University of Phoenix banned from recruiting at military events

Education Secretary: We need to do better on student loan defaults
Education Secretary: We need to do better on student loan defaults

The University of Phoenix has been banned from recruiting on military bases after being criticized for aggressively targeting veterans.

New students won't be able to use funding from the Department of Defense's tuition assistance program to enroll at the college.

About 9,000 veterans received about $20 million from the program to attend the University of Phoenix last year, according to the Pentagon. The college has a special part of its website just for veterans where it boasts having "military representatives who understand the culture and lingo you're used to."

But the Department of Defense has found that it did not get proper approval to hold events at military bases. It also didn't get permission to use military logos on its "challenge coins." These tokens are traditionally handed out in the military to recognize good work, but The University of Phoenix has its own mock version of the coins.

The college is also currently under investigation by the Federal Trade Commission about whether it used deceptive marketing tactics to recruit students.

The school has two weeks to make its case. At that time, the ban could become permanent. Its parent company, Apollo Education Group (APOL), disclosed the news in a regulatory filing Friday. It has already discontinued use of its challenge coins.

"University representatives had been working closely with Department of Defense leaders and we all expected a different response," said University President Tim Slottow in a statement.

After a scathing report from the Center for Investigative Reporting came out earlier this year, Senator Dick Durbin called on the Department of Defense to investigate the college.

For-profit colleges in general have been criticized for preying on veterans and low-income students, promising bright job prospects. But they continue to post high student loan default rates and below-average graduation rates.

Related: Good news for Corinthian's student debtors

Schools are not allowed to receive more than 90% of revenue from federal aid. But funds from the Department of Defense and the Department of Veterans Affairs don't count toward that limit. That gives for-profit schools an incentive to target veterans in order to stay below the threshold. In her run for president, Hillary Clinton has proposed closing that loophole.

Although thousands of veterans use financial aid from the Department of Defense, the University of Phoenix says that money only accounts for 1% of its net revenue. But any financial hit won't be good for the struggling school. It has lost about half of its students over the past five years and closed at least 100 campuses. The college currently has about 206,000 students and expects enrollment to decline to about 150,000 this year.

Correction: An earlier version of this article incorrectly said that the Department of Defense action would affect GI BIll funds. The Department of Veterans Affairs, which administers GI Bill funds, is evaluating any potential impact, a spokesman said.

Related: Veterans stranded after using GI Bill at defunct college

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