Interview Daniel Golden

An editor at large for Bloomberg News, he has reported extensively on the for-profit college sector. This is the edited transcript of an interview conducted on April 15, 2011.

• HIGHLIGHTS
• Why so much GI Bill money flows to for-profit colleges
• Why the trend alarms critics
• A key statistic vets should always look for
• Where's the accountability?

When did you start reporting on this sector of higher education?

It was years ago, when I was working at The Wall Street Journal and covered for-profit colleges. And I had that in the back of my mind when I came to Bloomberg in August/September 2009. On my second day there, Matt Winkler, the editor in chief, asked me to examine for-profit colleges.

I'd already heard about competition between for-profit colleges and state universities for active-duty military. I explored that first. And what I found was that for-profit colleges were very aggressively recruiting service members on military bases, and many of those service members had enrolled at for-profit colleges, some of whom were injured or disabled and couldn't really benefit from a college education.

And that led me to wonder about veterans: Once people left the services and were eligible for the GI Bill, would they also be going to for-profit colleges rather than the traditional colleges that they'd always gone to?

What did you find?

I found something like 22 percent of veterans who are paid for under the new GI Bill -- post-9/11 veterans of Iraq and Afghanistan -- are going to for-profit colleges. I also found that the tuition paid to colleges under the GI Bill, 35 percent of that money is going to for-profit colleges.

So for-profit colleges, which only educate about 10 percent of all students, are educating 22 percent of veterans and getting more than one-third of the federal money available. I found there's a very heavy representation of veterans and public money for veterans at for-profit colleges.

I also explored the reasons for this. Some of the reasons are perfectly natural. Many for-profit colleges have a large online component, and some veterans returning would rather go to college online because they're older than students in traditional campuses, or they may feel that their professors at traditional campuses or the students are not going to be sympathetic to people who served in the military.

But another component is very heavy, aggressive pursuit of veterans by for-profit colleges. They go to military fairs for former military; they attend conventions of veterans' groups; they advertise in military publications and on the Web to go after veterans as students.

They're not doing this only out of patriotism. They do this because they're tapping a large and growing amount of federal money. …

And they also do it because signing up veterans helps them to avoid federal law. There's a federal limit on how much money for-profit colleges can get in federal student aid. It can only be 90 percent of their total revenue.

But the veterans' money, although it comes from the Veterans Administration under the GI Bill, does not count toward that 90 percent cap. Instead, it counts toward the 10 percent of private revenue, and this is very important to for-profit colleges, because almost all of them are bumping up against that 90 percent limit.

They have hardly any students who are paying out of their own pocket. Virtually all their students are paid for by government grants and loans. So to avoid what's known as the 90 percent rule, they are pursuing veterans in the methods I just mentioned.

But when we think about it, what's wrong with these for-profits going after the veterans? It's the veterans' decision to make.

The issues with for-profit colleges going after veterans is that they may not be the best academic program or environment for these veterans. Many of the for-profit colleges have online programs, and many of the veterans coming back have post-traumatic stress disorder [PTSD]. It's very important for them to be able to reintegrate into society, and taking a course in your basement on a computer is not the best way to reintegrate. It's probably better to be in a traditional academic setting with other students and with professors, and reacclimating to the civilian world and civilian life.

The other problem is that these colleges have relatively low graduation rates. Even when you do graduate from the colleges, it's questionable how much a degree from one of them is going to be worth. So that a veteran seeking to rise to the middle class -- which is the traditional service the GI Bill has provided -- may not be able to do so by getting a degree from a for-profit college.

Another issue: For-profit colleges only educate about 10 percent of all college students in this country, but 22 percent of veterans go to for-profit colleges. And of the tuition and fee money that's going for veterans under the GI Bill, 35 percent of that money is going to for-profit colleges.

The reason for that gap is that most of the veterans are going to public schools, state schools, which are cheaper than for-profit colleges. So the taxpayer is paying more to send a veteran to a for-profit college than they would to send a veteran to a local state school or community college. …

Overall spending on veterans' education is increasing rapidly. It went from less than $5 billion in 2009 to nearly $10 billion in 2010. And a lot of that is driven by for-profit colleges and their wooing of veterans. …

Would you say the veterans are sort of bombarded by websites? I did my own general searching around for the GI Bill, and a site called GIBill.com comes up which leads you only to for-profit schools.

Yes, I think military veterans are bombarded by for-profit college recruiters: on websites that look as if they're objective ways to go to college, but in reality are lead generators for the for-profit colleges; through advertisements in military publications; through booths at job fairs and veterans' organization conventions. So in all these ways, if you're a veteran, you really can't escape a recruiter for a for-profit college.

And when they get a vet on the phone, what happens then? Do you have any experience with any of that?

The sales pitches of these colleges to recruiters are very sophisticated, and they combine a soft sell and a hard sell, depending on what's needed.

For example, I was examining one for-profit college and how it recruited veterans. It had sent him an e-mail saying if you don't sign up soon, somebody else will take your space. Well, this is an online college; it's not like there's a physical seat that he's competing for.

So it's this kind of hard-sell pressure combined with soft-sell promises and assurances of a degree, or of a successful job and other future benefits. And there's always also the assurance that the government will take care of your cost of your education so you don't have to worry. And sometimes it can get more complicated than that, because there are many rules [involved in] being able to qualify for the GI Bill and other benefit programs.

Have these schools increased their military divisions to specifically recruit veterans?

Yes. Several for-profit colleges have sizable teams of recruiters aimed specifically at military service members and veterans. These teams are often growing into the hundreds of recruiters. And one of the biggest jobs these teams have is to make sure not only that the veteran enrolls, but that the veteran qualifies for the GI Bill benefits, which is the main goal for the for-profits.

Do you know much about them hiring ex-military guys to speak to veterans on the phone? Are you familiar with that?

Sure. … For-profit colleges tend to hire former military to recruit both service members and veterans. And in fact, when I was looking into the recruiting of service members by for-profit colleges, I went to Camp Lejeune, which was a marine base in North Carolina. And I found that one of the for-profit colleges was sending a recruiter to the Wounded Warriors Barracks, where she was signing up brain-injured marines, who even had difficulty remembering what courses they were taking.

It's quite a widespread phenomenon, the use of former military to establish a rapport, to gain access to military bases or to veterans groups, and in general to smooth the path to the recruitment.

… Are these vets getting enough information about the choices they're making, and who's in charge of that? ...

I think that it would be helpful if veterans were much better informed. And the VA's position, when I talked to them last year, was that they didn't want to be in the position of favoring one college against another. And they were making relatively little information available on college choices to veterans at the time.

I think there's some information that even I have trouble getting that I think veterans should know. For example, you can find out a for-profit college's overall graduation rate, but it's very hard, if not impossible, to find out the graduation rate for veterans in particular, which would be very useful to know, because that would give you some sense of how effective the school's support services are for veterans. But that's just one example of the kind of information that's pretty much unavailable.

I've heard a lot of these phone conversations, when they talk about how military-friendly they are.

One of the biggest problems for veterans going to for-profit colleges is that most of the for-profit colleges are predominantly online, and they don't have the same level of support services that a traditional campus does.

Veterans who don't have a lot of experience with the world of college and may be suffering from an injury or from post-traumatic stress disorder, they're stuck taking these classes on the computer, without the kind of in-person tutoring or backup or support and encouragement that they may well need.

Why do graduation rates matter? Why is that a significant statistic?

A low graduation rate can be a warning sign. It may be that the school doesn't provide the support services that students need to earn a degree and then a job afterward. It may be that its academic offerings are not well taught or don't hold the students interest.

In the case of veterans, it's also important, because the GI Bill only provides funding for 36 months of classes. So if you've gone to a school for 30 months and you don't graduate, and perhaps you can't transfer the course credits somewhere else, you're stuck. You can only qualify for a few more months of GI Bill funding, and then you need to get loans, and that may burden you for a lifetime. So it's very important that veterans don't waste the college opportunity that the GI Bill provides.

So that information would be valuable for a vet to have in choosing a college?

I think graduation rates would be valuable in choosing a college. I think it would be even more valuable if there was a graduation rate specifically for veterans that they could look at. Now, the argument the for-profit colleges make is their graduation rates are not low when you take into account the mix of their student population.

They'll say: "We educate low-income students. We educate students who are the first in their family to go to college, and therefore, you can't expect us to have the same graduation rate as Harvard or Yale or the University of Virginia." There's some validity to that argument.

But it's also clear that they're often recruiting students who have very little chance of success. And one would think it would be their responsibility to bring in students who can benefit from college and gain a degree.

Tell me who Chris Pantzke is and how you came to meet him.

Chris Pantzke is an Iraq veteran with PTSD. When I was researching for-profit colleges and their recruiting of veterans, a source of mine suggested I might want to talk to him. I went to see him in his home in southern Virginia and found that he was very distressed over his education. He was going to a for-profit college, the Art Institute of Pittsburgh, on the GI Bill and other benefits, and he was struggling.

There was an online photography program. He was not doing well in the program. He was failing a number of courses. He was having difficulty understanding the homework. And I'll never forget, he showed me some holes in the wall near the computer that he did his course on. He explained that he had gotten so frustrated with his inability to deal with the courses that he had punched those holes in the wall.

It was a very compelling and moving story and I think illustrated the larger point, which is that veterans with serious disabilities like Chris Pantzke are probably better off in a setting where they have other students and faculty around them rather than being isolated in their home, taking classes online.

He had preserved a string of e-mails between himself and officials at the Art Institute of Pittsburgh, and included in those e-mails were several in which he had asked for help. He had asked for face-to-face tutoring; he had asked for simplified homework assignments. And they had told him that they wouldn't make those accommodations for him.

Without those accommodations, Pantzke was struggling in his classes. Here was a veteran who had given his health in the defense of his country, and the taxpayers were footing the bill for him to go to college, and yet the money was not serving any noticeable purpose except to distress him. And I found it very poignant.

Was his story part of a larger investigation you were doing on for-profits signing up GIs with handicaps?

For more than a year, I did a series of investigations on recruiting by for-profit colleges, and I was looking at how they recruit a variety of vulnerable groups whose tuition is paid by federal grants and loans: veterans, active-duty military, homeless people, low-income people.

What my research showed is that for-profit colleges aggressively pursue vulnerable students because they can tap the federal money, the taxpayer money available for their education. …

What is your argument to someone from the for-profit industry who says about such tactics, "It's small time; it's anecdotes, and it's not standard practice"?

I'd say obviously not every student at a for-profit college has a bad experience. There are many success stories and students who have done well at for-profit colleges.

But I'd say that the evidence suggesting that there are problems at for-profit colleges are more than just a few isolated anecdotes. They're backed up by statistics. For example, there are alarming statistics about the default rates on student loans of students at for-profit colleges. There are graduation rates which, however one might try to spin them, are certainly disturbing: Well fewer than half of students at for-profit colleges graduate, no matter how you slice the numbers.

So there's statistics that raise concern. In addition, there have been government reports. There was a GAO [Government Accountability Office] report that looked at any number of for-profit college campuses and found widespread recruiting problems. Now, the for-profit college industry has criticized that report and pointed to some weaknesses in it, but overall, the findings stand.

… Did the school not do the right thing in flunking Sgt. Pantzke out? In a way, it's sort of like they recognized they had a student who wasn't passing muster. I guess my point is, some people might ask whether he should be in college.

I think that when a school admits a student like Chris Pantzke, somebody who is a veteran, who has PTSD and makes no secret of those problems -- he told the school of his situation when he enrolled -- then it has a responsibility to help him see through his college experience and gain a degree.

And too often at for-profit colleges, the emphasis is on recruiting the students, bringing them in the front door, getting the access to the federal money, and then leaving them to fend for themselves.

And that's what happened in Chris Pantzke's case. If the Art Institute of Pittsburgh deemed him worthy of a college education, then recognizing that he had PTSD and he was a veteran and he was readjusting to society, it needed to take some special pains and precautions to help him succeed.

Too often these students are abandoned once they get into their courses and once they qualify for financial aid, rather than giving the support services that they might be more likely to get at a traditional campus.

If the government is going to give Chris Pantzke upwards of $80,000 for his education, shouldn't there be some government accountability over Chris Pantzke to make sure that that money is spent in the right place?

My reporting suggested that there is a lack of government accountability over how the GI Bill money is being spent by for-profit colleges.

The Veterans Administration does audit colleges periodically, and each state has what's called a State Approving Agency [SAA] that looks at the colleges that received GI Bill funds. But in most cases, these are not really reviews of academic quality; they look at attendance records.

If a school teaches truck driving, they make sure the school has a truck, but they're not really looking closely at things like the graduation rate for veterans, the job placement rate, these kinds of important indicators of whether the money is really serving a purpose. So I think there could be more in-depth and thoughtful monitoring of how GI Bill money is spent by for-profit colleges.

What about the issue of credit transfers? A veteran may start at a for-profit school and then go to transfer, and they can't. Have you heard any stories like that?

Yeah, it's been a common complaint over the years that veterans and other students who go to for-profit colleges can't always transfer their credits to other schools and may not be fully informed of that beforehand.

Now, you can look at that two ways. You can also blame the colleges on the receiving end, saying, why don't they accept these credits? Maybe they're discriminating against for-profit colleges. But certainly the college where they go originally has a responsibility to tell students. ...

Why should we care about what's going on with the recruitment of veterans by for-profit colleges?

There are several reasons why this is an important issue.

One is that these veterans have served our country loyally and in great peril, and they deserve the best treatment the country can provide. And if that means a college education, it should be a free education at a place that gives them a chance to succeed and to learn and to get a good job afterward.

Another reason is that these educations are being funded by the taxpayer, and we're in a period when America is in economic crisis, and there's not a lot of extra public money to go around. So we'd like to make sure that the rapidly increasing dollars that are spent under the GI Bill are spent wisely and where they can do the most good.

Another reason we should be concerned about this is that one of the most effective pitches that the military uses in recruiting young men and women is the prospect of tuition assistance for their college education while they're a service member, and then the GI Bill giving them a free education after they graduate. So that's why many service members join up, because they want to get a college education for free and use that for a route to the middle class in the time-honored American tradition.

And that's why we should be so concerned that our government and our society live up to our end of the bargain and provide a decent college education, with good support services, that can help veterans of wars in Iraq and Afghanistan earn a living wage and support themselves and their families.

Is the VA asking the right questions of the colleges that accept GI Bill money?

The government does try to monitor colleges that receive GI Bill funding. The VA does audit these colleges periodically. And every state has something called a State Approving Agency that looks to make sure they meet minimum standards -- do they have equipment; do students really show up; things like that. But there's not a lot of academic-quality indicators that are easily available to the veteran.

They don't have easy access to graduation rates, job placement rates and veteran-specific information, such as what is the graduation rate for veterans; how many veterans do we have enrolled; information like that.

So the veteran is often thrown on to whatever they can find out by using the Web. And on the Web, they encounter a lot of advertisements and pitches from for-profit colleges that they may be very receptive to.

Where is this going? What's going on in Washington on this issue?

There have been a number of hearings in the House on tighter oversight of Defense Department tuition assistance going to active-duty service members at for-profit colleges. In recent months, as a result of media reports and congressional scrutiny, the VA has seemed to wake up to this issue of GI Bill money going disproportionately for for-profit colleges, at least to some extent. A month or two ago, it revoked GI Bill benefits for several for-profit college campuses, and it seems to be interested in providing more information to veterans who are making college choices. So the lasting effect of this may be that the VA may become more vigilant about where it's spending its GI Bill money.