ED Analysis Finds Many For-Profits Benefit From 90/10 Loophole

By Allie Bidwell, Communications Staff

Many for-profit institutions benefit from a loophole in a federal regulation intended to prevent them from bringing in too much revenue from federal student aid, according to an analysis released by the Department of Education (ED) on Wednesday.

The analysis found that if benefits from the Department of Veteran Affairs (VA) and the Department of Defense (DOD), such as the GI Bill, were included in calculations for the 90/10 rule the same way other Title IV programs are, as many as 200 for-profit institutions would exceed that limit.

"These benefits were created in recognition of the selfless sacrifices made by our veterans and servicemembers, not to make them a target for predatory businesses," said Secretary of Education John B. King Jr., in a statement.

ED also announced that 17 for-profit institutions were found to be currently out of compliance with the existing limit, two of which (Pat Wilson's Beauty College and United Medical and Business Institute) missed the ratio for two consecutive years, and effective January and July 2015, respectively, were deemed ineligible to participate in Title IV programs for at least two years.

Currently, for-profit institutions are prohibited from gathering more than 90 percent of their revenue from Title IV federal student loans and grants. They are required to collect at least 10 percent of their revenues from other sources "to show that institutions can attract funding from sources other than solely from the federal government, as a proxy for quality," according to ED.

However, DeVry Education Group in September announced that it would voluntarily limit the amount of revenue it derives from federal funding to 85 percent, including military tuition assistance benefits. 

President Barack Obama and several Democratic lawmakers have advocated for reducing the limit back to the original 85/15 ratio, and including veteran and servicemember aid in the calculation. According to ED, if just the threshold were lowered, the number of failing schools could increase from 17 to 563.

"These findings shine a light on the institutions skirting the 90/10 Rule by relying on the hard-earned education benefits awarded to servicemembers," said Under Secretary of Education Ted Mitchell, in a statement. "Closing the 90/10 loophole would remove the incentive for-profit schools have for recruiting veterans and servicemembers aggressively for programs that may not serve them well."


Publication Date: 12/22/2016

Cyrus V | 12/22/2016 11:15:59 AM

Vets are some of the smartest folks on this planet. They know which school serves their interest best. They have learned critical thinking skills in the military.

Kyle R | 12/22/2016 11:2:43 AM

What I'm failing to see in this article or be present by Secretary King is the evidence that supports the claim that for-profits "target" veterans. Nice try at attempting to beat down the industry before the new administration takes office.

Jeff A | 12/22/2016 10:40:05 AM

Vets care more about completion times, success rates, Vet-centered services, employment prospects, and being in classrooms with other Vets, rather than whether a college serves them so well, that 'too many' enroll. There is already an 85% rule for Vets.

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