How the 90/10 Rule is Reshaping Higher Education

At the end of 2022, the U.S. Department of Education published a new 90/10 rule which includes many updates! Today we’ll cover what the 90/10 Rule is, and what changes you will need to know about going forward.

What is 90/10?

“The 90/10 rule was originally implemented to limit the amount of revenue that proprietary schools could receive from Title IV Financial Aid funds. Recently, this rule was changed to say that proprietary schools can receive no more than 90% of their revenue from, “federal financial assistance.” This includes funds from federal programs outside of the Title IV programs – including, but not limited to, widely used VA benefits.” – Jackie Tuthill, Senior Consultant

What Has Changed with 90/10?

The 90% now includes more than just Title IV Funds. This means funding is provided by a federal agency, not JUST Title IV funding. Some examples include:

  • Funds received from Veteran Affairs
  • Funds received from the Department of Defense
  • Funds received from state grants
  • Funds received from workforce contracts
  • WIOA funds (There may be a nonfederal portion and schools are encouraged to contact the appropriate agency to determine the allocations)

This regulation requires that schools make a “good faith effort” to reach out to appropriate agencies to obtain the federal and non-federal share amounts.

Disbursements made directly to Students:

Disbursements made by an outside agency directly to a student must be included if the funds are used to make a payment to the school. It is the school’s responsibility to obtain proper supporting documentation of funds provided directly to the student for institutional charges.

Timing of Drawdown of Title IV Funds:

Regulations were updated to require schools to make all “eligible” Title IV drawdowns before the end of the fiscal year. However, ED does not define “eligible.”

Denominator Changes with 90/10:

  • Funds from the sale of accounts receivable cannot be included in the 90/10 calculation.
  • New requirements for non-Title IV programs, in order for their revenue to be included in the denominator.
  • Revenue from Non-Title IV eligible programs can also be included, IF the program meets at least one of the following:
    • Licensed or approved
    • Accredited
    • Provides an industry-recognized credential
    • Provides training needed to maintain state licensing requirements, or…
    • Provides training to meet additional licensing requirements for specialized training for practitioners that already meet the general licensing requirements in that field

To be eligible, programs should also:

  • Program instructors must be an employee of the school (no independent contractors)
  • Program must be taught at its main location or an approved additional location, at another school facility approved by the appropriate state and accrediting agency, or at an employer facility
  • Programs must do more than provide facilities for test preparation, act as proctor, or oversee a course of self-study
  • Be taught in person. Distance Education programs are excluded.
  • Only include payments from unrelated entities
  • Not include any course included in a Title IV eligible program

FAS highly encourages schools to reach out to their CPA to discuss these changes and how they may affect their 90/10 calculation!

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