The 90/10 Rule Under HEA Title IV: Background and Issues

The 90/10 Rule Under HEA Title IV: Background and Issues

The 90/10 Rule Under HEA Title IV:
April 26, 2021
Background and Issues
Alexandra Hegji
Title IV of the Higher Education Act (HEA; P.L. 89-329), as amended, authorizes the primary
Analyst in Social Policy
programs that provide federal financial assistance (e.g., Pell Grants and Direct Loans) to students

to assist them in obtaining a postsecondary education at eligible institutions of higher education
(IHEs). IHEs seeking to participate in the Title IV programs must meet a variety of requirements.

In general, many of these requirements apply to all institutional sectors—public, nonprofit, and
proprietary (or private for-profit). One of the requirements, the 90/10 rule, applies only to proprietary IHEs.
Under the 90/10 rule, proprietary IHEs must derive at least 10% of their total tuition and fees revenues from non -Title IV
sources (or, conversely, no more than 90% of their tuition and fees revenue from Title IV funds) during a fiscal year. The
HEA and accompanying regulatory provisions specify how revenues are to be calculated. If an IHE fails to meet the rule’s
requirement in a single year, its certification to participate in the Title IV aid programs becomes provisional for two
institutional fiscal years. If an IHE fails to meet the rule’s requirements in two consecutive years, it loses its eligibilit y to
participate in the Title IV programs for at least two institutional fiscal years. The rationale behind the 90/10 rule is twofold:
(1) reducing fraud, waste, and abuse at proprietary IHEs and (2) if a proprietary IHE is of sufficient quality, it should be able
to attract a specific percentage of revenues from non-Title IV sources.
A small percentage of proprietary IHEs derive greater than 90% of their tuition and fees revenues from Title IV sources. In
award year 2017-2018 (the most recent year for which data are available), 12 proprietary IHEs (0.7%) did so. In addition,
very few proprietary IHEs have lost Title IV eligibility for failure to meet the 90/10 rule’s requiremen ts in recent years. Over
the 10-year period from award year 2008-2009 to award year 2017-2018, eight proprietary IHEs have lost their eligibility for
failure to meet the requirements. None of these institutions have since regained Title IV eligibility.
In recent years, some Members of Congress have proposed a number of amendments to the 90/10 rule. Many of these
proposals have arisen because there is a level of congressional and stakeholder dissatisfaction with the current rule, which
largely stems from two primary reasons. First, the so-called 90/10 loophole allows proprietary IHEs to include non-Title IV
federal funds in the 10% threshold; thus, some stakeholders have alleged that proprietary IHEs target enrollment of
servicemembers, veterans, and their families who are eligible for GI Bill educational benefits and Departmen t of Defense
Tuition Assistance in order to meet the 90/10 rule’s 10% non-Title IV revenue requirement. Second, some believe that the
90/10 rule is arbitrary and treats proprietary IHEs inequitably, as it only applies to them even though some public and private
nonprofit IHEs have similar student outcomes (e.g., graduation rates). Others, however, believe that treating proprietary IHEs
differently is proper, because of their profit motive and because some rely heavily on Title IV revenues while producing poor
student outcomes.
In light of these critiques, some Members of Congress have proposed several amendments to the rule. Prominent proposals
that have been made include the following:
 terminating a proprietary IHE’s eligibility to participate in the Title IV programs after a single year of
noncompliance with the 90/10 rule;
 applying the 90/10 rule to public, nonprofit, and proprietary IHEs;
 eliminating the 90/10 rule altogether;
 adjusting the ratio used in the 90/10 rule (e.g., requiring IHEs to derive at least 15% of their revenues from
non-Title IV sources); and
 requiring that proprietary IHEs may not derive more than a specific percentage of revenues from Title IV
sources and military and veterans educational assistance benefits.

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Contents
History of the 90/10 Rule ................................................................................................. 1
Pre-1992 Institutional Accountability Issues .................................................................. 2
The Higher Education Amendments of 1992 .................................................................. 4
1997 GAO Study of Student Outcomes at Proprietary Institutions ..................................... 4
The Higher Education Amendments of 1998 .................................................................. 5
The Higher Education Opportunity Act of 2008.............................................................. 5
2010 GAO Study on Proprietary IHEs Subject to the 90/10 Rule ...................................... 6
The American Rescue Plan Act of 2021 ........................................................................ 7
Current 90/10 Rule .......................................................................................................... 9
Formula ................................................................................................................... 9
Numerator......................................................................................................... 10
Denominator ..................................................................................................... 11
Exclusions......................................................................................................... 12
Enforcement ........................................................................................................... 14
Historical Compliance ................................................................................................... 15
Recent Congressional Proposals ...................................................................................... 17
The 90/10 Rule as a Condition of Title IV Eligibility ..................................................... 18
Application of the 90/10 Rule to Public and Nonprofit IHEs .......................................... 18
Elimination of the 90/10 Rule .................................................................................... 19
Ratio Adjustments ................................................................................................... 21
Additional Considerations......................................................................................... 22

Figures
Figure 1. Proprietary IHEs’ Percentage of Title IV Revenues ............................................... 16
Figure 2. Proprietary IHEs Failing to Meet 90/10 Rule Requirements and Losing Title IV
Eligibility.................................................................................................................. 17

Tables
Table 1. Treatment of Different Types of Revenue in the 90/10 Rule Calculation..................... 13

Contacts
Author Information ....................................................................................................... 24

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The 90/10 Rule Under HEA Title IV: Background and Issues

itle IV of the Higher Education Act (HEA; P.L. 89-329), as amended, authorizes the
primary and largest (in terms of participation and dollars) federal programs that provide
T financial assistance (e.g., Pel Grants and Direct Loans) to students to assist them in
obtaining a postsecondary education at eligible institutions of higher education (IHEs).1 In
academic year 2019-2020, approximately 6,000 institutions were eligible to participate in the
Title IV programs.2 Of these IHEs, approximately 32% were public institutions, 30% were private
nonprofit institutions, and 38% were proprietary (or private for-profit) institutions. In award year
2019-2020, approximately $114.5 bil ion was disbursed to students attending IHEs through the
Title IV federal student aid programs.3 Of these funds, approximately 53% was disbursed to
students attending public IHEs, 34% to students attending private nonprofit IHEs, and 12% to
students attending proprietary IHEs.
IHEs seeking to participate in the Title IV programs, and thus to be able to disburse Title IV funds
to their students, must meet a variety of requirements.4 For example, al IHEs, regardless of sector
(i.e., public, private nonprofit, or proprietary) must be accredited by an accrediting agency
recognized by the Department of Education (ED) and be authorized to offer postsecondary
education by the state in which they are located. One requirement, unique to proprietary IHEs, is
the 90/10 rule. Under this rule, proprietary IHEs must derive at least 10% of their total tuition and
fees revenue from non-Title IV funds (or, conversely, no more than 90% of their revenue from
Title IV funds) during a fiscal year.5
This report examines the 90/10 rule. It begins with a history of the rule and then describes the
current form of the rule. Final y, the report discusses a variety of congressional proposals relating
to the rule, along with relevant policy considerations.
History of the 90/10 Rule
The current 90/10 rule traces its genesis to its predecessor, the 85/15 rule, which was put into
effect by the Higher Education Amendments of 1992 (P.L. 102-325). Since that time, Congress
has significantly updated the rule on several occasions. This section provides an overview of the
impetus for developing the 85/15 rule and the numerous legislative changes that have been made
to the rule over time. In describing these changes, this section also discusses two Government

1 For more information on HEA T itle IV aid programs, see CRS Report R43351, The Higher Education Act (HEA): A
Prim er.
2 U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data
System Data Explorer, “ Number and percentage distribution of T itle IV institutions, by control of institution, level of
institution, and region: United States and other U.S. jurisdictions, academic year 2019 –20,” https://nces.ed.gov/ipeds/
Search?query=&query2=&resultT ype=all&page=1&sortBy=date_desc&overlayT ableId=27423. T his figure excludes
foreign IHEs that participate in the Direct Loan program. In award year 2019-2020, 377 foreign IHEs participated in
the program. Of those, nine (2.4%) were proprietary IHEs. (U.S. Department of Education, Office of Federal Student
Aid, Student Aid Data Center “T itle IV Program Volume Reports: Loan Volume, Direct Loan Program,” AY2019-
2020 Q4, https://studentaid.gov/sites/default/files/fsawg/datacenter/library/dl-dashboard-ay2019-2020-q4.xls).
3 U.S. Department of Education, Office of Federal Student Aid, Student Aid Data Center “T itle IV Program Volume
Reports: Award Year Summary by School T ype,” 2019-2020, https://studentaid.gov/sites/default/files/fsawg/
datacenter/library/SummarybySchoolT ype.xls. T his total includes T itle IV funds made available through the Direct
Loan, Pell Grant, Iraq/Afghanistan Service Grant, and T EACH Grant programs. It excludes T itle IV funds made
available through the Federal Supplemental Educational Opportunity Grants, and Federal Work -Study programs.
4 For an overview of the various requirements IHEs must meet to participate in the T itle IV programs, see CRS Report
R43159, Institutional Eligibility for Participation in Title IV Student Financial Aid Program s.
5 HEA §487(a)(24).
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Accountability Office (GAO) reports that evaluated proprietary IHEs’ reliance on Title IV funds
and may have informed congressional decisionmaking.
Pre-1992 Institutional Accountability Issues
Congressional interest in limiting the amount of revenue a proprietary IHE could derive from
Title IV funds arose for a variety of reasons. During the late 1980s and into the 1990s, Congress,
GAO, and ED’s Office of Inspector General (OIG) conducted investigations of the federal student
aid programs and found evidence of extensive waste, fraud, and abuse.
While concerns over these problems were raised across al institutional sectors, the OIG identified
proprietary IHEs as a “major contributor” to the fraud, waste, and abuse.6 For example, the OIG
found that some proprietary IHEs set tuition prices that bore “little or no relation to the quality of
the training” offered, student employment prospects in fields relevant to the students’ training, or
the prospect of a salary that would enable students to repay their federal student loans. Rather, the
OIG found that tuition prices were often set based on the maximum amount of available federal
student aid, which in many cases led to inflated institutional prices. At the same time, the OIG
found that many public institutions offered training in similar fields that was of sufficient quality
to al ow students to gain entry-level employment, and for lower prices than were being charged
by proprietary IHEs.7
Similarly, GAO found that some IHEs used the federal student loan program as a source of “easy
income” with little regard for students’ ability to repay their loans.8 According to GAO, loan
default rates of students who attended proprietary IHEs were much higher than default rates of
students who attended public and private nonprofit IHEs.9 Congressional witnesses testified and
information was offered to indicate that some proprietary IHEs focused efforts on recruiting low-
income and educational y disadvantaged students and obtaining federal student aid funds rather
than providing students with a meaningful education.10
At the same time, concerns were raised that the program integrity triad was not providing
sufficient oversight of the activities of proprietary IHEs. The triad is a three-part regulatory
structure consisting of accreditation by an ED-recognized accrediting agency, state authorization
(frequently referred to as state licensure at the time), and ED certification, which al IHEs must
meet to participate in the Title IV programs.11 There were concerns that the accreditation and state
authorization standards were “inconsistent and of varying degrees of quality.”12 Accreditation
with respect to proprietary IHEs was described as “providing little, if any, assurance that quality

6 Letter from the Office of Inspector General, House, Congressional Record, (June 29, 1994), pp. H5327-H5328
(hereinafter, “ Congressional Record, Letter from the Office of the Inspector General”).
7 Ibid.
8 U.S. Government Accountability Office (GAO), Guaranteed Student Loans, GAO/HR-93-2, December 1992, p. 7.
9 Specifically, default rates of individuals who borrowed their last student loan in 1983 and defaulted by September 30,
1987, were 39% at proprietary IHEs and 25% at two -year public IHEs (the next highest default rate). U.S. Government
Accountability Office (GAO), Guaranteed Student Loans: Analysis of Student Default Rates at 7,800 Postsecondary
Schools, GAO/HRD-89-63BR, July 1989, p. 15.
10 See, for example, U.S. Congress, Senate Committee on Governmental Affairs, Permanent Subcommittee on
Investigations, Abuses in the Federal Student Aid Program s, 101st Cong., 2nd sess., February 20, 26, 1990, S.Rept. 101 -
659 (Washington, DC: GPO, 1990), p. 3 (hereinafter, “Senate Committee on Government Affairs, Abuses in the
Federal Student Aid Program s”).
11 For additional information, see CRS Report R43159, Institutional Eligibility for Participation in Title IV Student
Financial Aid Program s.
12 Senate Committee on Government Affairs, Abuses in the Federal Student Aid Programs, p. 128.
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training” was being provided,13 while state licensing procedures were found to be “largely
ineffective in assuring quality education.”14 In addition, investigations found that ED’s
certification procedures were inadequate to protect students’ or the federal government’s
interests.15 A congressional investigation also found that a lack of communication among the
triad’s components and within ED compounded the shortcomings in institutional oversight.16
As a result, Congress debated a variety of ways to strengthen the program integrity triad in
general, and the federal role in certification in particular. The idea of preventing waste, fraud, and
abuse based on institutional dependence on federal funds was already being used in the veterans
educational assistance programs. Under the GI Bil programs (unless they were exempt or
requirements were waived), the Department of Veterans Affairs (VA, then referred to as the
Veterans Administration) was prohibited from paying benefits to students enrolled in courses in
which over 85% of the enrollees had al or part of their tuition, fees, and other charges paid to
them or for them by the VA or the institution.17 The VA 85/15 rule was original y conceived in the
early 1950s based on experience with the WWII GI Bil .18 It was intended to prevent for-profit
trade schools of dubious quality from generating excessive profits by overcharging the VA for
benefits for veterans enrolled in schools established to train veterans with GI Bil benefits,
enrolling such veterans exclusively, and employing misleading advertising to maintain or increase
their enrollments.19 Evaluations of the veterans educational assistance programs found that the
rule helped prevent abuse.20
One proposal for addressing the concerns related to proprietary institutions was limiting the
amount of revenue a proprietary IHE could derive from Title IV funds. Proponents of the policy
believed it would stem abuse and might restore some healthy market-based incentives, as
proprietary IHEs would no longer be able to set prices at a level that might be beyond the reach of
students not fully supported by federal financial aid.21 The OIG postulated that the policy would
force institutions to set prices “to reasonable levels relative to the value of the training offered,
without direct federal price controls.”22 Proponents further argued that if a proprietary IHE is of
sufficient quality, it should be able to attract a specific percentage of revenues from non-Title IV
programs.23 Opponents of the policy argued that it could effectively punish schools that served
low-income students who were reliant on Title IV aid to attend school and may limit

13 Ibid., p. 125.
14 Ibid., p. 21.
15 Senate Committee on Government Affairs, Abuses in the Federal Student Aid Programs, p. 32. See also U.S.
Government Accountability Office (GAO), Student Financial Aid: Education Can Do More to Screen Schools Before
Students Receive Aid, GAO/HRD-91-145, September 1991.
16 Senate Committee on Government Affairs, Abuses in the Federal Student Aid Programs, p. 132.
17 38 U.S.C. §3680A(d).
18 U.S. Congress, House Select Committee to Investigate Educational, T raining, and Loan Guaranty Programs Under
GI Bill, Select Com m ittee to Investigate Educational, Training, and Loan Guaranty Program s Under GI Bill , Created
pursuant to H. Res. 93, 82nd Cong., 2nd sess., February 14, 1952, H.Rept. 1375, pp. 2, 7, 29-49.
19 Ibid.
20 U.S. Congress, Committees on Veterans’ Affairs, Veterans’ Education Policy, committee print, prepared by
Commission to Assess Veterans’ Education Policy, 100th Cong., 2nd sess., September 22, 1988, S. Prt. 100-125
(Washington, DC: GPO, 1988), p. 164.
21 See, for example, Congressional Record, Letter from the Office of the Inspector General.
22 Congressional Record, Letter from the Office of the Inspector General.
23 See, for example, Rep. William David Ford, “ Department of Labor, Health, and Human Services and Education, and
Related Agencies Appropriations Act, 1995,” Congressional Record, daily edition, vol. 140, part 85 (June 29, 1994), p.
H5321.
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postsecondary educational access for low-income students if proprietary IHEs were forced to
deny such students admission in order to meet the required percentage of revenues not derived
from Title IV student aid.24
The Higher Education Amendments of 1992
As part of the Higher Education Amendments of 1992 (P.L. 102-325), Congress instituted a
number of changes to strengthen the program integrity triad in general, and the federal role in
certification in particular.25 For example, Congress lowered the cohort default rate thresholds for
IHEs participating in the federal student loan program, thus making them more rigorous and
increasing the number of IHEs likely to be excluded from participation in the program, and
strengthened the criteria and procedures to be used by ED when evaluating accrediting agencies
for recognition. Among these provisions, the act established the 85/15 rule.
Under the 1992 amendments, the definition of proprietary institution of higher education for
purposes of Title IV program eligibility was amended to require that proprietary IHEs derive at
least 15% of their tuition and fee revenues from non-Title IV sources. The effect of including the
requirement in the definition of proprietary IHE was that proprietary IHEs that failed to meet the
requirement in a single year were immediately ineligible to participate in the Title IV programs.
The act did not contain provisions specifying how institutional revenues were to be calculated;
determining how the requirement was to be implemented was left largely to the discretion of ED.
Following its enactment, the 85/15 rule generated considerable contention. For example, the
Career College Association, which represented proprietary IHEs, brought unsuccessful court
actions against the provision.26 Also, ED regulations to implement the rule were delayed by
language in appropriations statutes27 due to concerns over the formula used to calculate the
percentage of funds derived from non-Title IV sources and potential impacts on schools and
students.28 Ultimately, the regulations did not go into effect until July 1, 1995.
1997 GAO Study of Student Outcomes at Proprietary Institutions
Following the 1992 HEA amendments, and amidst continued concerns about proprietary IHE
performance, Members of Congress requested that GAO examine the relationship between
proprietary IHE performance and their reliance on Title IV student aid.29 GAO found that

24 U.S. Congress, Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, Abuses in
the Federal Student Aid Program s, Part 4, 101st Cong., 2nd sess., October 10, 1990, S.Hrg. 101-659, Pt. 4 (Washington,
DC: GPO, 1991), p. 185.
25 Other changes made to address fraud, waste, and abuse in the T itle IV programs included limiting the T itle IV
eligibility of short -term programs, establishing criteria ED must review when making accrediting agency recognition
decisions, setting stricter institutional cohort-default rate requirements, and strengthening ED’s ability to gauge an
IHE’s financial stability.
26 See, for example, Jim Zook, “Higher Education Act Survives Legal Challenges,” The Chronicle of Higher
Education, September 7, 1994.
27 Department of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 1 995
(P.L. 103-333). U.S. Department of Education, Dear Colleague Letter, GEN-95-26, “ Implementation of the 85 percent
rule to determine eligibility for T itle IV student assistance programs,” May 1, 1995, https://ifap.ed.gov/dear-colleague-
letters/05-01-1995-gen-95-26-implementation-85-percent-rule-determine-eligibility.
28 See, for example, Rep. William F. Goodling, “ Department of Labor, Health, and Human Services and Education, and
Related Agencies Appropriations Act, 1995,” Congressional Record, daily edition, vol. 140, part 85 (June 29, 1994), p.
H5321.
29 U.S. Government Accountability Office (GAO), Proprietary Schools: Poorer Student Outcomes at Schools That
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proprietary IHEs that relied more heavily on Title IV funds as a source of revenue tended to have
poorer student outcomes in terms of student completion and placement rates and higher student
loan default rates.30 GAO concluded that requiring proprietary IHEs to obtain a substantial y
higher percentage of revenues from non-Title IV sources could result in the federal government
realizing substantial savings from a reduction in student loan defaults. However, GAO
acknowledged that increasing the required proportion of non-Title IV revenues could limit student
access to postsecondary education, as more stringent revenue requirements might result in
proprietary IHEs admitting fewer low-income students who are reliant on Title IV student aid.31
The Higher Education Amendments of 1998
Under the Higher Education Amendments of 1998 (P.L. 105-244), Congress amended the 85/15
rule to make it less restrictive by altering the percentage of non-Title IV revenues that proprietary
IHEs were required to earn. Under the amendments, proprietary IHEs were required to earn at
least 10%, rather than 15%, of their revenues from non-Title IV funds to be eligible to participate
in the Title IV programs.32 Thus, the 85/15 rule became the 90/10 rule.
The Higher Education Opportunity Act of 2008
Following the 1998 amendments, there was continued debate over whether the 90/10 rule truly
served as a measure of institutional quality. Some commentators stated that it had been
“incoherently applied”33 and questioned whether the rule, as implemented, was fair and
accurate.34 It was also asserted that rather than measuring institutional quality, the rule measured
the socio-economic status of a school’s students and served as an incentive for schools to either
not serve the most needy students or to raise tuition in order to comply with the rule.35 Others,
however, believed that schools should continue to demonstrate that they were able to derive some
revenues from non-Title IV sources36 and believed that the 90/10 rule was serving its purpose of
preventing abuse.37
Ultimately, under the Higher Education Opportunity Act of 2008 (HEOA; P.L. 110-315),
Congress and the Administration made several changes to the 90/10 rule, most of w hich made it

Rely More on Federal Student Aid, GAO/HEHS-97-103, June 1997, p. 1, https://www.gao.gov/assets/230/224202.pdf.
30 Ibid., pp. 5-8.
31 Ibid., pp. 8-10.
32 A review of the legislative history leading to the enactment of the Higher Education Amendments of 1998 did not
reveal a stated rationale for the change.
33 U.S. Congress, Senate Committee on Health, Education, Labor, and Pensions, The Higher Education Act and the
Workforce: Issues for Reauthorization, 108th Cong., 2nd sess., March 4, 2004, S.Hrg.108-426 (Washington, DC: GPO,
2004), p. 83.
34 U.S. Congress, House Committee on Education and the Workforce, Subcommittee on 21st Century Competitiveness,
H.R. 3039, The Expanding Opportunities in Higher Education Act of 2003 , 108th Cong., 1st sess., September 11, 2003,
H.Hrg. 103-31 (Washington, DC: GPO, 2004), pp. 3, 31 -32.
35 U.S. Congress, Senate Committee on Health, Education, Labor, and Pensions, The Higher Education Act and the
Workforce: Issues for Reauthorization, 108th Cong., 2nd sess., March 4, 2004, S.Hrg.108-426 (Washington, DC: GPO,
2004), pp. 83-84; U.S. Congress, House Committee on Education and the Workforce, Subcommittee on 21 st Century
Competitiveness, H.R. 3039, The Expanding Opportunities in Higher Education Act of 2003 , 108th Cong., 1st sess.,
September 11, 2003, H.Hrg. 103-31 (Washington, DC: GPO, 2004), pp. 3, 31-32.
36 U.S. Congress, House Committee on Education and Labor, College Opportunity and Affordability Act of 2007, report
to accompany H.R. 4137, 110th Cong., 1st sess., December 19, 2007, 110-500, pp. 268-269.
37 Kellie Bartlett, “For-profit colleges and reauthorization,” Chronicle of Higher Education, May 16, 2005.
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less difficult for proprietary IHEs to meet the rule’s requirements. However, the amendments also
strengthened reporting and disclosure requirements associated with the rule. In describing
changes to the rule ultimately made under the HEOA, a House report accompanying a House-
passed reauthorization bil from the prior year stated that the amendments were a “carefully
balanced approach toward easing the burden of the [90/10] rule on schools while providing
additional safeguards to protect students and the federal fiscal interest.”38
The HEOA removed the 90/10 rule from the definition of proprietary IHE. That is, the rule was
eliminated as a condition of Title IV institutional eligibility. Consequently, proprietary IHEs that
violated the 90/10 rule in a single year would no longer lose their Title IV eligibility immediately.
The amendments established a period of provisional eligibility for the two years following the
failure to meet the requirement (discussed in detail in the “Enforcement” section). Proprietary
IHEs that violated the rule for two consecutive years would lose their Title IV eligibility for at
least two years.
The HEOA also changed the revenue sources used for determining compliance with the 90/10
rule. The amendments specified certain sources of revenue that may be counted in the 10% that
comprises total revenues from non-Title IV sources. Many of these sources were al owed under
regulation prior to the HEOA, but the HEOA also added several new sources. For example, the
HEOA newly allowed proprietary IHEs to count revenue earned from qualified non-Title IV
eligible education or training programs toward the 10% requirement.39 In effect, a proprietary
IHE could have its Title IV eligible programs fully paid for by Title IV federal student aid, but
have the Title IV aid count as only 90% of its total revenue if the other 10% of its tuition and fees
revenue is derived from non-Title IV eligible education programs.
The HEOA established new reporting requirements for ED. Under the amendments, ED is
required to submit annual y to Congress a report that contains, for each proprietary IHE, the
amount and percentage of revenues received from Title IV sources and the amount and
percentage of revenues received from other sources. The HEOA also required ED to publicly
disclose on its College Navigator website the identity of each proprietary IHE that fails to satisfy
the 90/10 rule’s requirements, and the extent to which the IHE failed to do so.40 Final y, the
HEOA required GAO to complete a one-time report to Congress on proprietary IHEs subject to
the rule (see below).
2010 GAO Study on Proprietary IHEs Subject to the 90/10 Rule
In 2010, GAO published a report in accordance with Congress’s HEOA directive to analyze and
report on proprietary IHEs subject to the 90/10 rule.41 Some key findings from the report included
the following:

38 U.S. Congress, House Committee on Education and Labor, College Opportunity and Affordability Act of 2007, report
to accompany H.R. 4137, 110th Cong., 1st sess., December 19, 2007, H.Rept. 110-500, p. 269.
39 T he HEA establishes requirements regarding which programs of education a student may receive T itle IV aid for
while enrolled. Many T itle IV eligible IHEs offer non -T itle IV eligible education programs, including noncredit
programs.
40 T he HEA requires ED t o provide resources to prospective and current students and their families about colleges to
help guide their decisions on the College Navigator website available at https://nces.ed.gov/collegenavigator/.
41 U.S. Government Accountability Office (GAO), For-Profit Schools: Large Schools and Schools that Specialize in
Healthcare Are More Likely to Rely Heavily on Federal Student Aid, GAO-11-4, October 2010, https://www.gao.gov/
assets/320/310897.pdf.
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 Between 2003 and 2008, almost al proprietary IHEs reported complying with the
90/10 rule.
 School characteristics associated with higher than average Title IV revenue rates
included, for example, (1) enrolling high proportions of low-income students, (2)
offering distance education, (3) having a publicly traded parent company, and (4)
being part of a corporate chain.
 When controlling for the effects of other characteristics, schools that enrolled
more than 2,000 students, specialized in healthcare, or did not grant degrees were
more likely than other IHEs to have Title IV revenue rates above 85%.42
 A school’s tuition rate was not associated with a high likelihood of the school
having Title IV revenue rates above 85%.
The American Rescue Plan Act of 202143
The Department of Defense (DOD) provides educational assistance to eligible servicemembers
and their families, while the VA provides educational assistance to eligible servicemembers and
veterans and their families. Benefits provided to eligible individuals include those made available
under the GI Bil s and DOD’s Tuition Assistance (TA) program and may be used at qualifying
proprietary IHEs and other qualifying institutions. The Post-9/11 GI Bil , which went into effect
in 2009, increased the amount of GI Bil benefits paid compared to previous GI Bil s and
authorized benefits to be paid directly to educational institutions.44 From FY2008 to FY2011, GI
Bil benefits increased from approximately $2.8 bil ion to approximately $9.8 bil ion.45 Most
recently in FY2020, approximately $1.2 bil ion in Post-9/11 GI Bil benefits were paid directly to
for-profit educational institutions to cover tuition and fee charges.46 TA distributes tuition and fee
payments to IHEs on behalf of participating servicemembers. In FY2019, DOD requested almost
$0.5 bil ion for such payments.47
These direct payments to for-profit educational institutions48 during a period of increased
congressional scrutiny on proprietary IHEs focused some attention on the effects of such

42 GAO was unable to include a measure of student income in its model of characteristics that were associated with an
increased likelihood of very high (i.e., above 85%) T itle IV revenue rates. GAO, Large Schools and Schools that
Specialize in Healthcare Are More Likely to Relay Heavily on Federal Student Aid, p. 24.
43 Portions of this subsection were drafted by Cassandria Dortch, CRS Specialist in Education Policy.
44 Educational institutions include IHEs and other institutions. For a full description of the GI Bills, see CRS Report
R42785, Veterans’ Educational Assistance Program s and Benefits: A Prim er.
45 Department of Veterans Affairs, President’s Budget Request FY2010, Volume III, p. 2B-2; and Department of
Veterans Affairs, President’s Budget Request FY2013, Volume III, p. 2B-2.
46 Department of Veterans Affairs, GI Bill Comparison T ool, https://www.va.gov/gi-bill-comparison-tool, downloaded
by CRS on April 20, 2021.
47 Department of Defense budget justification documents, and information provided to CRS by military legislative
liaisons in 2018.
48 For purposes of GI Bill benefits, an educational institution is “any public or private elementary school, secondary
school, vocational school, correspondence school, business school, junior college, teachers’ college, college, normal
school, professional school, university, or scientific or technical institution, or other institution furnishing education for
adults. Such term includes any entity that provides training required for completion of any state-approved alternative
teacher certification program (as determined by the Secretary). Such term also includes any private entity (that meets
such requirements as the Secretary may establish) that offers, either directly or under an agreement with another entity
(that meets such requirements), a course or courses to fulfill requirements for the attainme nt of a license or certificate
generally recognized as necessary to obtain, maintain, or advance in employment in a profession or vocation in a high
technology occupation (as determined by the Secretary). T he term also includes any qualified provider of
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payments on IHEs, GI Bil and TA recipients, and GI Bil and TA expenditures. In general, there
has been concern that a disproportionate share of Post-9/11 GI Bil benefits have been paid to and
used for attendance at proprietary IHEs that have poor educational outcomes for veterans and are
not the best use of federal dollars.49 There have been several reports of false or predatory
marketing or advertising practices on the part of some proprietary IHEs attempting to enroll GI
Bil and TA participants, in part to pass the 90/10 requirement.50 Some stakeholders have cal ed
the intention of some proprietary IHEs to use GI Bil and TA funds to stay below the 90%
threshold the 90/10 loophole.
Because of these concerns, for several years some stakeholders have recommended requiring that
tuition and fee revenues received collectively from Title IV benefits, GI Bil benefits, TA, and al
other federal educational benefits not exceed 90% of total tuition and fee revenues at proprietary
IHEs. However, concerns with this policy option have been raised. Implementing such a change
might result in some IHEs discouraging GI Bil and TA participants from enrolling or may result
in the closure of some IHEs. Either potential outcome could be seen as limiting veteran choices in
postsecondary education. Either potential outcome could also been seen as adversely affecting
some servicemembers and veterans because some proprietary IHEs offer a high-quality
education, have strong educational outcomes, offer flexible instructional modes, offer flexible
schedules, and may award educational credits that might not be accepted as transfer credits at
public or private nonprofit IHEs following a school closure. In addition, school closures may be
seen as wasting federal dollars and increasing the cost of GI Bil benefits to the federal
government, as some participants may use more benefits to complete their education even as
other participants might be permanently dissuaded from finishing their education.51
Recently, Congress and the President enacted the American Rescue Plan of 2021 (P.L. 117-2 ),
which amended the HEA to specify that proprietary IHEs may not derive more than 90% of their
tuition and fees revenues from federal education assistance funds. Federal education assistance
funds are defined as “federal funds disbursed or delivered to or on behalf of a student to be used
to attend such institution.” This definition seemingly encompasses GI Bil and TA benefits, and
potential y other federal funds used to pay a student’s tuition and fees at an IHE. The amendment
is to apply to institutional fiscal years beginning on or after January 1, 2023.

entrepreneurship courses.” 38 U.S.C. §3452(c).
49 See, for example, U.S. Congress, Senate Health, Education, Labor and Pensions Committee, New Data on Post-9/11
G.I. Bill Benefits Show Disproportionate Share of Taxpayer Dollars Going to For-Profit Colleges with Concerning
Outcom es, September 22, 2011.
50 See, for example, Michael Stratford, “For-Profit-College Marketer Settles Allegations of Predatory Practices,”
Chronicle of Higher Education, June 26, 2012; Andy T homason, “ Defense Dept. Lifts Suspension of U. of Phoenix
from T uition Assistance Program,” The Chronicle of Higher Education, January 15, 2016.
51 For supporting and opposing positions, see, for example, U.S. Congress, Senate Committee on Homeland Security
and Governmental Affairs, The 90/10 Rule: Im proving Educational Outcomes for Our Military and Veterans, hearing,
113th Cong., 1st sess., July 23, 2013, S.Hrg. 113-206 (Washington, DC: GPO, 2014); and U.S. Government
Accountability Office (GAO), Post-9/11 GI Bill: Veterans Affected by School Closures, GAO-19-553T , June 19, 2019.
T he Congressional Budget Office estimated that restoring GI Bill benefits and providing transitional Post -9/11 GI Bill
housing stipends to students who attend institutions that permanently close after 2017 during an academic t erm would
increase spending for education benefits by $150 million over the 2018 -2027 period (Congressional Budget Office,
H.R. 3218: Harry W. Colm ery Veterans Educational Assistance Act of 2017 , September 6, 2017, pp. 7-8).
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Current 90/10 Rule
Currently, HEA Section 487(a)(24) requires that as part of their program participation agreements
(PPAs),52 proprietary IHEs must agree to derive at least 10% of tuition and fee revenues from
non-Title IV sources.53 Each proprietary IHE calculates and discloses to ED the percentage of
revenues derived from Title IV program funds in a footnote to its annual audited financial
statements.54 HEA Section 487(d)(1) and regulations specify how revenues are to be calculated
for purposes of the 90/10 rule. Under HEA Section 487(d)(2), if a proprietary IHE fails to meet
the 90/10 rule requirements in any one institutional fiscal year,55 then the IHE’s certification56 to
participate in the Title IV programs becomes provisional for two institutional fiscal years (see the
“Enforcement” section). An IHE that fails to meet the 90/10 rule requirements for two
consecutive institutional fiscal years loses eligibility to participate in the Title IV programs for at
least two institutional fiscal years.
Formula
As noted above, each proprietary IHE calculates and discloses to ED the percentage of revenues
derived from Title IV program funds. The current formula that proprietary IHEs use to calculate
their Title IV tuition and fees revenue for purposes of the 90/10 rule can be stated as follows:57
Title IV funds used for tuition, fees, and other institutional charges to students
divided by
Revenues generated from (1) tuition, fees, and other institutional charges for students
enrolled in Title IV-eligible programs of education and qualified non-Title IV eligible
programs of education plus (2) institutional activities necessary for the education or
training of students.58
If the result after multiplying the result of the formula by 100 is greater than 90%, then an IHE is
deemed to be out of compliance with the 90/10 rule.
In calculating revenues to be included in the formula, proprietary IHEs must use the cash basis of
accounting.59 Under the cash basis of accounting, revenue is recognized only when it is received,

52 IHEs that participate in the T itle IV student aid programs must have a current PPA. A PPA is a document in which an
IHE agrees to comply with the laws, regulations, and policies applicable to the T itle IV programs.
53 Both domestic and foreign proprietary IHEs must meet the 90/10 rule requirements. Foreign IHEs are only eligible to
participate in the Direct Loan program. HEA §102(a)(1)(C).
54 34 C.F.R. §668.23(d)(3). In general, an IHE that participates in the T itle IV student aid programs must have an
independent auditor conduct an annual audit of its financial statements. T he resulting financial statement audit must be
submitted to ED. HEA §487(c)(1)(A).
55 An institutional fiscal year is a one-year period that an IHE uses for financial reporting and budgeting. An IHE may
set its own institutional fiscal year. Office of Federal Student Aid, Federal Student Aid Handbook: 2020 -2021, vol. 2,
p. 90 (hereinafter, “ FSA Handbook”).
56 Certification refers to ED’s determination that an IHE meets T itle IV participation requirements. An IHE may not
participate in the T itle IV programs until ED has certified it for participation. For additional information , see HEA
Section 498.
57 T he mathematical expression of the 90/10 calculation is described in 34 C.F.R. Part 668, Subpart B, Appendix C.
58 Institutional activities necessary for the education or training of students could include, for example, a restaurant
operated by an IHE in which students may be required to work as part of their training. U.S. Congress, House
Committee on Education and Labor, College Opportunity and Affordability Act of 2007 , report to accompany H.R.
4137, 110th Cong., 1st sess., December 19, 2007, H.Rept. 110-500, p. 269.
59 34 C.F.R. §668.28(a)(2). For institutional loans made to students on or after July 1, 2008, and prior to July 1, 2012,
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rather than when it is earned. For the purposes of determining compliance with the 90/10 rule,
revenue is considered “an inflow or other enhancement of assets to an entity, or a reduction of its
liabilities resulting from the delivery of production of goods or services.”60A proprietary IHE may
only recognize revenue when it represents cash received from a source outside of the institution.
In calculating an IHE’s 90/10 ratio, consideration of funds received is determined on a student-
by-student basis. That is, an IHE determines how much tuition and fees for each student is paid
for with Title IV funds and how much is paid for with non-Title IV funds.
Numerator
The numerator of the 90/10 calculation must include institutional revenues derived from the Title
IV programs, including the Pel Grant, Direct Loan, Federal Work-Study (FWS), and Federal
Supplemental Educational Opportunity Grant (FSEOG) programs.61 Some exclusions apply (see
the “Exclusions” section).
Proprietary IHEs must generally treat Title IV funds as used to pay tuition, fees, and institutional
charges prior to the application of other funds, regardless of whether the institution credits the
funds to the student’s institutional account or pays funds directly to the student.62 Some
exceptions to this rule apply.
Specifical y, IHEs may consider funds from the following sources as used to pay tuition, fees, and
institutional charges63 prior to applying Title IV funds:
 grants provided by nonfederal public agencies (e.g., state aid) or private sources
(e.g., assistance from the student’s employer) that are independent of the IHE;64
 a contract with a federal, state, or local government agency for the purpose of
providing job training to low-income individuals in need of such training (e.g.,
contracts under Title I of the Workforce Innovation and Opportunity Act65);

proprietary IHEs included as revenue the net present value of the loans made to the students during the applicable fiscal
year. As this provision is no longer applicable, regulations that become effective July 1, 2021, rescind provisions
relating to it. U.S. Department of Education, “ Distance Education and Innovation,” 85 Federal Register 54818,
September 2, 2020.
60 FSA Handbook, vol. 2, p. 94.
61 Under the FWS and FSEOG programs, participating IHEs are required to provide a nonfederal match equal to a
portion of the federal funds they receive. T he federal funds to support these programs are included in the numerator of
the 90/10 calculation. T he nonfederal match is excluded entirely from the 90/10 calculation. 34 C.F.R. §668.28.
62 HEA §487(d)(1)(C). In administering T itle IV funds to students, ED first makes the T itle IV funds for which the
student is eligible available to their IHE. T he IHE then applies the T itle IV funds to the student’s institutional account
and retains institutional charges (e.g., tuition and fees). T he remainder of the T itle IV funds are then refunded to the
student.
63 Institutional charges are generally those for room and board and other educational expenses that are paid directly to
the school. For additional information on institutional charges, see FSA Handbook, vol. 4, pp. 30-31.
64 T his might also include, for example, student scholarships from a local business. U.S. Department of Education,
“Institutional Eligibility Under the Higher Education Act of 1965, as Amended,” 59 Federal Register 6449, February
10, 1994.
65 For additional information, see CRS Report R46306, Direct Federal Support of Individuals Pursuing Training and
Education in Non-degree Program s.
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 funds from savings plans for educational expenses established by or on behalf of
the student if the saving plan qualifies for special tax treatment under the Internal
Revenue Code (IRC) (e.g., 529 accounts);66 and
 qualified institutional scholarships, which may include tuition discounts, if the
funds are derived from an outside source unrelated to the IHE.67
In effect, the application of funds from the above-listed sources prior to the application of any
Title IV funds to tuition, fees, and institutional charges diminishes the amount of Title IV funds
that would otherwise appear in the numerator, thereby making it easier for IHEs to meet 90/10
rule requirements.
Denominator
The denominator of the 90/10 calculation must include al institutional revenues derived from a
variety of statutorily specified sources, unless excluded (see the “Exclusions” section).
Institutions must include the following sources of revenue in the denominator:
1. funds paid by or on behalf of a student by a party other than the IHE

(a) for tuition, fees, and other institutional charges for Title IV-eligible programs
of education68; and

(b) for tuition, fees, and other institutional charges for certain non-Title IV
eligible education or training programs69; and
2. funds generated from qualifying activities conducted by the IHE that are
necessary for the education and training of the students (e.g., salon services
receipts from customers that result from a required cosmetology course).70

66 U.S. Congress, House Committee on Education and Labor, College Opportunity and Affordability Act of 2007, report
to accompany H.R. 4137, 110th Cong., 1st sess., December 19, 2007, H.Rept. 110-500, p. 269. For additional
information on 529 plans, see CRS Report R42807, Tax-Preferred College Savings Plans: An Introduction to 529
Plans.
67 Qualified institutional scholarships (which may include tuition discounts) are those scholarships provided by a
proprietary IHE “in the form of monetary aid or tuition discounts based upon the academic achievements or financial
need of students, disbursed during each fiscal year from an established restricted account, and only to the extent that
funds in that account represent designated funds from an outside source or income earned on those funds.” HEA
§487(d)(1)(D)(iii).
68 HEA Section 487(d)(1)(E) and accompanying regulations require IHEs to include as institutional revenues “from
sources other than funds received under” T itle IV, the proceeds of Unsubsidized Federal Family Education Loan
(FFEL) and Direct Loan program Stafford Loans that exceed the loan limits in effect on May 6, 2008, and t hat were
received by a student on or after July 1, 2008, but before July 1, 2011. T his provision was enacted in response to the
Ensuring Continued Access to Student Loans Act (ECASLA; P.L. 110-27), which raised the loan limits for
Unsubsidized FFEL Direct Loan program Stafford Loans by $2,000 for most types of undergraduate students. T he
excess of loan proceeds resulting from the increased loan limits were technically T itle I V funds that affected the
percentage of funds proprietary IHEs generated from T itle IV. Because the specified timeframe for loan disbursement
has passed, this provision is no longer applicable.
69 T he certain non-Title IV eligible programs are education programs that are not eligible for T itle IV purposes and that
(1) are approved or licensed by the appropriate state agency; (2) are accredited by an ED -recognized accrediting
agency; (3) provide an industry-recognized credential, or prepare students to take an examination for an industry-
recognized credential; (4) provide training needed for students to maintain state licensing requirements, or (5) provide
“training needed for students to meet additional licensing requirements for specialized training for practitioners that
already meet the general licensing requirements in a field.” 34 C.F.R. §668.28(a)(3)(iii).
70 Qualifying activities are those that are (1) “conducted on campus or at a facility under the control of the institution,”
(2) “performed under the supervision of a member of the institution’s faculty,” and (3) “required to be performed by all
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Funds under category 1 above include, but are not limited to, al revenues included in the
numerator of the 90/10 calculation.
Any non-Title IV sources of revenue can be applied to a student’s tuition, fees, and other
institutional charges after the application of Title IV funds and the funds applied before Title IV
funds discussed above. This could include, for example, DOD educational benefits and veterans
educational assistance. As such, the following types of institutional aid are to be included in the
denominator to the extent to which they are needed to fulfil tuition, fees, and other institutional
charges not covered by Title IV aid:
 qualified institutional scholarships using funds from an outside source unrelated
to the IHE,71
 qualified tuition discounts using funds from an outside source unrelated to the
IHE,72
 loan repayments received on institutional loans made on or after July 1, 2012,73
and
 qualified recourse loans.74
Exclusions
Several types of funds are excluded from both the numerator and the denominator of the 90/10
calculation. These include the following:
 funds paid directly to a student under the FWS program, unless the IHE credits
the student’s school account with the FWS funds (i.e., the funds are used to pay a
student’s institutional charges);
 institutional funds used to match Title IV federal student aid funds;75
 Title IV program funds that were refunded to ED because the student to whom
(or on whose behalf) the funds were paid failed to complete the period of
enrollment (i.e., Title IV funds required to be returned under a return of Title IV
funds calculation);76 and

students in a specific educational program at that institution.” HEA §487(d)(1)(B)(ii).
71 See footnote 67.
72 See footnote 67.
73 When institutional loans are initially made to students, they are excluded from the 90/10 calculation altogether, as
they do not represent an inflow of assets to the IHE at that time. For institutional loans made to students on or after July
1, 2008, and prior to July 1, 2012, proprietary IHEs included as revenue the net present value (NPV) of the loans made
to the students during the applicable fiscal year. In short, the formula to determine the NPV of institutional loans took
into account the discounted value of cash flows caused by inflation over time. As the exception is no longer applicable,
regulations that become effective July 1, 2021, rescind several provisions relating to it. U.S. Department of Education,
“Distance Education and Innovation,” 85 Federal Register 54818, September 2, 2020.
74 Recourse loans are loans made by private lenders “that are in any manner guaranteed by the school.” Proceeds from
these loans may be included in the denominator if the IHE’s reported revenues are also reduced by t he amount of
recourse loan payments made to recourse loan holders during the same fiscal year. In addition, the non -recourse portion
of a partial recourse loan (i.e., any portion not guaranteed by the IHE) may also be included as revenue in the 90/10
calculation, if the contract identifies the percentage of the sale that is non -recourse. FSA Handbook, vol. 2, p. 94.
75 T his includes, for example, the institutional funds used to match the federal contribution under the FWS, FSEOG,
and Perkins Loan programs.
76 For additional information on return to T itle IV calculations, see FSA Handbook, vol. 5.
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 the amount charged for books, supplies, and equipment, unless the costs are
included as tuition, fees, or other institutional charges.77
Table 1 summarizes the treatment of various sources of revenue under the 90/10 calculation. This
is not necessarily an exhaustive list of al revenues that an IHE may derive, but rather a summary
of the specific funding sources discussed in this report. Only revenue sources that an IHE may
currently receive are included in the table.
Table 1. Treatment of Different Types of Revenue in the 90/10 Rule Calculation
Revenue Sourcesab
Additional Information
Included in both the numerator and the denominator
Title IV programs funds
The fol owing Title IV funds are excluded from the calculation altogether:

 FWS funds paid directly to students, unless the funds are credited to a
student’s school account;
 institutional funds used to match Title IV federal student aid fundsc; and
 funds refunded to ED because the student to whom (or on whose
behalf) the funds were paid failed to complete the period of enrol ment.
Included in the denominator
Grants provided by nonfederal public agencies or

private sources independent of the IHE
Contracts with federal, state, or local government

agencies for the purpose of providing job training
to low-income individuals
Savings plans for educational expenses established

by (or on behalf of) a student if the savings plan
qualifies for special tax treatment under the IRC
Qualified institutional scholarships
 Must be awarded based on the academic achievement or financial need

of students
 Must be disbursed from an established restricted account with
designated funds from an outside source or income earned from such
funds
Qualified tuition discounts
 Same requirements as qualified institutional scholarships
Loan repayments made on institutional loans made
 IHE may only include as revenues repayments received during the
on or after July 1, 2012
appropriate fiscal year for previously disbursed institutional loans.
Qualified recourse loans
 To include proceeds from a recourse loan in the denominator, an IHE

must reduce reported revenues by the amount of recourse loan
payments made to recourse loan holders during the same institutional
fiscal year.
 The non-recourse portion of a partial recourse loan may be included in
the denominator if the loan contract identifies the percentage of the
sale that is non-recourse.

77 Section 487(d)(1)(F)(ii) of the HEA also specifies that funds received by an IHE from a state under the Leveraging
Educational Assistance Partnership (LEAP) program , Special Leveraging Educational Assistance Partnership (SLEAP)
program, and the Grants for Access and Persistence (GAP) program are excluded from the calculation. T hese three
programs provided federal matching grants to states to assist them in establishing need-based scholarship programs for
postsecondary students, among other activities. T he SLEAP program was replaced by the GAP program under the
HEOA (P.L. 110-315). T he LEAP and GAP programs have not received federal appropriations since FY2010.
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Qualified activities conducted by the IHE necessary Qualifying activities must be
for the education and training of students
 conducted on campus or at a facility under institutional control,

 performed under the supervision of institutional faculty, and
 required of al students in a specific educational program.
Source: CRS analysis of HEA §487(d) and 34 C.F.R. §668.28.
a. With the exception of institutional activities necessary for the education or training of students, al revenue
sources listed represent funds paid for tuition, fees, and other institutional charges.
b. Funds received under the LEAP, SLEAP, and GAP programs are excluded from this table, as the SLEAP
program no longer exists and the LEAP and GAP programs have not received federal appropria tions since
FY2010.
c. This includes institutional funds used to match the federal contribution under the FWS, FSEOG, and Perkins
Loan programs.
Enforcement
ED requires each proprietary IHE that has a PPA to
Conversion to Nonprofit or
disclose to it the percentage of revenues derived from
Public Status
Title IV program funds79 in a footnote to its annual
ED guidance requires a school that converts
audited financial statements.80 An IHE may have a
from a proprietary to a nonprofit or public
single PPA covering the main campus and some or al
status for Title IV purposes to continue to
of its branch campuses and locations, or it may have
report its compliance with the 90/10 rule for
separate PPAs covering the main campus and each
at least one complete institutional fiscal year
after ED has approved the change in status. If
branch campus and location that meets Title IV
the school fails the 90/10 rule requirements
requirements. Thus, an IHE’s 90/10 ratio may
for the first year under the new status, it
represent revenues from multiple campuses.81 In
would be required to report 90/10 rule
general, an IHE must submit its audited financial
compliance for an additional year. Other
problems with 90/10-rule disclosure may
statements to ED within six months of the end of its
result in the school being required to report
fiscal year.82 However, a proprietary IHE that fails to
for one more year.78
satisfy the 90/10 rule for its most recent fiscal year
must report such failure to ED within 45 days of the end of the institutional fiscal year.83
Under HEA Section 487(d)(2), if a proprietary IHE fails to meet the 90/10 rule requirements in
any one institutional fiscal year, then its certification to participate in the Title IV programs
becomes provisional for up to two institutional fiscal years following the institutional fiscal year
in which it failed to meet the requirements. Under provisional certification, although ED certifies

78 FSA Handbook, vol. 2, p. 92.
79 IHEs must disclose other 90/10 rule-related information as well, including the dollar amount of the numerator and
denominator of the 90/10 calculation. See U.S. Department of Education, Office of Inspector General, Guide for Audits
of Proprietary Schools and for Com pliance Attestation Engagem ents of Third -Party Servicers Adm inistering Title IV
Program s, September 2016, p. 28, https://www2.ed.gov/about/offices/list/oig/nonfed/schoolservicerauditguide.pdf.
80 34 C.F.R. §668.23(d)(3). In general, an IHE that participates in the T itle IV student aid programs must have an
independent auditor conduct an annual audit of its financial statements. T he resulting financial statement audit must be
submitted to ED. HEA §487(c)(1)(A).
81 Whether a PPA covers one or more campuses depends on how an IHE is organized, which is a determination made
by the IHE. For example, three institutional campuses may be covered by a single PPA, or three related campuses may
be covered under three individual PPAs. In the first scenario, the three campuses would collectively report a single
90/10 calculation, and in the second scenario, each individual campus would report its own 90/10 calculation.
82 34 C.F.R. §668.23(a)(1).
83 34 C.F.R. §668.28(c)(3).
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that an IHE has demonstrated it is capable of meeting the Title IV institutional participation
standards and is able to meet its responsibilities under its PPA, the IHE must meet “any additional
conditions specified in the institution’s program participation agreement that the Secretary
requires the institution to meet in order for the institution to participate under provisional
certification,” which may include, for example, meeting additional reporting requirements.84
An IHE that fails to meet the 90/10 rule requirements for two consecutive institutional fiscal
years loses eligibility to participate in the Title IV programs for at least two institutional fiscal
years. To regain eligibility, the IHE must demonstrate compliance with al Title IV eligibility
requirements for at least two institutional fiscal years after the institutional fiscal year in which it
became ineligible.85 The HEA requires ED to publicly disclose on the College Navigator86
website the identity of any proprietary IHE that fails to meet any 90/10 rule requirement.
Historical Compliance
This section il ustrates proprietary IHE’s performance under the 90/10 rule for the past 11 years.
Figure 1 shows the percentage of proprietary IHEs deriving specified percentages of revenues
from Title IV sources during the period from award year (AY) 2007-2008 (the first year in which
the HEOA amendments were in effect) to AY2017-2018 (the most recent year for which data are
available). ED reports IHEs’ compliance with the 90/10 rule for institutional fiscal years that end
in a specified award year. For example, an IHE’s performance in its institutional fiscal year that
ended December 31, 2017, would be reported in AY2017-2018, which encompasses July 1, 2017,
through June 30, 2018. In addition, ED only reports data for those IHEs whose financial
statements and 90/10 revenue percentages have been reviewed and accepted by ED.87 Thus, it is
possible that some proprietary IHEs’ performances under the 90/10 rule are not included in the
data.
Figure 1 shows that, general y, a smal percentage of proprietary IHEs derive greater than 90% of
their revenues from Title IV sources. Over the 11 award year period depicted, fewer than 2% of
reported proprietary IHEs derived greater than 90% of their revenue from Title IV sources in any
given year, ranging from a high of 1.4% (29) in AY2011-2012 to a low of 0.2% (4) in AY2015-
2016. Over the same period, between 11% (209 in AY2007-2008) and 21% (441 in AY2011-
2012) of reported proprietary IHEs derived greater than 85% but no more than 90% of their
revenues from Title IV sources. Overal , most proprietary IHEs derive between 60% and 85% of
their revenues from Title IV sources.

84 34 C.F.R. §668.13(c)(4)(ii).
85 HEA §487(d)(2)(A); 34 C.F.R. §668.28(c)(1).
86 U.S. Department of Education, National Center for Education Statistics, College Navigator, https://nces.ed.gov/
collegenavigator/.
87 Letter from Robert L. King, Assistant Secretary, Office of Postsecondary Education, to Robert “Bobby” Scott,
Chairman, House Committee on Education and Labor, October 29, 2019, https://studentaid.gov/sites/default/files/2017-
2018-transmittal.pdf.
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Figure 1. Proprietary IHEs’ Percentage of Title IV Revenues
Institutional Fiscal Years Ending in AY2007-2008 through AY2017-2018

Source: CRS analysis of U.S. Department of Education data (U.S. Department of Education, Federal Student Aid
Data Center, “Proprietary School 90/10 Revenue Percentages,” https://studentaid.gov/data-center/school/
proprietary).
Notes: ED reports IHEs’ compliance with the 90/10 rule for institutional fiscal years that end in a specified
award year. “TIV” is tuition and fees revenue derived from Title IV sources.
Figure 2 depicts the number of proprietary IHEs that failed the 90/10 requirement in a single year
and those that lost Title IV eligibility due to failing the 90/10 requirement for two consecutive
years in each of the past 10 award years (i.e., since the transition to IHEs losing Title IV
eligibility after two consecutive years of noncompliance). The same data limitations that apply to
Figure 1 (discussed above) apply to Figure 2. Very few proprietary IHEs (eight total) have lost
Title IV eligibility due to failing the 90/10 requirement for two consecutive years over the last 10
award years for which data are available. None of those eight IHEs have since regained Title IV
eligibility.88 Substantial y more proprietary IHEs have failed the 90/10 requirement in at least one
year, ranging from a high of 29 in AY2011-2012 to a low of 4 in AY2015-2016.

88 CRS analysis of U.S. Department of Education, Postsecondary Education Participants System, downloaded March
15, 2021.
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Figure 2. Proprietary IHEs Failing to Meet 90/10 Rule Requirements and Losing
Title IV Eligibility
Institutional Fiscal Years Ending in AY2008-2009 through AY2017-2018

Source: CRS analysis of Department of Education data, U.S. Department of Education, Federal Student Aid Data
Center, “Proprietary School 90/10 Revenue Percentages,” https://studentaid.gov/data-center/school/proprietary.
Note: ED reports IHEs’ compliance with the 90/10 rule for institutional fiscal years that end in a specified award
year.
Recent Congressional Proposals
In recent years, some Members of Congress have proposed a number of amendments89 to the
90/10 rule. These proposals have arisen because there is a level of congressional and stakeholder
dissatisfaction with the current rule. Some stakeholders advocate for closing the so-cal ed 90/10
loophole (see the “The American Rescue Plan Act of 2021” section). Some stakeholders believe
that the 90/10 rule treats proprietary IHEs inequitably, as it only applies to them even though
some public and nonprofit IHEs may have similar student outcomes (e.g., graduation rates).90
Others, however, believe that treating proprietary IHEs differently is proper, as many rely heavily
on Title IV revenues while too frequently producing poor student outcomes.91 Several proposals
that may garner attention, along with relevant policy issues and considerations, are discussed
below.92

89 See, for example, S. 3114 (116th Congress) and H.R. 3179 (116th Congress).
90 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, The 90/10 Rule: Improving
Educational Outcom es for Our Military and Veterans, 113th Cong., 1st sess., July 23, 2013, S.Hrg.113-206
(Washington, DC: GPO, 2014), p. 4.
91 Danielle Douglas-Gabriel, “Republican leader backs restrictions that could end for-profit colleges’ aggressive
recruitment of veterans,” The Washington Post, November 19, 2019.
92 Policy issues and options discussed in this section are based on existing and prior congressional legislative proposals,
proposals forwarded by presidential administrations, topics addressed at congressional hearings, and issues and options
identified by external researchers, think tanks, and practitioner groups. CRS has also identified some additional
considerations that might be explored in evaluating these policy issues.
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The 90/10 Rule as a Condition of Title IV Eligibility
The HEOA eliminated the 90/10 rule as a condition of institutional eligibility for participation in
the Title IV programs by removing it from the HEA Section 102 definition of a proprietary IHE,
but instituted a requirement for IHEs to agree to meet the 90/10 rule’s provisions as part of their
PPAs. In addition, the HEOA established that proprietary IHEs violating the 90/10 rule in a given
year do not immediately lose their Title IV eligibility; they may only lose Title IV eligibility after
two consecutive years of failing the 90/10 requirement. As indicated in Figure 2, since AY2007-
2008 very few IHEs have lost Title IV eligibility under this construct. As such, some Members of
Congress want the 90/10 rule to be more consequential and have proposed reinstating it as a
condition of Title IV institutional eligibility by returning it to the HEA Section 102 definition of
proprietary IHE.93 Doing so would mean that a single year of noncompliance with the rule would
result in immediate loss of Title IV eligibility for proprietary IHEs that are presumably of low
quality.
Making the 90/10 rule a condition of Title IV eligibility would likely require some proprietary
IHEs to take action to decrease their reliance on Title IV funds to ensure compliance with the rule
in a single year. Making the 90/10 rule a condition of Title IV eligibility may also result in the
closure of some presumably low quality IHEs, as their primary source of revenues would be
eliminated if they fail to meet the rule’s requirements. Current and prospective students may
subsequently choose to attend higher quality IHEs. However, concerns have been raised that
immediate loss of Title IV eligibility may harm students,94 as their educational experience may be
suddenly disrupted either because they have to transfer to another IHE to access Title IV aid or
because the proprietary IHE they attended had to close.95
On the other hand, retaining the 90/10 rule as part of the PPA may al ow some proprietary IHEs
time to take corrective action to meet the 90/10 requirement after failing in a single year.
Permitting corrective time periods may be especial y relevant to IHEs that experience a decrease
in revenues from non-Title IV sources due to circumstances beyond their control, such as an
economic downturn.96
Application of the 90/10 Rule to Public and Nonprofit IHEs
Only proprietary IHEs must comply with the 90/10 rule; thus, some believe that the rule
inequitably singles out these institutions. As such, some recent legislative proposals would apply
the 90/10 rule to public and nonprofit IHEs as wel .97 Proponents of such measures argue that if
the 90/10 rule truly relates to institutional quality, then it should apply to al IHEs equal y. This
may be especial y true, they argue, because some public and nonprofit IHEs have student
outcomes (e.g., graduation rates) that are similar to those of proprietary IHEs.98 Proponents also

93 See, for example, H.R. 4674 (116th Congress), as reported by the House Committee on Education and Labor.
94 See, for example, Stephen Burd, “House Panel Deals a Setback to For-Profit Colleges and a Victory to Privacy
Advocates,” The Chronicle of Higher Education, July 14, 2005.
95 For additional information on issues faced by students when their IHEs close, see CRS Report R44737, The Closure
of Institutions of Higher Education: Student Options, Borrower Relief, and Other Im plications.
96 Letter from Jason Altmire, President and CEO, Career Education College and Universities, to Joseph R. Biden,
President -Elect, January 11, 2021, https://www.career.org/uploads/7/8/1/1/78110552/
cecu_ltr_biden_administration_priorities_and_policy_recommendations_2021 -1-11.pdf.
97 See, for example, S. 3114 (116th Congress).
98 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, The 90/10 Rule: Improving
Educational Outcom es for Our Military and Veterans, 113th Cong., 1st sess., July 23, 2013, S.Hrg.113-206
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argue that regulation of IHEs should be sector-neutral and that the federal government should not
favor one type of IHE over another through burdensome regulations “merely because of tax
status.”99
Those who oppose proposals to apply the 90/10 rule to al types of IHEs believe that treating
proprietary IHEs differently is proper, arguing that many proprietary IHEs produce poor student
outcomes. They believe that because proprietary IHEs rely heavily on Title IV aid and produce
comparatively poor student outcomes, they pose the highest risk to students and taxpayers; thus,
imposing restrictions on Title IV revenues at proprietary IHEs is a necessary guardrail.100 In
addition, proprietary IHEs are fundamental y different from public and nonprofit IHEs because
they have a fiduciary duty to maximize profits for stakeholders, an incentive that does not exist
for public and nonprofit IHEs.101
While applying the 90/10 rule to al sectors would presumably increase accountability across al
Title IV participating IHEs, the extent to which public and nonprofit IHEs rely on Title IV funds
as a source of revenues, as currently calculated under the 90/10 rule, is unclear. Data necessary to
calculate an IHE’s 90/10 ratio are general y not publicly available and largely remain with IHEs;
therefore, it is difficult to estimate effects of changes to the application of the 90/10 rule.102 If,
however, the 90/10 rule were applied to public and nonprofit IHEs, it is possible that some IHEs
at risk of failing the 90/10 requirement may adjust their practices in ways similar to those
reported by proprietary IHEs (e.g., limiting access to low-income student populations).103
Application of the 90/10 rule to public and nonprofit IHEs would also likely increase
administrative burden for the schools.
Elimination of the 90/10 Rule
One of the primary assumptions underlying the 90/10 rule is that if a proprietary IHE is of
sufficient quality, it should be able to attract a certain percentage of revenues from non-Title IV
sources. At the same time, some Members of Congress believe that the rule is not an appropriate
proxy measure for institutional quality104 and have introduced legislation to eliminate the rule
altogether.105 Proponents of eliminating the rule argue that it penalizes IHEs that enroll high

(Washington, DC: GPO, 2014), p. 4.
99 Mary Clare Amselem, Progressive Plan for Higher Education is Harmful Policy for America, Heritage Foundation,
Issue Brief No. 6023, October 29, 2020, p. 6, https://www.heritage.org/sites/default/files/2020-10/IB6023.pdf.
100 U.S. Congress, House Committee on Education and Labor, College Affordability Act, report to accompany H.R.
4674, 116th Cong., 2nd sess., December 28, 2020, H.Rept. 116-700 (Washington, DC: GPO, 2020), p. 344 . See also,
Danielle Douglas-Gabriel, “ Republican leader backs restrictions that could end for -profit colleges’ aggressive
recruitment of veterans,” The Washington Post, November 19, 2019.
101 U.S. Congress, House Committee on Education and Labor, College Affordability Act, report to accompany H.R.
4674, 116th Cong., 2nd sess., December 28, 2020, H.Rept. 116-700 (Washington, DC: GPO, 2020), p. 343.
102 Some reports have attempted to calculate public and nonprofit IHEs’ performance under the 90/10 rule. See, Vivien
Lee and Adam Looney, Understanding the 90/10 Rule: How reliant are public, private, and for-profit institutions on
federal aid?, Brookings Institution, January 30, 2019, https://www.brookings.edu/wp-content/uploads/2019/01/
ES_20190116_Looney-90-10.pdf and Mark Kantrowitz, Consequences of the 90/10 Rule, August 19, 2013, p. 16.
103 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, The 90/10 Rule: Improving
Educational Outcom es for Our Military and Veterans, 113th Cong., 1st sess., July 23, 2013, S.Hrg.113-206
(Washington, DC: GPO, 2014), p. 60.
104 U.S. Congress, House Committee on Education and the Workforce, Promoting Real Opportunity, Success, and
Prosperity Through Education Reform Act, report to accompany H.R. 4508, 115th Cong., 2nd sess., February 8, 2018,
H.Rept. 115-550 (Washington, DC: GPO, 2018), pp. 213 -214.
105 See, for example, H.R. 4508 (115th Congress).
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proportions of underserved student populations and “discourages them from providing the type of
access that federal student funding initiatives were intended to enable”106 because the rule in
effect measures enrolled student characteristics (e.g., socio-economic status) rather than
educational quality. Proponents also argue that because the rule is applied only to proprietary
IHEs, it is largely arbitrary, as public and nonprofit IHEs can and do enroll students with similar
characteristics.
Proponents of eliminating the 90/10 rule have also surmised that the rule leads to increased
tuition costs for students, as IHEs may adjust their prices upward to remain below the 90%
threshold and ensure that they do not fail the rule’s requirements.107 It is unclear whether that is
the case,108 however, as there may be limits on IHEs’ ability to increase tuition and fees in order
to comply with the rule. First, this is because students may be unable to make up the difference as
tuition charges increase if available aid does not change. Second, the calculation of the 90/10 rule
restricts the use of institutional aid as revenue (for more formation, see the “Formula” section),
and proprietary IHE’s access to state student aid programs may be limited.109 Both of these
considerations may limit an IHE’s use of these sources as revenue for 90/10 rule purposes.
Opponents of eliminating the rule argue it is necessary because proprietary IHEs should not be
funded solely by federal dollars and that federal dollars should not be used to shore up low-
quality schools. They believe that if a school is of sufficient quality, a party other than the federal
government, such as an employer, student, or private scholarship organization, should be wil ing
to pay for attendance at the school.110 There are also concerns that without the 90/10 rule, students
may lose critical protections against institutional practices of fraud and abuse. In addition, some
opponents argue that the rule does not lead to increased tuition for students.111
A complete repeal of the 90/10 rule would treat proprietary IHEs the same as public and nonprofit
IHEs with respect to measuring institutional revenues and may enable proprietary IHEs to enroll
students of certain backgrounds without concern about failing a federal revenue standard. Other
measures of institutional quality that were enacted at the time of or after the enactment of the
original 85/15 rule would presumably remain in place, which may provide some level of
institutional accountability absent the 90/10 rule. Such measures include the cohort default rate,112

106 Anthony J. Guida Jr. and David Figuli, “Higher Education’s Gainful Employment and 90/10 Rules: Unintended
‘Scarlett Letters’ for Minority, Low-Income, and Other At-Risk Students,” The University of Chicago Law Review, vol.
79, no. 1 (Winter 2012), p. 132.
107 U.S. Congress, House Committee on Education and the Workforce, Promoting Real Opportunity, Success, and
Prosperity Through Education Reform Act, report to accompany H.R. 4508, 115th Cong., 2nd sess., February 8, 2018,
H.Rept. 115-550 (Washington, DC: GPO, 2018), pp. 213-214.
108 See, for example, U.S. Government Accountability Office (GAO), For Profit Schools: Large Schools and Schools
that Specialize in Healthcare Are More Likely to Rely Heavily on Federal Student Aid, GAO -11-4, October 2010, p.
32, https://www.gao.gov/assets/320/310897.pdf and Mark Kantrowitz, Consequences of the 90/10 Rule, August 19,
2013.
109 For example, states may operate state student aid programs for which only students enrolled in public or nonprofit
IHEs are eligible. See, for example, Va. Code Ann. §23.1 -628 and §23.1-638.
110 T he Institute for College Access & Success and T he Project on Student Debt, Q&A on the For-Profit College “90-
10” Rule, January 25, 2016, p. 2, https://ticas.org/wp-content/uploads/legacy-files/pub_files/90-10_qa_0.pdf.
111 Lauren Walizer, HEA Proposals Fail Low-Income Students on Affordability, Equity, and Connecting to Work,
CLASP, December 2017, p. 2, https://www.clasp.org/sites/default/files/publications/2017/12/
2017.12.8%20HEA%20Proposal%20Fails%20Low-Income%20Students_0.pdf.
112 An institution’s cohort default rate is the percentage of an IHE’s federal loan recipients who enter repayment in a
given fiscal year and who default within three years. For additional informatio n, see CRS Report R43159, Institutional
Eligibility for Participation in Title IV Student Financial Aid Program s.
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financial responsibility standards,113 and more robust standards ED must use to recognize
accreditation agencies, which in turn play a quality assurance role in evaluating an IHE’s
educational quality.114 These measures gauge institutional practices that may not reflect market
viability, a key rationale behind enactment of the original 85/15 rule. In addition, there is also a
level of discontent with the effectiveness of these other measures.115
Ratio Adjustments
Since the enactment of the Higher Education Amendments of 1998, proprietary IHEs have been
required to derive no more than 90% of their revenues from Title IV sources, a less stringent
standard than what was required under the 85/15 rule. As indicated in Figure 1, a smal
percentage of proprietary IHEs derive greater than 90% of their revenues from Title IV sources,
and thus may experience consequences for failure to comply with the 90/10 rule. As such, some
Members of Congress would like rules relating to institutional Title IV revenues to be more
stringent by adjusting the ratio of Title IV to non-Title IV revenues. Recently, congressional
proposals have focused on modifying the rule to require that proprietary IHEs derive no more
than 85% of their revenues from Title IV funds.116 The remainder of this subsection wil focus on
potential considerations for the creation of an 85/15 rule; however, many considerations discussed
herein could be applied to other proposals that would require proprietary IHEs to derive even
larger percentages of revenues from non-Title IV sources, such as an 80/20 rule.117
Proponents of adjusting the rule’s ratio to 85/15 argue that the current 90/10 ratio permits
excessive amounts of federal funds to flow to IHEs that do not provide a good return on
investment in terms of student outcomes.118 Requiring proprietary IHEs to derive a larger portion
of revenues from other sources, they argue, would ensure that the rule is a meaningful measure of
a proprietary IHE’s market viability and restore the efficacy of the metric as original y intended
by Congress when enacted in 1992.119
The argument for requiring proprietary IHEs to derive a larger share of their revenues from non-
Title IV sources is based on the expectation that such a change would enhance institutional
accountability, as it may cause some proprietary IHEs to bolster their educational offerings in
order to attract a more diversified stream of revenues, while penalizing those IHEs that do not.
Proprietary IHEs unable to meet heightened standards may ultimately lose Title IV eligibility,

113 ED determines an IHE’s financial responsibility based on its ability to provide the serv ices described in its official
publications, to administer the T itle IV programs in which it participates, and to meet all of its financial obligations. For
additional information, see CRS Report R43159, Institutional Eligibility for Participation in Title IV Student Financial
Aid Program s.
114 For additional information on accreditation, see CRS Report R43159, Institutional Eligibility for Participation in
Title IV Student Financial Aid Program s.
115 See, for example, U.S. Congress, House Committee on Education and the Workforce, Promoting Real Opportunity,
Success, and Prosperity Through Education Reform Act, report to accompany H.R. 4508, 115th Cong., 2nd sess.,
February 8, 2018, H.Rept. 115-550 (Washington, DC: GPO, 2018), p. 205.
116 See, for example, H.R. 3112 (116th Congress), H.R. 4674 (116th Congress), and S. 1175 (116th Congress).
117 See, for example, H.R. 3369 (116th Congress).
118 Senator Jack Reed, “Reed, Durbin, Blumenthal, Warren: Congress Should End Loophole that Encourages For -Profit
Colleges to T arget Veterans & Servicemembers,” press release, November 10, 2015, https://www.reed.senate.gov/
news/releases/reed-durbin-blumenthal-warren-congress-should-end-loophole-that -encourages-for-profit-colleges-to-
target -veterans-and-servicemembers.
119 U.S. Congress, House Committee on Education and Labor, College Affordability Act, report to accompany H.R.
4674, 116th Cong., 2nd sess., December 28, 2020, H.Rept. 116-700 (Washington, DC: GPO, 2020), p. 345.
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which may result in the closure of some presumably low-quality IHEs. Current and prospective
students may subsequently choose to attend higher-quality IHEs; however, they may also
experience disruptions to their education should their school lose Title IV eligibility or potential y
close.
Opponents of ratio adjustments make arguments similar to those expressed by supporters of
eliminating the 90/10 rule altogether: that requirements measuring sources of institutional
revenue are inappropriate proxy measures for institutional quality, are applied arbitrarily to only
one sector (i.e., proprietary IHEs), may endanger student access and choice in postsecondary
education, and may lead to increased tuition costs for students.120
Additional Considerations
In addition to the above-described congressional proposals to address 90/10 rule issues, a variety
of other issues relating to the rule have arisen that Congress might consider.
 Treatment of Emergency Aid: Congress may explore how emergency aid to
students121 should be treated in the 90/10 calculation. ED has indicated that some
emergency aid provided to students through proprietary IHEs in response to the
Coronavirus Disease 2019 (COVID-19) pandemic is excluded from the 90/10
calculation, while other COVID-19 related emergency aid is included in the
calculation.122 Congress might consider whether emergency aid to address rare or
one-time situations should be counted against an IHE in determining its 90/10
ratio.
 Institutional Student Loans: Institutional student loans are loans made by an
IHE directly to students to help them finance their postsecondary education.
When an IHE makes a loan to a student, it may only include repayments received
on those loans during the applicable fiscal year in the denominator of its 90/10
rule calculation (i.e., it may consider them as revenues). Inclusion of institutional
student loan payments in the denominator reduces an IHE’s percentage of
revenues received from Title IV sources. It has been al eged that some
proprietary IHEs make institutional loans to students who may ultimately be
unable to fully repay the loans in order to meet the 90/10 rule’s requirements.123
Congress might consider how institutional student loans should be treated under
the rule.
 Recourse Loans: In the context of the 90/10 rule, recourse loans are loans (some
of which may be made to students to help finance their postsecondary education)

120 U.S. Congress, House Committee on Education and Labor, College Affordability Act, report to accompany H.R.
4674, 116th Cong., 2nd sess., December 28, 2020, H.Rept. 116-700 (Washington, DC: GPO, 2020), p. 1434.
121 For additional information, see CRS Report R46378, CARES Act Education Stabilization Fund: Background and
Analysis; and U.S. Department of Education, Fact Sheet —Higher Education Emergency Relief Fund (HEERF) II,
January 14, 2021, https://www2.ed.gov/about/offices/list/ope/factsheetheerfii.pdf.
122 U.S. Department of Education, Higher Education Emergency Relief Fund (HEERF) Frequently Asked Questions
(FAQ) Rollup Docum ent, October 14, 2020, p. 7, https://www2.ed.gov/about/offices/list/ope/
heerffaqsoct2020rollup.pdf; and National Association of Student Financial Aid Administrators, Are HEERF I and
HEERF II Funds Included In the 90/10 Calculation? , February 2021, https://askregs.nasfaa.org/article/34986/are-heerf-
i-and-heerf-ii-funds-included-in-the-90-10-calculation. It appears that ED has made this distinction among the sources
of funds based on whether the funds could be used to satisfy students’ tuition and fees account balances.
123 Sarah Butrymowicz and Meredith Kolodner, “Left in the Lurch by Private Loans from For -Profit Colleges,” The
New York Tim es, March 25, 2021.
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made by private lenders “that are in any manner guaranteed by the school.”
Proceeds from these loans may be included in the denominator of an IHE’s 90/10
rule calculation, which would then reduce the IHE’s percentage of revenues
received from Title IV sources. In recent years, the federal government has taken
action against some proprietary IHEs, al eging that they have used recourse loans
that they knew students would be unable to repay to enable the IHEs to comply
with the 90/10 rule.124 Congress might consider how recourse loans should be
treated under the rule.
Institutional Restructuring: It has been reported that some proprietary IHEs
may engage in a variety of restructuring or other business practices to enable
them to comply with the 90/10 rule or to avoid its application altogether. The
90/10 rule applies to each proprietary IHE with a PPA; some institutional parent
companies may have multiple IHEs each with their own PPA. As such, some
companies may move some academic programs or branch campuses from IHEs
that derive a high percentage of revenues from Title IV funds to IHEs that derive
a lower percentage from Title IV funds to ensure that the former IHEs remain in
compliance with the 90/10 rule.125 Some IHEs may convert from proprietary to
nonprofit status, which would prevent application of the 90/10 rule to the school
altogether.126
While ED requires that proprietary IHEs that convert to nonprofit or public status
continue to report compliance with the 90/10 rule for at least one complete
institutional fiscal year following the conversion, it does not appear that ED has
established practices to address IHEs that may restructure to remain in
compliance with the 90/10 rule. Congress may consider whether to strengthen
90/10 rule requirements in light of institutional restructuring and conversion
practices. Some proposals or suggestions that have been put forward recently
include, for example, prohibiting proprietary IHEs from moving some academic
programs or branch campuses from IHEs that derive a high percentage of
revenues from Title IV funds to IHEs that derive a lower percentage from Title
IV funds,127 and requiring proprietary IHEs that convert to nonprofit status to
comply with the 90/10 rule for five years following the conversion.128

124 Consumer Financial Protection Bureau (CFPB), “CFPB T akes Action Against Aequitas Capital Management for
Aiding Corinthian Colleges’ Predatory Lending Scheme,” press release, August 17, 2017,
https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against -aequitas-capital-management-aiding-
corinthian-colleges-predatory-lending-scheme/.
125 See, for example, Goldie Blumenstyk, “Colleges Scramble to Avoid Violating Federal-Aid Limit,” The Chronicle of
Higher Education, April 2, 2011; and T he Institute for College Access and Success, Com m ents on Topics for
Negotiated Rulem aking, Docket ED: ED-2015-OPE-0103, September 16, 2015, pp. 15-17, https://ticas.org/wp-content/
uploads/legacy-files/pub_files/ticas_dtr_neg_reg_comments.pdf.
126 See, for example, Michelle Hackman, “After Obama-Era Crackdown, For-Profit Colleges Seek Nonprofit Status,”
The Wall Street Journal, May 30, 2018; and Robert Shireman, The Covert For-Profit, T he Century Foundation,
September 22, 2015, https://tcf.org/content/report/covert-for-profit/.
127 See, for example, T he Institute for College Access and Success, Comments on Topics for Negotiated Rulemaking,
Docket ED: ED-2015-OPE-0103, September 16, 2015, p. 17, https://ticas.org/wp-content/uploads/legacy-files/
pub_files/ticas_dtr_neg_reg_comments.pdf.
128 See, for example, H.R. 4674 (116th Congress).
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Author Information

Alexandra Hegji

Analyst in Social Policy

Disclaimer
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