New Fodder for 90/10 Debate

As lawmakers contemplate change to the federal rule that caps for-profit colleges' receipt of student aid to include veterans benefits, analysis shows that many would have trouble complying. 

October 13, 2014

Twenty-seven for-profit colleges last year exceeded the cap on the share of their revenue that can come from federal student loans and grants, according to annual data released Friday by the U.S. Department of Education.

The colleges violated the federal threshold known as the “90/10 rule,” which prohibits for-profit colleges from deriving more than 90 percent of their operating revenue from federal student aid money. Colleges that hit the threshold for two years in a row risk losing their eligibility for such funds.

Only one of the 27 colleges announced that failed the metric last year had also failed the previous year. That college, Baton Rouge College, would have been kicked out of the federal student aid program had it not already lost eligibility because its accreditation was revoked.

This year’s 90/10 rule data comes as for-profit colleges and their critics are eyeing changes to the requirement in the upcoming reauthorization of the Higher Education Act.

One key issue is how the rule should account for the federal funds that for-profit colleges receive from veterans’ educational benefits and tuition assistance for active-duty service-members. Currently only federal student aid – like Stafford student loans and Pell Grants – count toward the cap, which applies only to for-profit colleges.

According a Department of Education internal analysis obtained by Inside Higher Ed, far more colleges would fail the 90/10 threshold if the it included veterans’ benefits and Pentagon tuition assistance programs. The analysis, which was first reported last week by the Center for Investigative Reporting, found that 133 additional colleges in the 2013 data release would have failed to meet that revised standard, as opposed to the 29 that actually did last year.

An additional 292 colleges, the analysis shows, would have come within five percentage points for crossing the 90-percent line.

For-profit colleges have long argued that the requirement is not a meaningful metric and that it cuts off access to students who rely on Education Department loans and grants to attend their institutions. Further, they argue, adding veterans' benefits to the calculation would cut off access and force the closure of for-profit education programs that enroll large numbers of veterans.

Some veterans' groups agree with that argument. The American Legion, for instance, has pressed members of Congress not to change the 90/10 rule from its current form.

Critics of the industry, meanwhile, including student and consumer advocates as well as other veterans' groups, see the lack of veterans' benefits in the 90/10 calculation as a loophole that needs to be closed in order to prevent colleges from having such a strong financial incentive to enroll veterans, which they say leads to aggressive recruiting tactics. 


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