End of a Military Free Ride?

August 17, 2011

WASHINGTON -- The Defense Department is said to be considering changes to its tuition assistance for active-duty military members that would make students responsible for up to 25 percent of tuition costs. The budget-cutting move would affect more than 300,000 students who receive tuition assistance, especially those who pay less than $250 per credit hour -- a group that includes many community college students as well as students at for-profit institutions, which frequently tie their tuition prices for military service members to the maximum benefit payment.

American Public Education Inc., a for-profit college company whose American Military University focuses on members of the armed services, suggested in its second quarter earnings call this month that the cuts were likely, and said they would be announced soon. The Defense Department has not confirmed whether any cuts will take place.

“We're looking at all options to ensure the benefit is available for everyone rather than lose it completely because of our fiscally prudent environment,” Maj. Monica Matoush, a Pentagon spokeswoman, said in an emailed statement that noted increases in the scope and cost of the agency's tuition assistance programs in recent years. “Any changes to the tuition assistance program would be made after considering all options and would be the result of extensive analysis and the review of all alternatives.”

Lawmakers suggested reducing the tuition assistance benefit, which pays up to $4,500 per year for active-duty military members to take college courses, even before the debt ceiling deal in August called for $350 billion in cuts to defense spending over the next decade. With that additional pressure, “we all think this is going to happen,” said Jim Sweizer, vice president for military programs with American Public University System, the two colleges that comprise American Public Education, Inc.

The company laid out three changes that it considered possible: a reduction of the maximum tuition benefit from $4,500; a reduction of the maximum benefit per credit hour of $250; or a return to some version of the “75-25 split,” the former tuition assistance program under which the military paid 75 percent of the cost of education and students were responsible for the rest.

A return to the split is considered the most likely. The military switched to paying 100 percent of the cost of a college education (up to the maximum allotted per year or per credit hour) in 2002, primarily as a recruiting measure, said Sweizer, who was chief of the Air Force’s Voluntary Education Program when the switch took place.

The tuition benefit has come under increased scrutiny over the past year as the federal government has focused on for-profit colleges, where many military members spend their federal tuition dollars. At a hearing in September, members of Congress said programs accepting the tuition benefit needed more oversight. The Government Accountability Office drew the same conclusion in a report in March, and the Defense Department announced a new memorandum of understanding with participating institutions in July, which requires that institutions be accredited and adds some disclosure requirements.

The latest changes are budgetary, not regulatory, in nature.

The cost of the program almost tripled between 2001 and 2010. The increased benefit was partially responsible, as was the rising cost of college. Last year, about 350,000 members of the military received $542 million in benefits. In June, the House of Representatives attached an amendment to a defense spending bill for 2012 that would require a review of tuition assistance, including studying the effects of a return to the 75-25 split.

Students could make up the 25 percent in three ways: through their own money, including loans; through federal financial aid programs like Pell Grants; or by using G.I. Bill benefits to make up the difference, an option known as the “Top-Up Program.” Sweizer said that he expects most students would opt for the latter, and that students who attend colleges that cost more than tuition assistance will pay are already using the G.I. Bill to "top up."

Still, many attend less-expensive institutions. For-profit colleges that cater primarily to the military, such as American Military University, or provide discounted tuition for members of the armed services, including the University of Phoenix and DeVry University, set the cost for many courses at $250 per credit hour, the maximum allowable limit. About 40 percent of tuition benefits go to for-profit colleges. Most community colleges charge $250 or less per credit hour, including for the distance learning programs that many members of the military use.

The fact that those students will need time to consider their options, and the pending Oct. 1 start of the next fiscal year, makes an imminent announcement likely, Sweizer said. “Individuals who are going to college in the services are used to getting that benefit,” he said. “I think any type of reduction which will cause them to incur out-of-pocket costs will be a bit of a shock.”

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