Limiting For-Profit Institutions from Circumventing the 90/10 Rule

As higher education becomes a necessary part of life, many new institutions are appealing to the less fortunate student. These schools are categorized as for-profit and market their programs to attract anyone willing to listen. They operate by cutting costs and by obtaining money given to students through federal financial aid. Because less fortunate students receive more financial aid for-profit schools attempt to attract this demographic group. The government has a law to limit the amount of money that a university can receive through federal financial aid. Called the 90/10 rule it “requires for-profit colleges to receive 10 percent of their revenue from nonfederal sources to be eligible to receive [up to 90% from] federal student aid.”

However, there are critical flaws to the 90/10 rule. Post 9-11 GI Bill benefits are not counted as federal revenue. As a result, many for-profit schools prey on military veterans. This gap in the law can cause some institutions to receive almost 100% of revenue from the federal government. Opponents argue that for-profit institutions increase tuition when Congress increases federal student aid funding in order to fulfill the rule.

Another loophole involves enrolling international students. Some top for-profit schools, such as EDMC, have Canadian campuses. The Canadian students are not qualified for US financial aid, consequently the tuition they pay is added into the  “10” percent, allow the schools to circumvent the law.

H.R. 340, Protecting Aid for Students and Taxpayers Act, would prevent for-profit institutions from using federal education assistance for advertising, marketing, and recruiting students. This would solve many of the problems with the 90/10 rule and close many of the loopholes.

The critical question then becomes the prioritization of funds: What’s more important, success and resources available to the students or the wad of cash that goes in the pocket of the institution? This may seem drastic, but it seems post-secondary institutions, especially those dedicated to the generation of profit, have become more of a business then a center of learning and growth. Although it’s not a perfect solution, reforming these policies will take our nation a step closer to providing students with more than a paper, a promise, and a plethora of debt when they graduate.

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