in a letter to CSAAVE.

CSAAVE, Bogue added, "erroneously" suspended some public institutions, failed to complete required audits, refused to approve programs on military bases, and dropped the ball on identifying and taking action against deceptive advertising practices.

The letter also cited California's decision not to act on the application for Ashford University, a school that's been under a legal cloud since California's Attorney General filed a lawsuit against it in 2017 (more on that in a bit).

AND CALIFORNIA WAS LIKE, 'WHOA THERE'

CSAAVE responded Tuesday with a letter to all colleges in California saying the Feds are wrong and the state is still the approving agency for California programs that want to enroll veterans with GI Bill benefits, and it will keep doing its job.

"CSAAVE retains its authority for approval of institutions and programs," said the agency's Latanaya Johnson in the letter. "This also means CSAAVE's approval process will not change."

CalVet followed up with a statement: "[The VA's] letter is riddled with inaccuracies. We intend to respond to the VA and refute their allegations point by point," the agency said.

Not so fast, a VA spokesperson shot back in an email.

"[W]ithout that [the Cooperative Agreement] CSAAVE has no legal authority whatsoever to approve institutions and programs enrolling California Veterans for receipt of GI Bill benefits," said Susan Carter, director of the VA's Office of Media Relations. "Therefore, VA will not issue payments based on any CSAAVE approvals issued after October 1."

THIS IS GETTING HEATED! WHAT DOES IT ALL MEAN?

To some, it means the VA is cracking down on CalVet and CSAAVE because they're over-regulating for-profit colleges.

"The VA is essentially trying to pull back California's ability to regulate schools [in the state] because they think they're doing too good of a job, and they want them to be less aggressive," said Bob Muth, professor of law at the University of San Diego and a Marine Corps veteran. "I think under California law, it's very clear the state approving agency has to continue to operate and do its job."

Advocates worry the feud will hurt student veterans and prop up what they consider a dubious for-profit education industry.

Experts say this turf war could end up in court.

LET'S BACK UP: WHAT IS THE GI BILL?

Actually, this debate has to do with the Post-9/11 GI Bill. It's a valuable benefit for veterans that also serves as a useful recruitment and retention tool for military branches.

Troops who served on active duty after September 10, 2001 for at least three years are eligible for 36 months of tuition assistance and a housing stipend based on the cost of living in their school's zip code.

Servicemembers can also apply to transfer GI Bill benefits to their spouses or kids if they've been in the military for at least six years and agree to re-up for an additional four.

An older version of the GI Bill, known as the Montgomery GI Bill, also offers three years of assistance, but its criteria is a bit different (more here).

In this April 3, 2017, file photo U.S. Army soldiers march in formation during a change of command ceremony at Joint Base Lewis-McChord in Washington. (Ted S. Warren/AP)

WHAT'S THE PROBLEM WITH FOR-PROFIT SCHOOLS?

Critics of for-profits say many student veterans who enroll don't reach graduation. If they do get a diploma, the jobs available to graduates don't pay enough to get them out from under a mountain of debt. People who enroll in for-profit schools default on their loans at nearly four times the rate of students at community colleges, according to an analysis from the Brookings Institution.

If a for-profit college goes out of business — like Corinthians and ITT Tech did — student veterans have a hard time transferring those credits to another institution.

Taxpayers can be on the hook, too. The federal government has approved more than $43 million to bail out student borrowers who attended schools owned by a collection of companies, like Los Angeles-based Dream Center Education Holdings, which was forced to close its Art Institute and Argosy University campuses late last year.

HOW DO SUPPORTERS OF FOR-PROFITS FEEL?

The for-profit higher-ed industry, and officials with the Department of Education under Secretary Betsy DeVos, argue "proprietary" schools provide the option for convenient programs, scheduling and locations (often online) that make secondary education possible for many low-income, minority, and adult students. And the problem of borrowing more than you can pay back for college, they argue, is not limited to students at for-profit schools.

WHAT DOES CONGRESS HAVE TO SAY?

Congressman Mark Takano (D-Riverside) is Chairman of the House Veterans Affairs Committee. He said he was "concerned" by the VA's decision and planned to meet with agency leadership by the end of the week.

"Having worked with CSAAVE, I know they have consistently acted in the best interest of student veterans," Takano said. "It is absolutely critical this is resolved expeditiously by CSAAVE and VA."

THIS ISN'T JUST ABOUT VETS

California is home to around 1.8 million veterans, more than any other state. As of August 2019, over 41,000 students were receiving GI Bill benefits in the state, CalVet said. Most of those are veterans themselves, but some are qualifying spouses and kids. They each receive thousands of dollars per year in tuition and housing support.

A report from the VA Office of the Inspector General in December blasted state approval agencies and the VA for gaps in oversight of schools — mostly for-profit colleges — and their advertisements.

Because of states' failures and VA's lax monitoring, the Veterans Benefits Administration "annually issues an estimated $585 million in related improper Post-9/11 GI Bill tuition and fee payments to ineligible or potentially ineligible schools," the report said. "$473.8 million of this amount will be paid to for-profit schools."

GI Bill funding is huge business. It also enables the growth of the for-profit college industry because of the strange way GI Bill payments are classified.

It's a legal quirk called the 90/10 rule.

THE 90/10 RULE SOUNDS LIKE A FAD DIET. WHAT IS IT?

For-profit schools are limited in the share of their revenue that's allowed to come from federal student aid programs. Currently, 90 percent may be drawn from public sources. The remaining 10 percent must be from the private sector.

Congress passed this regulation in the 1990s to introduce greater market pressures on for-profit institutions, theoretically weeding out schools handing out useless degrees.

"The rule was intended as a validation of the quality of the education provided and the tuition price," a January 2019 Brookings Institution report explained. "[I]f an institution is providing a valuable education, someone other than the federal government should be willing to pay for students to attend."

But here's the kicker. On a technicality, GI Bill payments do not count as federal aid — so for-profit schools can tally them along with the 10-percent private funding source requirement.

In other words, for every student veteran enrolled using the GI Bill, for-profits can sign up nine non-veteran students.

Advocates say this creates a predatory environment where veterans are sold a bill of goods to attend a school and later get stuck with debt they can't afford.

"This loophole is ridiculous and their accounting gimmick has to be shut down," said Carrie Wofford, president of Veterans Education Success, an advocacy group that conducts research, lobbies legislators, and works with states' attorneys general on legal actions to protect student veterans.

SO WHO'S REALLY IN CHARGE HERE?

It gets murky.

As part of its "Cooperative Agreement" with the VA, the state's CSAAVE agency is supposed to investigate waste and abuse at schools that enroll student veterans. The goal is to make sure taxpayer-funded GI Bill payments aren't going to institutions that defraud veterans or burden them with unreasonable debt.

Congress set up GI Bill oversight in a hybrid state-federal relationship. The bureaucracy breaks down like this: In most instances, the U.S. Department of Veterans Affairs in D.C. partners with state veterans agencies to determine if a college is worthy of accepting GI Bill funds. Inspectors look into questions like: What are the school's graduation rates? And what kind of debt-to-earnings ratio do graduates leave with? They also make sure students are actually taking the courses they claim they are.

Wofford says it's understandable California and the VA have dueling visions of who's in charge. Her organization just published a report finding "significant ambiguity and inconsistency" in legal language governing GI Bill oversight.

"Some parts of the statute say the Secretary of VA is in charge, some parts of the statute say the states are in charge," Wofford said.

SO THERE'S A LOT OF TENSION BUILDING UP?

Right. And Wofford says her group also found that over the past eight years, the VA has increasingly tasked state approving agencies with payment audits that have crowded out their ability to do quality school oversight.

"Instead of CalVet having time to question whether for-profit schools are worthy of veterans' time and GI Bill money, they're being sent to UC Berkeley and Stanford to check payment accuracy," Wofford said. "You can understand California's frustration. These are schools that are clearly not problematic."

WHY IS CALIFORNIA KNOWN FOR AGGRESSIVE REGULATION?

The state of California has been waging a long war against abuses in the for-profit college industry.

"California has a reputation nationally as aggressively protecting the GI Bill and veterans," said Muth, the USD professor. And at every step, "[t]here's been a series of these debates between California and the federal government." (Muth also serves as the supervising attorney with the University of San Diego's Veterans Legal Clinic.)

Very large for-profit college chains with tens of thousands of students in California, like Corinthian Colleges and ITT Tech, have gone out of business in recent years.

In both cases, CSAAVE had shut down the flow of GI Bill payments to the schools before they closed.

Another program drawing scrutiny from California regulators: Ashford University, an online college based in San Diego that's been scrutinized for shady recruitment and debt-collection practices.

CSAAVE has declined to act on Ashford's application for approval to use GI Bill funds, effectively putting Ashford on hold until a lawsuit filed by California's attorney general is resolved.

The federal Department of Veterans Affairs, however, says the state isn't doing its job by delaying a decision.

SO WHAT'S THE DEAL WITH THE ASHFORD LAWSUIT?

In this May 3, 2017, file photo, California Attorney General Xavier Becerra answers a question during a news conference in Sacramento, Calif. Becerra sued San Diego-based Ashford University, alleging the school and its parent company, Bridgeport Education Inc., used illegal business practices to deceive and defraud students. (Rich Pedroncelli/AP)

California Attorney General Xavier Becerra sued Ashford and its parent company Bridgepoint Education (now called Zovio) back in 2017, saying it "preyed on veterans and people of modest means."

The college allegedly misled prospective students about how much financial aid they would get, and how well they would be prepared for jobs in nursing, teaching and social work once they graduated. When students couldn't pay tuition, Ashford would come after them with aggressive debt collectors, the Attorney General's office said.

The lawsuit followed the publication of a Chronicle of Higher Education investigation into Ashford's lobbying efforts and relocation to Arizona to try and win VA approval for accessing millions of dollars in GI Bill payments.

WHAT'S THE TRUMP ADMINISTRATION UP TO?

The Trump administration has been steadily unwinding rules put in place during the previous administration, arguing the industry was the victim of an unfair crackdown.

The Department of Education under President Obama targeted for-profit colleges with tighter regulation.

The Obama Administration put rules in place to prevent students from being buried under debt they couldn't repay, and required for-profit schools to be more transparent in advertising — including presenting information on their graduates' debt-to-earnings ratios.

Education Secretary Betsy DeVos repealed the gainful employment rules in June — though the repeal won't take effect until July 2020. Her department argued the regulations unfairly targeted for-profits that serve a large number of minority and low-income students.

ISN'T CALIFORNIA WORKING ON ITS OWN REFORMS?

Yes. But results are mixed.

San Francisco Assemblyman David Chiu introduced a California version of the gainful employment requirement in February, but the bill was later gutted when it was determined the state didn't have the authority to collect the data necessary to enforce it.

Another piece of legislation — this one from Stockton Assemblywoman Susan Talamantes — intended to close the 90/10 loophole and lower the amount of federal student aid dollars for-profits could accept in California. But Talamantes pulled the bill in June.

In all, state Democrats put forward seven bills that were designed to tighten for-profit college oversight in the vacuum left by the Trump Administration loosening restrictions. Most of them failed to advance or were significantly watered down.

WHAT'S NEXT?

For now, veterans' tuition payments shouldn't be impacted by the battle between California and the Trump Administration.

"There is no risk of veterans losing any access to their benefits nor would this in any way hamper their ability to pursue their educational goals," CalVet said in its statement.

But Carrie Wofford questions whether federal regulators can effectively oversee the entire college and university system in the state of California.

"It's somewhat unrealistic," she said. "How is the VA sitting in Washington going to supervise more than 1,200 colleges in California?" (When you factor in all the professional programs, it's actually around 1,600 institutions, according to CalVet.)

Wofford said she's hopeful Congressman Takano will be able to bring the VA and California to the table to work out a deal. "They need a good working relationship," Wofford said.

WILL THIS TRANSITION CAUSE PROBLEMS?

A VA spokesperson says there shouldn't be a major disruption to the system when the feds take over as California's approval agency next month.

"Programs previously approved for benefits will remain approved," said the VA's Susan Carter, adding that the VA will handle new applications starting Oct. 1.

Carter said that veterans and their families using the GI Bill don't need to worry about their payments.

"GI Bill beneficiaries should not experience any negative impacts because of this transition," she said.