The Ed Department brokered a deal on 90/10 rule changes. Here’s what’s inside.

Dive Brief: 

  • The U.S. Department of Education reached consensus last week with higher education sector representatives on a proposal for a revamped 90/10 rule. The rule prohibits for-profit colleges from receiving more than 90% of their revenue from federal student aid. 
  • Representatives of student veterans and for-profit colleges both made concessions in the agreed-upon language, which will go into effect in 2023. For instance, federal money used to support state grants for tuition would count in the 90% calculation under the proposal — a measure that has drawn opposition from for-profit institutions. 
  • Career Education Colleges and Universities, a group representing the for-profit sector, applauded the department’s willingness to broker a deal on the 90/10 rule. “Although we might not like everything in this language, we can live with it,” said Nicholas Kent, senior vice president of policy and regulatory affairs for the group. 

Dive Insight: 

Last week, the Education Department wrapped up months of negotiated rulemaking, a process that requires the agency to convene representatives from across higher education to attempt to reach consensus on new regulatory proposals. The sessions involved talks among more than a dozen representatives for different groups, including nonprofit colleges, for-profit institutions and consumer advocates. 

The negotiators considered seven new regulatory proposals that would affect student aid programs, but they only reached consensus on two — the 90/10 rule and a regulation governing whether certain students without high school diplomas can receive federal financial aid.

“It is surprising to a lot of people in higher education that the negotiating committee reached consensus on what was probably one of the most contentious items,” Kent said. “I don’t think that a lot of people — especially when they saw the department’s opening proposal in January — thought that there was any way that the committee would reach consensus.”

The largest alteration to the 90/10 rule reflects a recent change in federal law. Currently, for-profit colleges are allowed to include military education benefits, such as the GI Bill, in the 10% calculation, which has led some institutions to aggressively recruit veterans. But Congress passed a law last year forcing colleges to include all federal education funds on the 90% side, starting in 2023. 

Negotiators compromised on other proposed changes to the rule as well. Those include whether programs ineligible for Title IV federal student aid funding can count toward the 10% calculation. 

“The essence of the deal has to do with ineligible programs, such as corporate training programs,” said Barmak Nassirian, a negotiator for student veterans. The department struck a deal with negotiators that would allow for-profit colleges to include those programs on the 10% side, but only if they are taught by instructors who also teach at one of their approved locations and that they hold programs at certain sites.

“We, in an ideal world, would have asked for a far stricter set of regulations,” said Nassirian, who is also the vice president for higher education policy at Veterans Education Success, an advocacy organization. “But at the same time, we wanted to be reasonable and we wanted to have a level of stability with regulations.”

Kent, from CECU, said the Ed Department walked back an earlier proposal that would have required programs ineligible for Title IV to be offered at Title IV-approved locations in order to count toward the 10% calculation. Under the deal, however, those programs can be offered at certain other locations, such as corporate sites. 

“Not being able to do that for the 10 side for these non-Title IV programs didn’t make sense,” Kent said. 

The changes agreed to Friday put certain limitations on income-share agreements, or ISAs, which have college graduates make payments for expenses such as tuition and fees through a portion of their income over a set period of time. The negotiators landed on language that attempts to ensure for-profit colleges can’t use ISAs to game the 90/10 rule.

The Ed Department also committed to including language in the regulatory proposal’s preamble that makes clear that ISAs are treated in the same way as private student loans, said Edward Conroy, senior advisor with the education policy program at New America, a liberal think tank. 

“There was definitely some give and take on both sides,” Conroy said of the overall deal on 90/10. 

Conroy hopes the changes will reduce the level of aggressive recruiting that targets veterans. He also expects they might prompt for-profit colleges to offer more training to corporations, which could help them add revenue to the 10% side of the ledger. 

Because the negotiators reached consensus, the Ed Department is largely bound to the agreed-upon language when it formally proposes the new 90/10 rule. However, the public will be allowed to comment on the proposal for at least 30 days after its published, which is expected in the summer. 

Although public comments could prompt the Ed Department to make changes to the final rule, Kent doesn’t expect anything major. “We’re likely to see a final rule that looks pretty similar to what we ended up with on Friday,” Kent said.

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