Holly Petraeus: For-Profit Colleges Misleading Soldiers

For-profit colleges have been under fire for graduates' high loan default rates. Now the industry is accused of targeting members of the military with aggressive and often misleading marketing. David Greene talks with Holly Petraeus, director of service member affairs at the Consumer Financial Protection Agency and the wife of General David Petraeus, who recently wrote about the issue in The New York Times.

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DAVID GREENE, Host:

For-profit colleges have been under fire for the high loan default rates of their graduates. And now the industry is under criticism for something else - targeting members of the military with aggressive and often misleading marketing.

Some of the latest criticisms come from Holly Petraeus, the wife of CIA director and former General David Petraeus. She works at the Consumer Financial Protection Agency, and her job is to protect service members from financial abuse. We spoke to her to find out more about the issue. Holly, good morning.

HOLLY PETRAEUS: Good morning.

GREENE: In a recent op-ed that you did for The New York Times, you wrote that for-profit colleges see service members, military service members as nothing more than dollars signs in uniform. Can you tell me what you meant by that?

PETRAEUS: Well, there's a real incentive for for-profits to see them that way because of something called the 90/10 rule, which says that for-profit colleges can only get 90 percent of their money from Title IV education funds, and the 10 percent has to come from somewhere else. But the fact is that military tuition assistance and the GI Bill are not Title IV education funds, so they end up in the 10 percent category, which means for every service member that a for-profit college can sign up, that then gives them the ability to sign up nine other people who are using Title IV funds.

GREENE: It's a bit of a complicated formula. I want to make sure I understand it correctly. So for-profit colleges, the law was going to try and make sure they weren't getting all of their money in the form of federal dollars, and so they have to get at least 10 percent of their money from somewhere else, not the Department of Education. And they seem to have found a loophole, here. If they can recruit a lot of members of the military who are returning and using this GI Bill money to get college degrees, that helps them reach their 10 percent of non-Department of Education money.

PETRAEUS: Exactly.

GREENE: I suppose one of the challenges for people returning from the battlefield - I mean Iraq, Afghanistan - you don't have a lot of time to dig in and research your options for once you get back.

PETRAEUS: No. And I think there's two different things at play, here. When you're on active duty, for promotion, you really need to have some college under your belt - better still, a degree. So active duty service members are really looking for a college that can quickly kind of give them that education, and for-profits have definitely seen a niche there and offered convenience, military affinity and online education. But the question is: When they come to getting out of the service, will those courses that they took translate into a college afterwards, or translate into something that makes them attractive to an employer? And the case often is not.

GREENE: One of the things that you pointed out in your article that seemed most alarming was that some of these schools were actually going to military bases and doing recruiting in places where veterans were being treated for brain injury, traumatic brain injury?

PETRAEUS: Yeah. There was certainly a very egregious case of that, where a recruiter did go to a wounded warrior barracks and basically signed up the folks there, despite the fact that some of them did have brain injury and really didn't have the cognitive skills, frankly, at that point to be successful at school.

GREENE: We should say, I guess, that these schools are not doing anything illegal.

PETRAEUS: No, they aren't. It's aggressive, but it's not illegal.

GREENE: And so tell us what you think needs to change to protect these veterans and these service members coming home?

PETRAEUS: They definitely need to investigate the colleges that they're going to take courses from to be sure they are getting quality. And also, frankly, as long as the military education money is in the 10-percent category, I think the very aggressive chasing after service members is going to continue.

GREENE: Holly Petraeus is the assistant director for Service Member Affairs at the Consumer Financial Protection Bureau. Holly, thank you so much for joining us today.

PETRAEUS: Thank you. My pleasure.

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