JUDY WOODRUFF: Next: how funds from the federal G.I. Bill are flowing to for-profit schools, even though, all too frequently, veterans' prospects are not appreciably better after attending them.

The for-profit college sector is under the microscope. The U.S. Department of Education is expected to cut federal aid to schools with high default rates. The federal government and state attorneys general also are investigating marketing and lending practices of some schools. More than $10 billion was spent on the G.I. Bill for veterans' education last year.

Until now, for-profits have netted a growing amount of money from a new generation of vets. In California, nearly two of every three G.I. Bill dollars is spent on for-profit schools.

Aaron Glantz has the story from our partners at the Center for Investigative Reporting.

AARON GLANTZ, The Center for Investigative Reporting: The World War II G.I. Bill, it's one of the most cherished programs in American history. It paid the full cost of an education at any four-year college or university.

MAN: You mean, he can get any kind of education he wants? Now you're getting the idea.

AARON GLANTZ: The G.I. Bill was weakened in the decades after World War II, until Congress passed a new law in 2008 to help veterans returning home from Iraq and Afghanistan.

And so, for the first time since World War II, veterans can receive the full cost of a college education, paid for by taxpayers, up to $19,000 a year. But G.I. Bill money is not going where Congress expected. For-profit schools like the University of Phoenix and Ashford University are among the largest recipients.

MAN: Ashford has given me all the tools I need to be successful.

AARON GLANTZ: These schools are set up to make money.

Kate O'Gorman is political director at Iraq and Afghanistan Veterans of America.

KATE O'GORMAN, Iraq and Afghanistan Veterans of America: Many veterans simply are being aggressively and deceptively recruited by some bad actors in the for-profit school sector.

AARON GLANTZ: She says thousands of veterans are being left with worthless degrees and few job prospects.

KATE O'GORMAN: We're not getting the investment that we wanted when we sent these men and women to school.

AARON GLANTZ: In California alone, the Center for Investigative Reporting found nearly 300 schools banned from receiving state financial aid that still got G.I. Bill money, even schools with no academic accreditation at all, beauty schools, auto repair programs, and dog training academies, together, more than $600 million.

The biggest beneficiary is the for-profit University of Phoenix, which fails to graduate most of its students, according to the U.S. Department of Education.

Nationally, it took in nearly a billion dollars from the G.I. Bill over the last five years. The University of Phoenix has been especially successful at attracting veterans in San Diego, a port city with a high concentration of veterans.

Every year, soldiers and sailors here retire from active duty and turn to the G.I. Bill as they transition to civilian life, among them, David Pace, who served 20 years in the Navy. Pace dreamed of a career in the business world and enrolled in a bachelor's program at the University of Phoenix.

DAVID PACE, Veteran: I figured that, with that college degree, I would get a better job and move on.

AARON GLANTZ: He told me a recruiter from the University of Phoenix said he could turn his military experience into academic credit and graduate in just 18 months, leaving him with enough G.I. Bill money to pursue a master's degree.

DAVID PACE: But that ain't how it worked.

AARON GLANTZ: A year into that degree plan, Pace says he was told he would need to take 10 additional classes to graduate. He feels he was tricked.

DAVID PACE: I didn't know that. I really didn't know. I was going by what they told me.

AARON GLANTZ: It took Pace three years to graduate. By then, he had exhausted his entire education benefit. Pace attended this University of Phoenix campus in San Diego. It has received more G.I. Bill money than any brick-and-mortar campus in America, $95 million over the last five years.

That's almost seven times what the University of California, San Diego, got. In fact, the Center for Investigative Reporting found, the University of Phoenix's San Diego campus received more G.I. Bill money than the entire 10-campus U.C. System.

Last June, the school's accrediting body, the Higher Learning Commission, put the University of Phoenix on notice, saying the school didn't support student learning and effective teaching.

Students at the University of Phoenix often have trouble repaying their loans. More than a quarter default within three years of leaving school. And, at this campus, fewer than 15 percent of students graduate, according to the Department of Education.

I met with retired U.S. Army Colonel Garland Williams. He oversees military programs for all University of Phoenix campuses nationwide.

Do you feel like this almost billion dollars of taxpayer money to the University of Phoenix is a good investment for the taxpayers?

GARLAND WILLIAMS, Vice President, University of Phoenix: The veterans have chosen us because of the programs that we offer. We have over a hundred programs that we offer. And they have found the higher education goal that they have sought. And they have — we — those programs lead to careers that they want to aspire to. So, they have chosen us.

AARON GLANTZ: Do you have any evidence that it's actually leading to careers for these veterans?

GARLAND WILLIAMS: The veterans have chosen us. They have chosen to use their entitlement at the University of Phoenix.

AARON GLANTZ: Getting an associate's degree at the University of Phoenix costs nearly 10 times what a community college would charge. Nevertheless, the University of Phoenix says it's working with the government to ensure that veterans' needs are met.

To prove this point, the company allowed us to observe as a team of auditors arrived from the California Department of Veterans Affairs. University of Phoenix staff gathered the veterans' transcripts and financial information as they prepared for inspection. The auditors will check these documents to ensure compliance with G.I. Bill requirements.

Their goal: to make sure the school isn't billing the government for students who don't exist.

But the inspectors don't look at anything else.

Latanaya Johnson is a member of the audit team.

Are you looking at whether or not the instruction is good?

LATANAYA JOHNSON, California Department of Veterans Affairs: No, that's not a part of the visit, at all.

AARON GLANTZ: The University of Phoenix has been put on notice by its accrediting agency. Do you look at that?

LATANAYA JOHNSON: No, that's not a part of the visit at all.

AARON GLANTZ: Or any issues they might be having with the faculty not complying with certain regulations, you look at that?

LATANAYA JOHNSON: No, that's a different process completely.

SEN. TOM HARKIN, D, Iowa: This situation is unacceptable.

AARON GLANTZ: In Washington, lawmakers have tried again and again to strengthen regulations on which schools can receive G.I. Bill money. Democrat Tom Harkin, the chair of the Senate committee that oversees education, has spent years investigating the for-profit education industry.

SEN. TOM HARKIN: Neither the department of Veterans Affairs nor the Department of Defense has any way to assess whether or not they are getting a good education.

I might add neither does the Department of Education, nor does any of the entities that accredit these schools. They have no way of assessing what's happening to these students.

AARON GLANTZ: Kate O'Gorman of says veterans groups have been trying to change things, but have run up against organized opposition.

KATE O'GORMAN: We have seen money going into really key committees and campaign contributions. We see for-profit school lobbyists consistently on the Hill. Almost every time the veterans community goes into an office and says, we need these strong reforms and regulations, we see a for-profit school lobbyist walking out.

AARON GLANTZ: Now the legislative fight is moving to the state level.

In California, a bill would have required all schools to tell regulators how many veterans graduate and how many find jobs. It was gutted in the face of opposition from for-profit colleges.

MAN: This is a direct attack at our sector.

AARON GLANTZ: In a letter to lawmakers, the University of Phoenix's lobbyist called those requirements cumbersome and of little practical value.

I asked Garland Williams to explain his company's position.

GARLAND WILLIAMS: What I can tell you and your viewers is that the support that we provide our veterans, our active duty, and their family members is personal.

AARON GLANTZ: But we don't deserve to know how many of them are actually succeeding?

GARLAND WILLIAMS: You deserve to know that we provide the utmost care to our military. We think we do it right. We are always a learning organization to get it right, but we think we do it right because veterans choose the University of Phoenix.

AARON GLANTZ: Veteran David Pace wishes he had never made that choice. After spending an estimated $50,000 in taxpayers' money to obtain a business degree, he is still doing the same kind of blue-collar, physical labor that he did in the service.

DAVID PACE: I think that's the most frustrating part about it, is that I could have just came right out of the Navy and got this job without the time and the headache.

AARON GLANTZ: He's a maintenance electrician for a defense contractor at Naval Base San Diego. Pace says employers don't take his degree seriously.

DAVID PACE: If you say you got a degree from the University of Phoenix, you immediately get: paper factory or certificate factory. It doesn't get the same respect.

AARON GLANTZ: He hopes other veterans think more carefully than he did about where they spend their education benefit.

But advocates say it's not realistic to expect veterans like Pace to police the G.I. Bill. They say that's the job of Congress and regulators. Five years after the new G.I. Bill became law, there are still virtually no restrictions on where that money can be spent.

JUDY WOODRUFF: And a couple of footnotes.

For the record, David Pace does work for BAE Systems, which is an underwriter of the NewsHour.

This past week, one major for-profit education company, Corinthian Colleges, under scrutiny from the government and facing bankruptcy, announced that it would sell or close its 97 U.S. schools.

This story was part of "Reveal." It's a new investigative radio program from the Center for Investigative Reporting and PRX. It's airing on public radio stations nationally all this week.