Issue Paper 7: Title IV Revenue and Non-Federal Education Assistance Funds (90/10)

Session 3: March 14-18, 2022

Issue: Title IV Revenue and Non-Federal Education Assistance Funds (90/10)

Statutory cites: §487(a)(24) of the Higher Education Act, as amended

Regulatory cites: 34 CFR 668.28

Proposed Regulations Redline

§ 668.28 Non-Federal revenue (90/10).

(a) General –

(1) Calculating the revenue percentage. A proprietary institution meets the requirement in § 

668.14(b)(16) that at least 10 percent of its revenue is derived from sources other than Federal funds by 

using the formula in appendix C of this subpart to calculate its revenue percentage for its latest 

complete fiscal year. For purposes of this section--

(i) For any annual audit submission for a proprietary institutional fiscal year beginning on or after 

January 1, 2023, Federal funds used to calculate the revenue percentage include title IV, HEA 

program funds and any other educational assistance funds provided by a Federal agency directly to 

an institution or a student including the Federal portion of any grant funds provided by or 

administered by a non-Federal agency, except for non-Title IV Federal funds provided directly to a 

student to cover expenses other than tuition, fees and other institutional charges. The Secretary 

identifies the Federal agency and the other educational assistance funds provided by that agency in 

a notice published in the Federal Register, with updates to that list published as needed.

(ii) For any fiscal year beginning prior to January 1, 2023, Federal funds are limited to title IV, HEA 

program funds. 

(2) Disbursement rule. An institution must use the cash-basis of accounting in calculating its revenue 

percentage by —

(i) For each eligible student, counting the amount of Federal funds that were used to pay tuition 

fees and other institutional charges the institution received during its fiscal year—

(A) Directly from an agency identified under paragraph (a)(1)(i) of this section; and 

(B) Paid by a student who received Federal funds..

(ii) For each eligible student, counting the amount of title IV, HEA program funds the institution

received to pay tuition, fees and other institutional charges during its fiscal year. However, 

before the end of its fiscal year, the institution must—

(A) Request funds under the advanced payment method in §668.162(b)(2) or the 

heightened cash monitoring method in §668.162(d)(1) that the students are eligible to 

receive and make any disbursements to those students by the end of the fiscal year; or
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(B) For institutions under the reimbursement or heightened cash monitoring methods 

in §668.162(c) or (d)(2), make disbursements to those students by the end of the fiscal 

year and report as Federal funds in the revenue calculations the funds that the students

are eligible to receive before requesting funds.

(3) Revenue generated from programs and activities. The institution must consider as revenue only 

those funds it generates from -

(i) Tuition, fees, and other institutional charges for students enrolled in eligible programs as 

defined in § 668.8; 

(ii) Activities conducted by the institution that are necessary for the education and training of its 

students provided those activities are -

(A) Conducted on campus or at a facility under the institution's control; 

(B) Performed under the supervision of a member of the institution's faculty; 

(C) Required to be performed by all students in a specific educational program at the 

institution; and

(D) Related directly to services performed by students; and

(iii) Funds paid by a student, or on behalf of a student by a party unrelated to the institution, its 

owners, or affiliates, for an education or training program that is not eligible under § 668.8 and

that does not include any courses offered in an eligible program. The non-eligible education or 

training program must be provided by the institution, and taught by one of its instructors, at its 

main campus or one of its approved additional locations, at another school facility approved 

by the appropriate State agency or accrediting agency, or at an employer facility. The 

institution may not count revenue from a non-eligible education or training program where it 

merely provides facilities for test preparation courses, acts as a proctor, or oversees a course of 

self-study. The program must --

(A) Be approved or licensed by the appropriate State agency; 

(B) Be accredited by an accrediting agency recognized by the Secretary under 34 CFR 

part 602; 

(C) Provide an industry-recognized credential or certification;

(D) Provide training needed for students to maintain State licensing requirements; or 

(E) Provide training needed for students to meet additional licensing requirements for 

specialized training for practitioners that already meet the general licensing 

requirements in that field.
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(4) Application of funds. The institution must presume that any Federal funds it disburses or delivers to 

a student, or determines was provided to a student by another Federal source, will be used to pay the 

student's tuition, fees, or institutional charges up to the amount of those Federal funds if a student 

makes a payment to the institution, except to the extent that the student's tuition, fees, or other 

charges are satisfied by -

(i) Grant funds provided by—

(A) Non-Federal public agencies, provided that those grant funds do not include Federal 

or institutional funds unless the Federal portion of those grant funds can be determined 

and that portion of Federal funds must be included as Federal funds under this section. 

If the Federal funds cannot be determined no amount of the grant funds may be 

included under this section; or 

(B) Private sources unrelated to the institution, its owners, or affiliates; 

(ii) Funds provided under a contractual arrangement with the institution and a Federal, State, or 

local government agency for the purpose of providing job training to low-income individuals who 

need that training; 

(iii) Funds used by a student from a savings plan for educational expenses established by or on 

behalf of the student if the saving plan qualifies for special tax treatment under the Internal 

Revenue Code of 1986; or 

(iv) Institutional scholarships that meet the requirements in paragraph (a)(5)(iv) of this section. 

(5) Revenue generated from institutional aid. The institution may include the following institutional aid 

as revenue: 

(i) For loans made to students and credited in full to the students' accounts at the institution

and used to satisfy tuition, fees, and other institutional charges, the amount of principal

payments made on those loans by current or former students that the institution received 

during the fiscal year, if the loans—

(A) Are bona fide as evidenced by standalone repayment agreements between the 

students and the institution that are enforceable promissory notes; 

(B) Are issued at intervals related to the institution's enrollment periods; 

(C) Are subject to regular loan repayments and collections by the institution; and 

(D) Are separate from the enrollment contracts signed by the students. 

(ii) If an institution wants to include an income share agreement or any other alternative 

financing agreement as cash in its attestations in which the agreement is with the institution 

only or with a related party to include any entity in the ownership tree, any common 
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ownership, any other contractual agreement or continuous financial relationship for this 

section, then the following must be included in the agreement—

(A) The institution must clearly identify the institutional charges that are being 

covered by the agreement, the charges must be the same or less than the stated rate 

for institutional charges.

(B) The maximum time and amount a student would be required to pay is clearly 

identified including the implied or imputed interest rate and any fees.

(C) All payments must be applied in accordance with debt repayment 

regulations. Interest and fees would not be included in the attestation. 

(D) The imputed or implied interest rate cannot be more than the Federal Direct 

Unsubsidized Loan interest rate for the same borrower type at the time the 

agreement was signed.

(iii) Only cash payments representing principal payments on the income share agreement or 

other financing agreement that were used to satisfy tuition fees and other institutional 

charges may be included in the attestation. No amounts from the sale of the income share 

agreement or other financing agreement may be included in the attestation.

(iv) For scholarships provided by the institution in the form of monetary aid and based on the 

academic achievement or financial need of its students, the amount disbursed to students 

during the fiscal year. The scholarships must be disbursed from an established restricted 

account and may be included as revenue only to the extent that the funds in that account 

represent—

(A) Designated funds from an outside source that is unrelated to the institution, its 

owners, or affiliates; or 

(B) Income earned on those funds.

(6) Funds excluded from revenues. For the fiscal year, the institution does not include -

(i) The amount of Federal Work Study (FWS) wages paid directly to the student. However, if the 

institution credits the student's account with FWS funds, those funds are included as revenue; 

(ii) The amount of funds received by the institution from a State under the LEAP, SLEAP, or GAP 

programs; 

(iii) The amount of institutional funds used to match title IV, HEA program funds; 

(iv) The amount of title IV, HEA program funds refunded to students or returned to the 

Secretary under § 668.22; 
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(v) The amount the student is charged for books, supplies, and equipment unless the institution 

includes that amount as tuition, fees, or other institutional charges; 

(vi) Any amount from the proceeds of the factoring or sale of accounts receivable or 

institutional loans, regardless of whether the loans were sold with or without recourse; or

(vii) Any funds, including loans, provided by a third party related to the institution owners or 

affiliates to a student in any form.

(b) [Reserved] 

(c) Sanctions. If an institution does not derive at least 10 percent of its revenue from sources other than

Federal funds -

(1) For two consecutive fiscal years, it loses its eligibility to participate in the Title IV, HEA programs for 

at least two fiscal years. To regain eligibility, the institution must demonstrate that it complied with the 

State licensure and accreditation requirements under 34 CFR 600.5(a)(4) and (a)(6), and the financial 

responsibility requirements under subpart L of this part, for a minimum of two fiscal years after the 

fiscal year it became ineligible;

(2) For any fiscal year, it becomes provisionally certified under § 668.13(c)(1)(ii) for the two fiscal years 

after the fiscal year it failed to satisfy the revenue requirement. However, the institution's provisional 

certification terminates on -

(i) The expiration date of the institution's program participation agreement that was in effect on 

the date the Secretary determined the institution failed this requirement; or 

(ii) The date the institution loses its eligibility to participate under paragraph (c)(1) of this 

section;

(3) For any fiscal year that it fails to meet the requirements of this section, it must notify students of the 

possibility of loss of title IV eligibility;

(4) It must determine whether it passed the revenue requirement and report a failure no later than 45 

days after the end of its fiscal year, or immediately thereafter if subsequent information is obtained that 

shows an institution incorrectly determined that it passed the revenue requirement for the prior fiscal 

year; and

(5) It is liable for any title IV, HEA program funds it disburses after the fiscal year it becomes ineligible to 

participate in the title IV, HEA program under paragraph (c)(1) of this section, excluding any funds the 

institution was entitled to disburse under §668.26.