The Defense Department suspends the University of Phoenix from recruiting on military bases.

The U.S. Military Just Dealt a Huge Blow to For-Profit Education

The U.S. Military Just Dealt a Huge Blow to For-Profit Education

Business Insider
Analyzing the top news stories across the web
Oct. 9 2015 2:33 PM

The U.S. Military Just Dealt a Huge Blow to For-Profit Education

147531166-dr-bill-pepicello-president-of-the-university-of
President of the University of Phoenix Bill Pepicello stands with commencement speaker Martha Stewart at the university's graduation ceremony on June 29, 2012.

Photo by Mike Moore/Getty Images for University of Phoenix

This post originally appeared on Business Insider.

Apollo Education Group, the for-profit education company, is getting destroyed.

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The stock was down 10 percent early Friday on the news that the Department of Defense will no longer allow service members to use federal money to attend one of its subsidiaries, the University of Phoenix. And so the University of Phoenix will also no longer be able to recruit on military bases, the Wall Street Journal reported.

“The institution will not be authorized access to DoD installations for the purposes of participating in any recruitment-type activities,” said Dawn Bilodeau, chief of the Defense Department’s Voluntary Education program. “Further, no new or transfer students at the institution will be permitted to receive DoD tuition assistance.”

Military funds are a crucial stream of income for for-profit colleges because of something called the 90/10 rule. It states that they collect no more than 90 percent of their tuition funds from federal student aid. Military funds, however, do not count as federal student aid. 

So they make up a significant portion of how for-profit colleges are able to pass the 90/10 rule. This is also why for-profit colleges were so aggressive about enrolling members of the military.

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On Wednesday Apollo released an 8K saying that the DoD had put it on probation for using its logos without permission and holding events on military installations without the proper clearance.

On October 7, 2015, our wholly-owned subsidiary, University of Phoenix, Inc., was notified by the U.S. Department of Defense (“DoD”) that the University had been placed on probationary status in respect of its participation in the DoD Tuition Assistance Program for active duty military personnel, and that the DoD is considering whether to terminate the DoD Voluntary Education Partnership Memorandum of Understanding with the University (“DoD MOU”) which is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program. While on probationary status, currently eligible enrolled students will remain eligible to participate in the Tuition Assistance Program, but newly enrolled or transfer students of the University will not be eligible. In addition, while on probationary status the University will not be permitted to engage in various activities at military installations, including job training, career events, fairs and other sponsored events.

The University of Phoenix is holding more student debt than any other college in the US, exploding from $2.2 billion in 2000 to $35.5 billion in 2014.

Think about that for a moment, and then look at this graphic from Brookings.

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Brookings/Business Insider