Around 200 for-profit colleges get more than 90% of revenue from federal funding

Loophole sends extra funds to for-profit institutions

For-profit education companies receive far more public funding than you might realize.                

The institutions are not allowed to reap more than 90% of their total revenue from the federal government—that is, from federal grants, loans, and work-study programs—according to the so-called "90-10 rule" of the 1998 Higher Education Act reauthorization.

If a school exceeds the 90% threshold two years in a row, the rule dictates that it will not be eligible to receive any federal funding for the subsequent two years.

Yet nearly 200 for-profit colleges get more than 90% of their revenue from federal sources—and only two were punished for it this year—according to an analysis by Robert Kelchen, an assistant professor of higher education at Seton Hall University.

How can that be?

As described by the 90-10 rule, for-profit colleges do not have to count revenue obtained from veteran benefits from the Department of Defense (DOD) as part of federal funding.

Enroll more veterans with these 3 strategies

Some Democrats have pushed to include the DOD funds in the regulations, but Kelchen says it's unlikely to happen under a Republican-controlled congress that has significant support from for-profit colleges. 

Community colleges could face more competition from for-profits in the Trump era

Writing for Education Dive, Jarett Carter notes that nonprofit colleges are also facing pressure to reduce their reliance on state and federal funding. As an alternative source of funding, he recommends looking to "revenue-bearing partnerships with established industries to finance workforce pipelines and industrial innovation" (Carter, Education Dive, 1/12; Kelchen, "Brown Center Chalkboard," Brookings.edu, 1/11).

Learn more about building industry partnerships


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