Education Department to Publish NPRM on 90/10, Change of Ownership, and Pell Grant Eligibility for Prison Education Programs

By Hugh T. Ferguson, NASFAA Managing Editor

The Department of Education (ED) on Tuesday unveiled proposed regulations for the 90/10 rule for for-profit colleges, Pell Grant Eligibility for Prison Education Programs, and procedures for institutions undergoing changes in ownership.

According to ED officials, the forthcoming Notice of Proposed Rulemaking (NPRM) underscores the administration's effort to protect students and taxpayers by building a “more accessible higher education system.” Officials said the proposed regulations will officially be published in the Federal Register in the “coming days,” which will formally kick off the 30-day comment period. ED expects to finalize these rules by November 1, meaning they will take effect July 1, 2023. 

“These proposed regulations are a milestone in the Biden-Harris Administration’s ambitious regulatory agenda, both with respect to accountability and oversight of colleges, particularly for-profit colleges,” said James Kvaal, under secretary of education. “Today, we take the next step toward addressing some of the most significant and pervasive problems in higher education, including unscrupulous recruiting of veterans and abuses of the change of ownership process. We are committed to finalizing these regulations expeditiously and turning to the work yet to come.”

Tuesday’s proposals were shaped during a pair of negotiated rulemaking committees that met over the last year. During those sessions, the committee reached consensus on 90/10 and the Pell Grant Eligibility topics, but did not come to consensus on the change of ownership paper, which is reflected in ED’s proposed rule.

90/10 Rule 

Currently, for-profit institutions are required to obtain at least 10% of their revenue from sources other than student aid provided by ED. Under the consensus language approved for this issue paper during the Institutional and Programmatic Eligibility Committee, the proposed regulations would implement changes made in the American Rescue Plan Act to close the so-called 90/10 loophole, through which institutions can count federal aid for veterans and service members to meet the 10% revenue test. In its proposed regulations, ED expanded the federal funds to be counted in the revenue calculation to include all federal educational assistance funds, including the federal portion of funds administered by a nonfederal agency.

Changes of Ownership

Having not reached consensus during the committee session, ED has used its regulatory authority to propose processes for changes of ownership, which officials said will aim to protect students and taxpayers from institutions posing undue risk, and address conversions of for-profit to nonprofit status.

ED’s regulations clarify its definition of a nonprofit institution, and require an institution undergoing a change of ownership to notify both the department and students at least 90 days prior to the change, as well as require additional financial protection or to comply with conditions to protect against the risk of the transaction.

Pell Grant Eligibility for Prison Education Programs 

As part of the consensus language that was reached by the Affordability and Student Loans Committee, ED provided a framework for institutions developing their Prison Education  Programs. The regulations seek to ensure that state departments of corrections, the Federal Bureau of Prisons, or other entities assess institutions’ eligibility to offer prison education programs with feedback from stakeholders, including representatives of incarcerated individuals.

ED’s proposal also clarifies requirements for such prison education programs with a focus on data reporting to demonstrate how well a given program is serving their students.

Please share your feedback on these proposed rules with NASFAA to inform the drafting of our comments, as well as any comments you submit on behalf of your institution, by emailing [email protected].


Publication Date: 7/27/2022

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