Fact Sheet: Proposed Regulations to Support and Protect Students and Borrowers

The Biden-Harris Administration is proposing new regulations that carry forward the Administration’s 

commitment to supporting students and holding institutions accountable. The regulations propose to 

hold for-profit institutions to a strengthened requirement that they obtain at least 10 percent of 

revenue from non-federal sources. Additionally, the proposed regulations would strengthen the 

requirements for institutions undergoing changes in ownership, including for-profit institutions 

seeking to convert to nonprofit status. Finally, the proposed rules clarify the process by which 

incarcerated students in qualifying prison education programs can begin to access Pell Grants. The

public is invited to comment on the proposed regulations for 30 days. The Department of Education 

(Department) will consider those comments and publish final rules this fall so that they will take 

effect on July 1, 2023.

Summary of Major Provisions:

90/10 Rule

Proprietary institutions have long been required to obtain at least 10 percent of their revenue from 

sources other than Title IV financial aid like Pell Grants and federal student loans. Last year, President 

Biden signed into law the American Rescue Plan Act, which requires that at least 10 percent of funds 

come from sources other than any federal education aid. The proposed regulations would be a 

change from current practice, in which institutions can count federal aid for veterans and service 

members to meet the 10 percent revenue test. Prior to this change, this loophole led some 

institutions to aggressively target these populations because every $1 brought in from them meant

they could receive $9 more in Department of Education aid without needing to secure any private

investment. These proposed regulations, on which negotiators reached consensus, would provide 

that:

• Proprietary institutions include all federal education assistance, not just Title IV aid, in their 

90/10 calculations. The Department would publish in the Federal Register a list of the programs 

required for inclusion and update the list as needed. This change would ensure that for-profit 

institutions are not overly reliant on taxpayer-financed aid.

• Institutions cannot delay the draw-down of Title IV funds past the end of the fiscal year as a way 

to game the 90/10 calculation.

• For-profit institutions are restricted in when and how they can count institutional loans and 

alternative financing arrangements—like income-share agreements (ISAs)—as non-federal 

revenue. Specifically, the proposed regulations would only allow institutions to count actual 

revenue from principal payments made on these loans and arrangements and would create

consumer protection measures for ISAs or other alternative financing agreements that are 

included as non-federal revenue. Institutions couldn’t sell their portfolios of ISAs or institutional 

loans—sometimes for pennies on the dollar—and include those funds as non-federal revenue.

• For-profit institutions may include non-federal revenue from non-Title IV programs in their 

90/10 calculations as long as they are ineligible programs that are taught by the institution’s 

regular instructors and are located at a campus of the institution or an employer facility. The 

Department agreed to this language in the interest of reaching consensus, and is also seeking 

feedback from the public about how to best monitor the growth of these programs as a

potentialsource of non-federal revenue for institution close to failing the 90/10 rule.
• For-profit colleges that fail the 90/10 rule are required to notify both the Department and the 

institution’s students in a timely manner.

Changes in Ownership

A growing number of institutions undergo often-complex changes in ownership transactions, leading 

the U.S. Government Accountability Office to raise warnings that many of these conversions involved 

continued “insider involvement,” presenting risks to students and taxpayers. The Department sought to 

clarify the requirements and processes such institutions must follow to expand protections for students 

and taxpayers. The proposed regulations would:

• Ensure that nonprofit institutions are conducting themselves appropriately by further clarifying 

that an institution is generally not a nonprofit if it is an obligor on a debt owed to a former 

owner or where it holds a revenue-sharing or other agreement with a former owner or a current 

or former employee or board member that is inconsistent with the market value for the services 

provided. This will provide critical protections, particularly where for-profit colleges are seeking 

to convert to public or private nonprofit status, to ensure that colleges follow the law.

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

ownership at least 90 days in advance, allowing the Department to assess the contours of the 

planned transaction and providing students sufficient notice that their institution may be 

changing hands.

• Ensure that the riskiest transactions—those where the new owner is missing financial 

statements or where the Secretary otherwise deems it necessary—are accompanied by financial 

protection for taxpayers. Specifically, consistent with current practice, the Department would 

require a 10 percent letter of credit if the new owner is missing one of the two years of required 

audited financial statements and 25 percent if the new owner is missing both years. The 

Secretary may also require financial protection from the institution undergoing the transaction, 

as determined to be necessary.

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

with the same terms and conditions in their Title IV agreement as prior to the transaction. 

Where the prior terms are inadequate to protect against the risk of the transaction, this would 

provide the Department with much-needed flexibility to ensure students are protected.

• Lower the threshold for reporting on changes in ownership from a change in 25 percent of the 

ownership interest to 5 percent, increasing transparency into the transaction; and require a full 

review of change in control at a change of 50 percent, or at a lower level as determined to be 

appropriate by the Secretary.

• Clarify or incorporate the definitions of main campus, branch campus, and additional location, 

and require that institutions report their distance education programs through the main campus 

of the institution (consistent with current practice). In addition to ensuring greater consistency 

in institutional reporting, the changes to distance education would ensure equitable treatment 

for students enrolled in distance education and enrolled at the main campus for closed school 

discharge purposes.

Pell Grantsfor Incarcerated Individuals

Postsecondary programs offered in correctional facilities have been demonstrated to increase 

students’ skills, improve employment outcomes, and reduce recidivism. Congress recently 

established eligibility for Pell Grants for incarcerated individuals enrolled in qualifying programs.
These proposed regulations, on which negotiators reached consensus, would clarify and codify 

requirements for providers of prison education programs, providing that:

• Incarcerated students who would otherwise be eligible for Pell Grants and who are enrolled in a 

qualifying prison education program may access Pell Grants, up to the cost of attendance, for 

enrollment in their postsecondary programs while in a correctional facility.

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

another entity, as applicable) evaluate an institution’s eligibility to operate in the correctional 

facility, they would need to ensure a feedback process with affected stakeholders, including 

representatives of incarcerated individuals, to inform their decisions. Oversight entities would 

also need to consider key student outcomes and details about the operation of the program— 

such as whether instructors and credit transfer are substantially similar for the prison education 

program as on the school’s campus—as part of a holistic determination about the program’s 

approval.

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

they do, the programs would need to be designed to meet those requirements in the state 

where the correctional facility is located (or where most individuals will reside after release, for 

a federal prison). The programs also need to lead to occupations without state or federal 

prohibitions on the licensure or employment of formerly incarcerated individuals.

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

may be incarcerated individuals would be evaluated based on their completion rates, 

administrative capability, and financial responsibility. If granted, institutions with a waiver may 

increase their enrollment of incarcerated students, to include up to 50 percent of the student 

body as incarcerated students for the first five years of the waiver, and then up to 75 percent 

thereafter.

• Institutions would obtain approval from their accrediting agencies and from the Secretary only 

for the first eligible prison education program at each of the first two additional locations, and 

then would simply report subsequent program offerings to the Secretary.

• Reporting requirements would ensure 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.