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'Dollar signs with backpacks': Student loan chief details preventing predatory schools from preying on military veterans

Military veterans have consistently been targeted by predatory colleges eager to take advantage of federal funding available specifically to them.

“We once described this target population as being viewed by fraudulent schools as dollar signs with backpacks,” Federal Student Aid (FSA) Chief Operating Officer Richard Cordray told Yahoo Finance in an exclusive interview (video above).

FSA, an agency within the Education Department (ED), manages trillions of dollars in outstanding student loans and controls federal funding to colleges and universities across the country.

The ED, the Department of Defense, Department of Veterans Affairs, and the Consumer Financial Protection Bureau (CFPB) have been working in coordination over the last decade to launch a series of efforts designed to prevent military veterans from being taken advantage of by predatory schools.

“What we're marking is the 10-year anniversary of what are called the ‘Principles of Excellence’ … President Obama marked the original signing of the executive order, with the purpose in mind of protecting people who serve in the military … [who] find themselves often targeted by schools with fraudulent schemes because they see the dollar signs,” said Cordray, who was the head of the CFPB during the Obama administration.

President Biden delivers remarks aimed at addressing health problems suffered by military veterans exposed to potentially toxic environmental situations, in Fort Worth, Texas, March 8, 2022. REUTERS/Jonathan Ernst
President Biden delivers remarks aimed at addressing health problems suffered by military veterans exposed to potentially toxic environmental situations, in Fort Worth, Texas, March 8, 2022. REUTERS/Jonathan Ernst

Veterans are given federal dollars in the form of G.I. Benefits, which they can use to pursue higher education. Low-quality, high-cost for-profit programs aggressively recruit these veterans since those benefits allow schools to circumvent the cap on federal funding.

“We found that it was important for us — and I think it was the first time this had been done across the federal government — to have the Department of Education work together with closely with the Department of Defense and the Department of Veterans Affairs, to make sure that students were protected, that military service members were not going to be cheated out of their benefits, and not get the benefit of higher education,” Cordray explained.

The ‘Principles of Excellence’ provides more transparency regarding the financial cost and quality of schools through a bunch of efforts, such as through an online customer complaint system, the College Scorecard, a College Navigator, and more.

President Obama, joined by Fed Chair Janet Yellen and CFPB Director Richard Cordray, holds a meeting with financial regulators March 7, 2016. REUTERS/Kevin Lamarque
President Obama, joined by Fed Chair Janet Yellen and CFPB Director Richard Cordray, holds a meeting with financial regulators March 7, 2016. REUTERS/Kevin Lamarque

FSA is also ramping up oversight of schools to actively penalize any engaging in abuse.

In March, the agency announced that it was warning shady schools that engage in “​​aggressive and misleading recruiting practices to take advantage of service members, veterans, and military-connected students” would face consequences for doing so, including “the termination or limitation of a school’s participation in the Department’s federal student aid programs.”

“We are going to be bringing enforcement actions where they're appropriate against schools that cheat students, whether former military or not, but across the board, and I think it's really important for us to have that presence,” Cordray said. “And for schools to be aware that they're not going to be able to get away with things that they might have thought they could get away with in the past.”

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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