Fact Sheet: Changes to Protect Veterans, Students, and Taxpayers and Support Incarcerated Students 

Today, the U.S. Department of Education (Department) is publishing final regulations that promote 

accountability, expand college access to incarcerated students, and strengthen protection for veterans, 

service members, students, and borrowers. 

The final regulations implement a statutory change passed in the American Rescue Plan Act that will 

better protect veterans, service members, and their families from aggressive and deceptive recruitment 

by requiring that for-profit colleges receive at least 10 percent of their revenue from sources other than 

education assistance provided by Federal agencies. Additionally, the regulations will better protect 

students and taxpayers by strengthening requirements for institutions of higher education (institutions)

undergoing changes of ownership, including for-profit institutions seeking to convert to non-profit 

status. Finally, the regulations implement a statutory change recently passed by Congress to provide 

greater access for incarcerated students to high-quality educational programs and clarify the process by 

which incarcerated students in qualifying prison education programs can receive Pell Grants.

These regulations continue the Administration’s commitment to supporting students and holding 

institutions accountable. The final regulations published today were strengthened by robust public 

comment from stakeholders across the country and include several changes that clarify and improve 

parts of the Notice of Proposed Rulemaking published in July.

Additional details on the major provisions of the rule and changes made in response to public comment 

are included below.

90/10 Rule

Last year, President Biden signed into law the American Rescue Plan Act, which requires that for-profit 

institutions receive at least 10 percent of their revenue from sources other than federal education 

assistance funds or lose access to Federal financial aid. Previously, for-profit institutions were permitted 

to count Federal money from sources other than the Department, including funds from the Department 

of Veterans Affairs (VA) and Department of Defense, toward meeting the 10 percent revenue 

requirement. Now those funds will be counted as Federal education funds included in the 90 percent 

portion of the calculation. The final regulations implement this change, closing a significant loophole 

which incentivized some for-profit colleges to aggressively recruit and even deceive veterans and service

members so they could take in more Department funding. The Department achieved consensus in 

negotiating these changes, and the final regulations state that:

• Proprietary institutions include in their 90/10 calculation all Federal education assistance, not 

just Federal financial aid, that goes toward tuition, fees, and other institutional charges, with the 

exception of funds from a Federal source that go directly to a student and are specifically 

designated to cover expenses other than tuition, fees, and other institutional charges, such as 

housing. The Department will publish a list of the Federal education assistance programs that 

are counted in the 90 percent revenue test in the Federal Register and update the list as 

needed. This change ensures that for-profit institutions are not overly reliant on taxpayer funds 

and are able to pass a simple market test to generate at least 10 percent of their revenue from 

other sources. 
• Institutions cannot delay the draw-down of funds from the financial aid programs (i.e., Title IV 

programs) past the end of the fiscal year to reduce the amount of Federal aid reported in a fiscal 

year.

• Institutions can only count actual revenue from principal payments by the borrowers that are 

made on loans and alternative-financing arrangements, such as income-share agreements 

(ISAs). Institutions also cannot sell these student obligations and count those proceeds as 

qualifying payments for tuition and fees for the 90/10 revenue calculation. The final regulations 

further clarify the terms ISAs must meet in order to be counted and makes other changes to 

ensure that private loans and ISAs are treated consistently. For-profit colleges may only include 

funds generated from activities conducted by the institution that are necessary for the 

education and training of its students and must be related directly to services performed by 

students. Non-federal revenue may also include revenue generated by programs that do not 

participate in Title IV programs, as long as they meet certain criteria to ensure value to students. 

• For-profit colleges that fail the 90/10 rule are required to notify the Department and the 

institution’s students in a timely manner. 

Changes in Ownership

In recent years, the Department has seen an increase in the number of institutions applying for changes 

in ownership where institutions seek to convert from proprietary to nonprofit or public status. A 2020 

report by the U.S. Government Accountability Office raised concerns that many conversions involved 

continued “insider involvement,” where someone from the former for-profit ownership was also 

involved with the nonprofit purchaser, suggesting greater risk of impermissible benefits to those 

insiders.

The final regulations address the increased complexity of changes in ownership and help mitigate

increased risk to students and taxpayers. These changes provide critical protections, particularly where 

for-profit colleges are seeking to convert to public or private nonprofit status, to ensure that colleges 

meet the requirements under law. It also means former owners cannot receive payments based upon 

inflated valuations and still have the college be considered nonprofit. They also clarify requirements on 

applications while detailing Department procedures in evaluating these changes. The final regulations:

• State that nonprofit status for an institution undergoing a conversion is unlikely to be approved 

if the institution owes debts to a former owner or if it holds a revenue-sharing or other 

agreement with a former owner, current or former employee, or board member that is 

inconsistent with the market value for the services provided. The final regulations clarify that 

the market value consideration also applies to prior owners but does not apply with respect to 

debt arrangements with former owners, which would be unallowable. 

• Clarify that a for-profit institution remains for-profit for the purposes of Title IV unless and until 

the Department approves its application to change to non-profit status.

• Require colleges to notify both the Department and their students of a planned change in 

ownership at least 90 days in advance, which provides the Department time to assess the 

planned transaction and students with sufficient notice that their institution may be changing 

hands. 

• Ensure that the riskiest transactions are accompanied by financial protection for taxpayers. 

Consistent with current practice, the Department will require at least a 10 percent letter of 
credit of the institution’s prior year Title IV aid volume if the new owner is missing one of the 

two years of required audited financial statements and at least 25 percent if the new owner is 

missing both years. The Secretary may also require an additional 10 percent (or more) of

financial protection from the institution undergoing the transaction, as necessary.

• Eliminate an existing requirement that the Department continue an institution’s participation 

during the review of the change in ownership application with the same terms and conditions in 

their Title IV agreement as prior to the transaction. This change provides the Department with 

much-needed flexibility to ensure students are protected where the prior terms are inadequate 

to protect against the risk of the transaction.

• Increase transparency into an institution's owners by requiring the reporting of ownership 

interest changes to 5 percent, instead of the current threshold of 25 percent. The final 

regulations clarify that ownership changes comprising at least 5 percent, but less than 25 

percent, of ownership can be reported quarterly instead of within 10 days in most 

circumstances. 

• Raise the threshold for a full review of change in control from 25 percent ownership interest 

changes to 50 percent, or a lower level as determined to be appropriate by the Secretary. 

• Clarify the definitions of main campus, branch campus, and additional location. The final 

regulations remove the requirement that distance education programs must be associated with 

the main campus and will consider additional changes for a potential future rulemaking. 

However, the Department will continue to classify distance education programs as associated 

with the main campus, which is consistent with current practice. 

Pell Grants for Incarcerated Students in Prison Education Programs

A growing body of research has shown that high-quality postsecondary education programs offered in 

correctional facilities to incarcerated individuals reduces recidivism, and may have other benefits as 

well. Congress recently passed legislation which establishes eligibility for incarcerated individuals 

enrolled in eligible prison education programs to receive Pell Grants. The final regulations implement 

the statutory changes to provide access to Pell Grants and support to incarcerated individuals to receive 

high quality postsecondary education. In addition, the regulations establish important guardrails for 

incarcerated students and taxpayers to protect students from enrolling in programs that would not

permit them to benefit. The Department achieved consensus in negotiating these changes and the final 

regulations provide that:

• Incarcerated students who are enrolled in a eligible prison education program may access Pell 

Grants, up to the cost of attendance, for enrollment in public or nonprofit postsecondary

educational programs while in a correctional facility. 

• Accrediting agencies and the Department must approve an institution’s first prison education 

program at the first two correctional facilities where the institution operates such programs.

The accrediting agency reviews will include a site visit and a thorough review to ensure that the 

prison education program meets the same standards as substantially similar programs that are 

not prison education programs offered by the institution.

• As oversight entities (the state department of corrections or Federal Bureau of Prisons or 

another entity, as applicable) assess and approve prison education programs in the correctional 
facilities they oversee, they will be required to ensure there is a feedback process with relevant 

stakeholders, including representatives of incarcerated individuals, to inform their decisions.

• Oversight entities would also need to consider key program inputs and details about the 

operation of the program— such as whether instructors and credit transfer options are 

substantially similar for the prison education program and programs offered at the school’s 

campus—as part of a holistic determination about the program’s approval. 

• In consideration of public comments received, the final regulations make it optional for 

oversight entities to consider outcome factors, such as earnings, job placement, and postrelease enrollment, when determining whether a program is in a student’s best interest.

However, oversight entities will still need to consider program inputs such as experience and 

credentials of instructors, availability of academic and career advising services, and 

transferability of credits.

• Qualifying prison education programs do not need to lead to licensure or certification, but if 

they do, the programs must be designed to meet those educational requirements in the state 

where the correctional facility is located (or, for federal prisons, where most individuals will 

reside after release). The postsecondary institution offering the PEP is not able to enroll an 

incarcerated individual into a PEP if there is a prohibition on the individual qualifying for 

professional licensure or employment based on the individual’s conviction. This protects 

students from exhausting limited Pell Grant funds on a PEP that would not benefit them upon 

completion. 

• Institutions seeking a waiver to the statutory limit that not more than 25 percent of students 

enrolled at an institution may be incarcerated individuals must submit an application to the 

Department. If a waiver is granted, institutions may increase their enrollment of incarcerated 

students to reasonable limits set by the Department. The Department can terminate a waiver at 

any time if it determines that the institution no longer meets the requirements for a prison 

education program.

• Reporting requirements ensure that the Department is able to provide key data to the oversight 

entities and the institutions about their prison education programs, and to fulfill the 

Congressional mandate for a public report on the operation of such programs.