Veterans enrolled in an online university are caught in an escalating dispute involving the school, the Department of Veterans Affairs and state regulators in what school officials say is a campaign by Obama administration holdovers in Washington and their liberal allies to undermine for-profit universities.

Ashford University announced this month that it was temporarily suspending enrollment of veterans who receive tuition benefits under the Post-9/11 GI Bill. The school took action after the VA, in a reversal, told Ashford that it lacked sufficient approval for its online programs from regulators in Arizona.

The VA announced that it will suspend Ashford’s eligibility for GI Bill tuition payments and approval of student enrollments and re-enrollments within 60 days unless the university takes “corrective action.” That could disrupt the education of more than 10,000 veterans and active-duty military students among Ashford’s overall enrollment of more than 40,000 by early January.

Officials at Bridgepoint Education, the publicly traded parent company of Ashford, say the VA has overstepped its authority on an issue that legally should be left to states.

“We vigorously disagree with their interpretation, as Congress clearly delegates approval to the states in these matters,” said Vickie Schray, Bridgepoint’s executive vice president of regulatory affairs and public policy. “We have students who are close to graduation who would not be allowed to complete their degree. Our students would lose credits, lose time, lose money and in many instances would be forced to go somewhere else and start over, even though their choice is to attend Ashford.

Ashford filed a motion in federal court last week against VA Secretary David J. Shulkin seeking to overturn the agency’s action, essentially accusing the VA of making law arbitrarily.