Friday, October 16, 2009

Your Education Dollars at Work

Over at National Review's Phi Beta Cons blog, Robert VerBruggen asks a rather indelicate question. Instead of offering student loan debt relief to active duty military personnel, why not simply raise their salaries, and let them decide to use the money?

As Mr. VerBruggen notes, a recently-introduced Senate Bill is aimed at closing a loophole in the student loan program. Military personnel, serving overseas, are currently charged interest on their student loans. The measure, co-sponsored by 14 Senators, would prevent interest from accruing on the loans of military personnel--including members of the National Guard--while they serve on active duty. According to Washington Monthly, the interest free period would be limited to 60 months, and generate an average savings of $1,100-1,400 for each military member.

To some degree, VerBruggen has a point, though his argument is poorly focused. For starters, we'll assume that the student loans in question were used before the individual joined the military. With generous tuition assistance for active duty personnel (and GI Bill benefits for those on active service and qualified veterans), there should be little need for personnel in those categories to take out student loans.

Additionally, virtually all of the services have student loan forgiveness programs for new enlistees. By signing up for a specified period of service, new troops can have their students loans wiped away--and still qualify for active-duty education benefits. Instead of offering an interest-free period, it might be more practical to expand the loan forgiveness programs.

In terms of raising pay, VerBruggen's proposal would create something of a problem. Special pay--including re-enlistment bonuses--is paid to service members who possess specific skills, or volunteer for particular career fields. There is no precedent (that we know of) to pay Private Smith an extra $200 a month to service interest on his student loan, while his comrade gets less compensation because they don't have education debt.

Besides, if National Review is genuinely concerned about disparity and waste in the DoD education budget, they're barking up the wrong tree. We would suggest a closer look at the Tuition Assistance (TA) program for military personnel, which provides up to $4,500 a year for the cost of college classes.

Tuition assistance has been around for decades, and (overall) it has been a highly successful program. Thousands of military personnel have earned college degrees, enhancing their skills and those of the military as a whole.

For years, TA compensation was capped at 75% of a course's tuition costs. Military members picked up the rest, and paid for incidental costs, including books and technology fees. To help service members, many colleges offered discounted tuition rates and book scholarships, reducing out-of-pocket costs.

In 2002, the military decided to raise the payment rate from 75% to 100% of tuition costs. Pentagon officials viewed it as a necessity; with an improving civilian economy (and increased operations tempo associated with the War on Terror), increased TA rates were deemed essential to the military's recruiting and retention strategy.

Besides, conventional wisdom suggested that the expanded program wouldn't cost that much. In early 2002, one of the Air Force's highest-ranking budget officers predicted that the new TA program would require (at most) a 25% increase in funding. A Chief Master Sergeant told the general that his projection was dead wrong; program costs would skyrocket, he warned.

Seven years later, the numbers prove the wisdom of the Chief's warning. The Air Force's TA budget has grown three-fold over this decade (while overall force levels have slightly declined), far out-pacing inflation and annual tuition increases imposed by most colleges and universities.

And, some of that money was clearly wasted. An investigation by the Air Force Audit Agency found at least 17% of the tuition funding was spent on courses and programs with no military value. In 2005, the agency discovered at least $25 million was allocated for classes that provided no return to the service. Some of the more popular programs in that category included courses on financial planning, golf, and preparation for licensing as a real estate agent.

In 2010, the Air Force will spend an estimated $200 million on tuition assistance. Most will go to dedicated airmen who are pursuing legitimate educational programs--programs that will benefit both the individual and the service as a whole. But if the audit agency's estimate is correct (and no one has disputed it), the Air Force will waste $34 million on bogus courses that enhance personal hobbies, or prepare service members for civilian careers.

True, it's hard to begrudge a golf class or real estate seminar for someone who's spent years in Iraq or Afghanistan. But 53% of today's airmen have never deployed to a combat zone, so that argument only goes so far in Air Force circles. Besides, no one ever said the military should have to pay to improve your golf game, and if you're looking to prepare for a post-military career, there are other ways to pay for it (virtually everyone leaving active duty is qualified for the GI Bill).

At least one Air Force commander (four-star, now retired) tried to crack down on TA abuse, but had to abandon the effort. He discovered that the rules were written so loosely that virtually any college course or program of study met the criteria. No wonder that 35% of the airmen enrolling for classes in the first year of 100% TA had never taken a class before.

The "old" tuition assistance program was far from perfect, but it had one clear benefit. By forcing military members to invest some of their money, it separated serious students from the hobbyists, and those who simply wanted to cash in on a "free" program. It also made military students more savvy consumers; with some of their hard-earned dollars on the line, they searched carefully for programs (and universities) that truly met their needs.

Unfortunately, those days are long since past. The mega on-line schools have entered the military market in recent years, attracted by a large pool of eager students and hundreds of millions of dollars in TA money. Lobbyists for those schools (and their trade groups) would fiercely battle any attempt to limit tuition assistance, including requirements that funded courses benefit both the student and the military.

Indeed, "Big Ed" has been successful in pushing for an expansion of education benefits within the armed forces. The recently-implemented Post-9/11 G.I. Bill allows armed forces members to transfer unused benefits to spouses and dependents, and the Pentagon recently created something called "MyCAA accounts." That program provides up to $4,500 for military spouses, allowing them to develop "portable" career skills that will improve employment prospects after future military moves.

Regulations for the MyCAA program are equally vague; spouses can use the money for anything from college courses and cosmetology programs, to preparation sessions for a real estate license exam. It's too early to say how much of this money is being wasted, but the pattern has already been established.
ADDENDUM: In fairness, we should note that military TA is a model of efficiency compared to the federal student loan program. Members of the armed forces who fail to complete a class (or simply flunk) are forced to repay full tuition for the course--and quickly. Compare that to enforcement practices for student loans; admittedly, it's tougher for deadbeat students to get by without paying the loan, but repayment often takes years, compared to just weeks in the military.

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