August 13, 2009 - The Veterans Affairs Department has a backlog of nearly 200,000 education benefits claims from veterans just three weeks before universities and colleges start classes for the fall, and it is unlikely VA can process the applications in time, a knowledgeable congressional source said.

Hundreds of thousands of veterans have filed for education benefits established by the 2008 GI bill, formerly called the Post-9/11 Veterans Educational Assistance Act, which greatly expanded the benefits the government gives veterans for college education. For example, the bill hikes payments for tuition from $1,300 a month to a payment that is pegged at the highest tuition at a public university in a veteran's state of residence, which for Massachusetts would be $10,232. The bill includes monthly living expenses of $1,100 to $1,200.

VA has been overwhelmed with claims and the backlog means "schools are going to get paid late," said the congressional source who declined to be identified. Colleges and universities basically have two choices: decline to enroll veterans for the fall semester, which would cause bad publicity, or carry the veterans until VA payments arrive, according to the source. The situation is "not pretty, and it's going to get uglier," the source said.

Top Veterans Affairs officials at a House hearing in June said the department was on schedule to process the claims by the start of classes in the fall and VA was processing claims faster than it received them.

But, a report from the Veterans Benefits Administration released on Monday showed a backlog of 191,388 education benefit claims as of Aug. 10, an increase of 16,411, or 9.4 percent, from the previous week.

The backlog has increased every week since May, when recent veterans were able to apply for the rich package of benefits available under the law.

Unprocessed claims totaled 155,216 on July 13, an increase of 5.3 percent in impending claims from the previous week. During the past month, the number of pending claims rose4.4 percent on July 23, 4.6 percent on July 27 and 3.3 percent on Aug. 3.

VA officials did not respond to questions before deadline.

The backlog includes claims for payment under the post-9/11 GI bill and the older Montgomery bill, the congressional source said, but based on VA's own data, most pending claims are from the new GI bill. By comparison, for the second week of August 2008, VA had 47,536 educational benefits claims pending under the older GI bill, while this year it had more than four times that, reflecting the growing number of claims filed under the post-9/11 GI bill.

Keith Wilson, director of the Office of Education Service at the Veterans Benefits Administration, told a hearing of the House Veterans Affairs Economic Opportunity Subcommittee in June that VA could receive as many as 200,000 applications by the end of the summer under the new GI bill.

The bill has two payment streams: tuition and fees sent directly to the college or university, and a stipend for books and housing sent to the veteran. That means schools will feel the affects of the delayed processing first, followed by veterans because VA issues tuition payments before payments for books and housing, the congressional source said.

Universities and colleges that Nextgov contacted said they planned to make arrangements to keep veterans in school if their tuition and housing bills are not paid. Indiana University in Bloomington will "do everything to prevent financial hardship" for students who are veterans, said Margaret Baechtold, director of veterans support services at the school. That would include waiving late-payment fees and working with the on-campus housing department so veterans will be able to stay in their dorms if their stipends are delayed.

The university was late in filing for payments for tuition and fees with VA because it did not set tuition rates until late July, and officials expect that delay will cause a lag in GI bill payments, she said.

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