Report

How Much Do For-profit Colleges Rely On Federal Funds?
Brookings Institution

The outgoing Obama administration placed for-profit colleges under a great deal of scrutiny. This includes gainful employment regulations that will require graduates of vocationally-oriented programs to meet debt-to-earnings requirements and borrower defense to repayment rules (which will likely be quickly abandoned by the Trump administration) designed to help students who feel they were defrauded by their college.

In the 1992 Higher Education Act reauthorization, Congress included a provision that only applied to for-profit colleges, limiting the percentage of total revenue that for-profits could receive from federal grant, loan, and work-study programs to 85 percent. (This notably excludes veterans’ benefits, which are a large source of revenue for some colleges.) This percentage was increased to 90 percent in the 1998 reauthorization, which led to the rule being commonly referred to as “90/10.”

For-profit colleges that exceed 90 percent of their revenue from federal financial aid in two consecutive years can lose access to federal aid for the following two years. Some Democrats have tried to move back to the 85/15 rule or include veterans’ benefits in the federal financial aid portion of revenue, but these efforts will likely be unsuccessful given the support Republicans have received from for-profit colleges. Notably, some for-profits get a sizable portion of their revenue from veterans’ benefits.

I examined data from the Department of Education between the 2007-08 and 2014-15 academic years to look at how many for-profit colleges are close to the 90 percent threshold. As the table below shows, a sizable percentage of for-profit colleges get between 80 percent and 90 percent of their revenue from federal financial aid.