Department Of Education 90 10 Rule
Department Of Education 90 10 Rule, The 90-10 rule refers to a U.S. regulation that governs for-profit higher education. It caps the percentage of revenue that a proprietary school can receive from federal financial aid sources at 90%; the other 10% of revenue must come from alternative sources.
Not all federal sources of financial aid fall under this cap. In particular, funds supporting the education of troops and veterans, such as the GI Bill and Department of Defense Tuition Assistance program, are not subject to this cap.
The rule is intended to use a market mechanism to weed out the worst performing proprietary schools. The requirement’s intent was to ensure that no school could rely solely on federal funding.
Since 2010, growing scrutiny of the for-profit industry has spurred new efforts to strengthen the 90-10 rule. Some veteran and military groups have pushed for the GI Bill and Tuition Assistance Program to be included in the funds that are capped. Democratic lawmakers have sought new regulations to improve reporting and transparency in the rule.
History of the 90-10 Rule
The origin of the 90-10 rule lies in the history of veteran’s education benefits. Following World War II, a number of proprietary, fly-by-night colleges emerged to meet the heightened demand for colleges from returning troops. Concerned with the quality of these schools, the Veteran Administration instituted an 85-15 rule, capping the percentage of a school’s revenue from GI Bill funds at 85%.
In 1972, for-profit colleges became eligible to receive federal student financial aid under Title IV. There were then no restrictions on the percentage of revenue that could be received from these sources.
In the 1990s, lawmakers became concerned with the quality and recruiting practices of for-profit colleges. Almost half of student loan defaults came from for-profit school students despite comprising just a fifth of loans. This growing concern led to new efforts to impose more regulations on the industry.
The result was included in the 1992 Higher Education Act, which included the first iteration of today’s 90-10 rule. It required that a for-profit school receive no more than 85% of its from Title IV financial aid sources. This rule was modeled after the earlier Veteran Administration regulation.
During the 1998 reauthorization of the Higher Education Act, Congress changed the 85-15 rule to the 90-10 rule. Now for-profit colleges could receive up to 90%, rather than 85%, of revenue from Title IV funds.