CHEYENNE, Wyo. - For-profit colleges, pay-day loans, and spending temptations may turn into significant debt and worthless college degrees for military members, said Holly Petraeus, of the Consumer Financial Protection Bureau.
Petraeus is the head of the CFPB's Office of Service Member Affairs. She met Thursday with leadership from the Wyoming National Guard to talk about national concerns and identify issues in Wyoming.
Petraeus' office partnered with the Department of Defense to see that military families receive strong financial education; to monitor their complaints to the CFPB; and to coordinate efforts of federal and state agencies regarding consumer protection measures for military families.
"Some of it is just education," Petraeus said of providing troops with the weapons they need to stay out of debt and avoid bad financial decisions. "We can't always expect people to know what to do with money. Some people are going to do what they do anyway, but I think there's some, if they had some kind of modeling or education, might actually think about doing something smarter than just blowing it all on that Hummer or that flat screen TV."
A mixture of loopholes in federal laws, and steady paychecks and bonuses for troops not savvy in personal finances, coupled with companies specifically targeting military members, have led to increase indebtedness among troops.
While the CFPB has had complaints about various businesses, Petraeus said they do not have a public list of offenders.
"It's human nature, everyone wants the good list and the bad list, so they're always asking us, 'Tell us which ones are bad, we'll boycott them,' and we're like, we can't do that. As a regulator, we can't endorse one entity that we regulate over another," Petraeus said. "What we want is for consumers to get the information they need to make an informed decision."
For Wyoming Guardsmen, both Army and Air, senior leaders expressed concern about the use of pay-day loans and the trends for Soldiers and Airmen to earn degrees from for-profit colleges without proper accreditations.
Lt. Col. Christopher Smith, the judge advocate general for the Wyoming Air National Guard, said Airmen have brought contracts to him for his review. Those contracts range from warranties that cover nothing, to pay-day loans with over 700 percent annual percentage rate.
"The average pay-day loan is 390 percent when you do an annual rate," Petraeus said. "It's just based on the fact that you have a pay check and you will be expected to pay it back in two weeks. The problem is, 90 percent of the customers can't pay it back in two weeks."
Maj. Gen. Luke Reiner, Wyoming's adjutant general, identified the high costs of pay-day loans in the state. "So the APR for a $100 loan for 14 days is 780 percent," Reiner said, noting there is no cap on the number of loans a person can take out.
"Definitely education is the key, and command climate is important too," Petraeus said. "Frankly, financial readiness is tied to military readiness. If you have folks whose finances are a disaster, you may not be able to deploy them."
The education is about proper financial health and how to regain it, she said. The Wyoming National Guard offers its troops a financial counselor who will stop short of telling you what stocks to invest in. Other resources include the judge advocate general.
"Lately, just anecdotally, I've had three people with the extended warranties on used cars that don't cover anything," Smith said. "Fascinating documents, you just read them and you're going 'Well this says it covers A, B and C,' and then you read what it doesn't cover, and it's basically A,B and C."
He said those are just some of the items Airmen asked him to review. Others include offers from schools and colleges.
"There's a lot of questions about that industry as a whole, their track record in the aggregate is not that great," Petraeus said, of for-profit colleges and universities. "They graduate less than 50 percent of their students. Their student loan default rate is right around 50 percent, which are people who cannot find employment to pay back their student loans."
Petraeus attributed the fierce recruiting of GI Bill holders by for-profit colleges because of the 1998 amendment to the Higher Education Act. For-profits can only receive 90 percent of their money from federal education funds, but the GI Bill and federal military tuition assistance does not count as part of the 90 percent.
"So they are chasing the military hard and marketing to them hard and they are succeeding," she said. "I've talked to education folks, and I'd be interested to hear from yours, because a lot of them tell me at the National Guard, they just feel besieged by these schools that want access to the troops."
Two of the three for-profit schools in Wyoming signed the presidential executive order establishing principles of excellence for educational institutions serving service members, veterans, spouses and other family members, said Tim Fisher, a veterans' education consultant for the Wyoming Military Department. The principles are guidelines for educational institutions that receive federal funding.
There were no alarming trends found in compliance surveys conducted at the 28 Wyoming schools approved for the use of VA educational benefits, he said.
However, there are web-based schools that Wyoming veterans may choose to enroll in, which are based out of state and out of the purview of statewide compliance surveys, Fisher said.
Petraeus said there are those large national programs that lack accreditation at the regional level, which is more coveted than the national level. Then, there are those that have no accreditation at all.
"The tragedy is when they get all the way through these programs and find out it's not going to get them to where they want to go," she said.
For Smith, the problem his Airmen are running into is a matter of choosing a school, with little information to go on.
"To make a decision along those lines is really hard for them looking at a brochure. Often, what I tell them is, if you're trying to get a certification for a vocation, a lot of the for-profit schools are great, but go to the local union, go to the local employer and see if they accept that certification," Smith said. "They'll tell you. This is Wyoming, people are nice."
Regardless of disposition, the Wyoming National Guard offers service members and their dependents financial and educational counseling and employment coordination.