ARCHIVED

||
||
| **DCLPublicationDate: 5/1/95DCLID: GEN-95-26AwardYear: Summary: Implementation of the 85 percent rule to determine eligibility for Title IV student assistance programs.**May 1995GEN-95-26SUBJECT:  Implementation of the 85 percent rule to determine                   eligibility for Title IV student assistance programs.REFERENCE:  Section 481(b)(6) of the Higher Education Act of                         1965, as amended (HEA).                         Regulatory requirements are contained in 34 CFR                         600.5(a)(8), 600.5(d) through 600.5(g) and                         600.40(a)(2) of the Institutional Eligibility                         regulations.Dear Colleague:The purpose of this letter is to provide information on theimplementation of the 85 percent rule beginning July 1, 1995.The Higher Education Act of 1965, as amended (HEA), includesprovisions that determine the eligibility of postsecondaryeducational institutions to participate in the Title IV studentassistance programs.  In order for a proprietary institution ofhigher education to participate in the Title IV, HEA Programs, itmust have "at least 15 percent of its revenues from sources thatare not derived from [ Title IV, HEA Program ] funds, asdetermined in accordance with regulations prescribed by theSecretary."  Put another way, an eligible proprietary institution maynot have more than 85 percent of its revenues derived fromTitle IV, HEA Program funds.  This statutory provision has come tobe known as the 85 percent rule.On April 29, 1994, the Department published final regulations inthe Federal Register implementing the 85 percent rule.  Thoseregulations took effect on July 1, 1994.  However, section 510 ofthe Department of Education's FY 95 Appropriations Act, Public Law103-333, precluded the Department from implementing thoseregulations until July 1, 1995.As of July 1, 1995, the Department will begin to implement theregulations governing the 85 percent rule, and will make thoseregulations applicable to institutional eligibility determinationsbeginning with the 1995-96 award year.  Therefore, beginning withthe 1995-96 award year, proprietary institutions will be subjectto the regulatory provisions carrying out the 85 percent rule thatare contained in 34 CFR 600.5(a)(8), 600.5(d) through 600.5(g) and600.40(a)(2).  The provisions contained in 600.5(h) will not applysince they specifically addressed institutional eligibility forthe 1994-95 award year.  However, the statutory delay inimplementing the 85 percent rule will require special considerationsfor reporting and determining eligibility for the 1995-96 award year.A discussion of these considerations follows.     -    Under 600.5(d), a proprietary institution of higher          education must determine whether it satisfied the 85          percent rule during its most recently completed fiscal          year, completed prior to July 1, 1995.  For example, for          an institution using the calendar year as its fiscal          year, its most recently completed fiscal year is the one          that ended on December 31, 1994; for an institution          using the award year as its fiscal year, its most recently          completed fiscal year will be the one that ends on          June 30, 1995.     -    Under 600.40(a)(2), an institution that fails to satisfy          the 85 percent rule during its most recently completed          fiscal year loses its eligibility on the last day of that          fiscal year. However, because of the statutory delay in          implementing the 85 percent rule, an institution that          otherwise would have lost its eligibility prior to June          30, 1995, will be considered as losing its eligibility as          of June 30, 1995.  Thus, that institution will be          ineligible to participate in the Title IV, HEA Programs          beginning with the 1995-96 award year.     -    Under 600.5(f), an institution has 90 days after its          most recently completed fiscal year has ended to report          to the Secretary if it did not satisfy the 85 percent          rule for that period.  However, because of the statutory          delay in implementing the 85 percent rule, an institution          that otherwise would have had to notify the Department          regarding its failure to satisfy the 85 percent rule          prior to July 1, 1995, will have until July 10, 1995, or          90 days after the end of its fiscal year, whichever is          later, to provide that notice to the Department.     -    Under 600.5(e), an institution that determines that it          satisfied the 85 percent rule during its most recently          completed fiscal year must have the auditor who prepares          its audited financial statement under 34 CFR 668.15          report on the accuracy of that determination based upon          performing an "agreed-upon procedures attestation          engagement."  That report is submitted as part of the          audited financial statement.  However, if an institution          did not have its auditor make that report as part of the          audited financial statement because of the temporary          delay in implementing the 85 percent rule, the          institution shall have until July 31, 1995, or 90 days          after the end of its fiscal year, whichever is later, to          have that report submitted.     -    Finally, because the Department will implement the 85          percent rule starting with the 1995-96 award year, the          Department will not hold any proprietary institution of          higher education liable for any Title IV, HEA Program          funds it received for the 1994-95 award year solely          because it failed to satisfy the 85 percent rule in that          year.As noted above, if an institution determines that it failed tosatisfy the 85 percent rule, it must notify the Department; if aninstitution determines that it satisfied the 85 percent rule, theinstitution's auditor must report on the accuracy of thatdetermination and must submit that report to the Department.  Thatnotice and report shall be submitted to:          U.S. Department of Education          Institutional Participation Division          Room 3522, R.O.B. 3          600 Independence Ave., S.W.          Washington, DC  20202          (202) 401-6485Please remember that proprietary institutions will continue to besubject to the regulatory provisions carrying out the 85 percentrule that are contained in 34 CFR 600.5(a)(8) and 600.5(d) through600.5(g) for each fiscal year ending after June 30, 1994.For further information you may contact Cheryl Leibovitz in ourPolicy Development Division.  Ms. Leibovitz may be reached byletter at 600 Independence Ave, SW, (ROB-3, Rm. 3053),Washington, D.C.  20202 or by FAX at (202) 205-0786.A written inquiry will enable us to respond thoroughly and promptly.Sincerely,David A. Longanecker |
||
| FOIA |      Privacy |      Security |      NoticesWhiteHouse.gov |      USA.gov |      ED.gov |
|----------------------------------------------------------------------------------------------------|