For years progressives have been trying to close an imaginary loophole regarding the 90-10 rule and the GI Bill.
Colleges are subject to the 90-10 rule, which requires that no more than 90% of their revenue can come from federal financial aid. Meanwhile, Congress has consistently passed GI Bills, which provide funding for servicemembers and their families to attend college.
The issue is the interaction between the two: should GI Bill funding count in the 90 or in the 10? Historically, “for-profit colleges are allowed to include military education benefits, such as the GI Bill, in the 10% calculation, which has led some institutions to aggressively recruit veterans.”
Since counting GI Bill funding as non-federal financial aid made it easier for schools (particularly for-profits) to comply with the 90-10 rule, progressives labeled this a loophole and Congress recently passed a law that moved GI Bill funding from the 10% side to the 90% side starting in 2023.
But there was no loophole to close, and Congress was wrong to require the change.
The first issue is that GI Bill benefits are a form of compensation, and compensation should count toward the 10%, not the 90%. Consider the contrast with financial aid programs like Pell Grants and student loans. These aid programs are administered by the Department of Education and are available to everyone, with income being the primary restriction on eligibility. It makes sense to count these programs in the 90%. In contrast, the U.S. Department of Veterans Affairs (VA), which administers the GI Bill, clearly states that GI Bill money is a benefit that is earned by servicemembers. In other words, GI bill funding is a form of compensation, like health insurance or employer retirement account contributions. Compensation does not and should not count as federal financial aid. After all, if GI Bill benefits are considered federal aid, why not consider servicemembers’ paychecks to be federal aid as well?
Second, this treats similar programs differently. For example, many private employers like Starbucks provide funding for college to employees. All of this funding is counted in the 10%. Yet when the GI Bill does the same thing, it’s counted in the 90%.
Third, the new law will discourage colleges close to the cutoff from enrolling veterans. When GI Bill benefits were counted in the 10%, colleges had no reason to discourage veterans from enrolling. In fact, many for-profit colleges specifically recruited them because for each GI Bill student they enrolled, the college could then enroll more non-veterans who were heavily dependent on federal aid. Once the new law takes effect however, veterans could be shunned because now, for each GI Bill student a college enrolls, it will need to reduce non-veteran enrollment.
GI Bill benefits are compensation, and as such, they should not count as federal funding under the 90-10 rule. Just because progressives don’t like something doesn’t mean it’s a loophole.
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