Dozens of organizations serving veterans, service members, and their families have been urging the federal government to reconsider its plans to reduce financial protections for student borrowers. Research shows that past and current members of the military and their families are far more likely than those outside of the military to be the victims of predatory lending practices and to be targeted by fraudulent, for-profit colleges and universities.
On Sept. 14, 28 national military-service organizations issued a letter to U.S. Secretary of Education Betsy DeVos asking her not to follow through with the department’s proposed changes to Title IV regulations, which govern federal student financial aid programs. The proposed revisions to Title IV include eliminating national standards for what constitutes an academic credit hour and a mandate requiring that online instructors have “regular and substantive interactions” with students. Veterans’ groups say such deregulation will enable some predatory colleges and universities to overcharge military students for what they claim are low-quality educational experiences. They argue that without “regular and substantive interaction,” some colleges could charge tuition for courses that essentially amount to an online textbook or YouTube videos.
Another proposed rule change is also provoking the ire of veterans’ organizations. On Sept. 13, Veterans Education Success (VES) issued a statement criticizing the Education Department’s plan to eliminate the gainful employment rule. This law requires colleges and universities with low graduate employment rates to improve the value of their degree programs or risk losing federal funding. According to VES, removing this requirement would put military students more at risk of accruing large amounts of debt for low-quality degrees and few employment prospects.
The organization noted in its statement that members of the military and their families are disproportionately vulnerable to predatory colleges and lenders because of what is known as the “90/10 rule”. This law requires for-profit colleges to obtain at least 10 percent of their revenue from funds outside of Title IV dollars. As GI Bill funding does not fall under Title IV, for-profit colleges target military students because their enrollment increases the amount of federal dollars they receive.
Meanwhile, 49 Senate Democrats, as well as Vermont Sen. Bernie Sanders, an independent, are urging Mick Mulvaney, current acting director of the Consumer Financial Protections Bureau (CFPB), to maintain protections for veterans and service members against predatory lenders under the Military Lending Act. According to research, service men and women are four times more likely to be targeted by predatory lenders when purchasing a car, home, or other important items.
While the CFPB is not planning to change the actual provisions of the Military Spending Act, it is considering ending its practice of proactively monitoring lenders. Instead, government officials would rely on complaints filed by service members to gauge which lenders may be taking advantage of these individuals and their families. Some experts say this change would likely lead to an increase over time in predatory lending practices.
In August, CFPB spokesman John Czwartacki told The New York Times that the potential update to the rule was a response to concerns within the bureau — as well as among lending industry executives — that CFPB’s former director, Richard Cordray, engaged in overly aggressive enforcement tactics. However, several Democratic senators have argued that the decision to remove such safeguards is rooted in corporate greed.
Whatever Mulvaney’s motives are, he will soon no longer be in charge of the CFPB. On Aug. 23, the Senate Banking Committee approved Kathleen Kraninger’s nomination to take over the bureau. According to The Los Angeles Times, she is widely viewed as Mulvaney’s “protegé,” so it is likely her views on this issue will align with his.
As military students head into a new school year, it remains to be seen whether the organizations and lawmakers advocating on their behalf will succeed in convincing federal agencies not to deregulate oversight of predatory lenders.