Federal money for active-duty students is particularly attractive to for-profit schools, which have been signing up members of the services in record numbers.
So the Pentagon has developed new rules to ensure that service members are treated fairly when they use government money to attend college. Those rules are set to go into effect Jan. 1, but many of the nation's best-known schools say they cannot accept those requirements.
The dispute puts at risk millions of dollars in federal assistance.
At a hearing in September, Sen. Jim Webb said colleges need to provide more information so these students know what kind of school they are attending, and whether they can succeed there.
"Total cost of program, transfer ability of credits, default rates, graduation rates, job placement rates upon graduation are a few ways to ensure transparency," the Virginia Democrat said.
The Defense Department says they've been listening — and they're cracking down.
Starting in January, schools will have to sign a special memorandum before they can receive what's known as "tuition assistance" for active military. Schools must charge military and civilian students the same tuition. They have to give students a clear education plan. And, they have to try to give students academic credit for some of their military training.
That last point raised eyebrows at places like the University of California, where Lawrence Pitts is provost.
"UC has a very careful process for reviewing courses taken outside of UC," Pitts says.
He says he cannot promise in advance that University of California campuses will give credit for military training, as those schools want to review training courses one by one.
So, like other prestigious public and private universities, he says, the University of California will not sign that memorandum.
"If we did that on a regular basis," he says, "we would have a number of students ill-prepared and not be able to take full advantage of university education."
Many for-profit schools, however, have signed up. They say this shows they are more in tune with the needs of non-traditional students, like those in the service.
Brian Moran of the Association of Private Sector Colleges and Universities says his for-profit members are happy to recognize military training.
"It's something that we feel is important to these service members, and we embrace seamless transferability of credit in recognition of the experience of active service military, as well," Moran says.
The fact that military money might be headed to more for-profit schools is particularly annoying to people like Sen. Tom Harkin, an Iowa Democrat. Harkin's committee has held hearings highlighting what he says are aggressive recruiting practices by for-profit schools, some targeting more than $500 million annually in tuition assistance.
"One has to ask: Why is it that all the good schools are not signing the memorandum of understanding, and all the bad actors are?" Harkin asks.
The Defense Department would not comment.
Military service groups have been outraged at the idea that students could not use their tuition assistance dollars at hundreds of recognized colleges. They've written to Defense Secretary Leon Panetta, asking him to put these new rules on hold. They've been joined by 52 senators from both parties.
Some colleges say that if the issue isn't resolved, they will try to find money elsewhere so members of the military can stay in school.
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