The Biden administration finalized a new rule on Thursday, cracking down on predatory for-profit colleges by closing a long-standing loophole that created a financial incentive to target veterans and military personnel.
For years, closing the loophole, known as the “90/10 rule,” has been a top priority for veterans and military organizations. They argued that some for-profit colleges use aggressive practices and deceptive marketing to recruit veterans and military personnel in particular.
Congress included a provision to close the loophole in the US bailout, a pandemic relief package that was signed into law by President Joe Biden in 2021. The provision delayed implementation of the change two years. In the meantime, the Ministry of Education has been consulting with experts through a formal rule-making process to finalize the details of the new regulations.
The new rule will come into effect in January 2023. Schools will have to comply with it from the start of their new fiscal year.
The 90/10 rule is intended to limit the amount of revenue that for-profit colleges receive from the federal government. It requires that 10% of an institution’s revenue come from non-federal sources.
But the rule allowed those colleges to count the benefits of Department of Defense tuition assistance and the GI bill toward the 10% of revenue supposed to come from nonfederal sources. This created a financial incentive for for-profit colleges to enroll more veterans and military personnel.
Starting in 2023, for-profit colleges will no longer be able to count veterans and military benefits money toward this 10% revenue requirement.
As is currently the case, schools will lose their eligibility to participate in Title IV student assistance programs if they fail the 90/10 calculation for two consecutive years. It would make their students ineligible to receive federal student loans and grants, a move that could deal a devastating blow to a school’s enrollment.
Closing that loophole is one of two rules finalized by the Biden administration on Thursday that seek to hold for-profit colleges accountable for their actions.
The second rule aims to strengthen requirements for higher education institutions undergoing ownership changes, particularly for-profit institutions seeking to convert to nonprofit and tax-exempt status. The rule will come into effect in July 2023.
While a for-profit college can convert to nonprofit status for a variety of reasons, the U.S. Government Accountability Office has warned that in some cases former owners or other insiders may wrongly benefit from the conversion.
“These new rules crack down on some of the most deceptive practices we see in higher education, such as predatory marketing tactics that target U.S. military and veterans, and ownership changes aimed at evading accountability to taxpayers,” Education Secretary Miguel Cardona said in a press release.
Under Biden, the Department of Education has also fast-tracked claims from former students who claim they were defrauded by their for-profit colleges. There was a backlog of such requests, known as Borrower Defense Requests, when Biden took office. Since then, the Department of Education has approved approximately $14 billion in student loan forgiveness for more than one million borrowers under this program.
The Department of Education also finalized a separate rule on Thursday, which will make incarcerated individuals enrolled in correctional education programs eligible for federal Pell Grants, which can be worth up to $6,895 per year for low-income students. revenue.
Congress authorized the change in 2020, lifting a one-year ban on Pell grants for people in prison, part of a major federal spending package. The provision will not come into force until July 2023.