Proposed Regulations Redline

§ 668.28 Non-title IVFederal 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 Title IV, HEA

program 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, books and supplies and other institutional 

charges, or to assist the student with costs incurred due to a national disaster or emergency. The 

Secretary identifies theFederal 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,

however, any source of educational assistance funds identified by the Secretary in such a notice 

must not be considered federal funds until the institutional fiscal year following publication in the 

Federal Register.

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

program funds.

(2) Cash basis accounting. Except for institutional loans made to students under paragraph (a)(5)(i) of

this section, the institution must use the cash basis of accounting in calculating its revenue percentage.

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 non-title IV 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) Tuition and fees and other institutional charges pPaid by a student to whom thewho

received Federal funds. Federal agency provided 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

heighted cash monitoring method in §668.162(d)(1) ) and disburses funds to students 

in a manner consistent with student needs as required in 34 CFR 668.164 and past 

institutional practice throughout the fiscal year that the students are eligible to

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

§668.162(c) or (d)(2), Mmake 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 under the reimbursement or heighted

cash monitoring methods in §668.162(c) or (d)(2).;

(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; and

(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 toother than 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 or coursework offered in an eligible program. The

non-eligible education or training if the program must—

(A) Be provided by the institution, and taught by an instructor who also teaches at one 

of its approved locations. 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 ofself-study;

(BA) IsBe approved or licensed by the appropriate State agency;

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

part 602; or

(DC) Provides or prepare the student to obtain an industry-recognized credential or

certification., or prepares students totake an examination for an industry-recognized 

credential or certification issued by an independent third party;

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

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

specialized training for practitioners that already meet the general licensing

requirements in that field.

(4) Application of funds. The institution must presume that any Title IV, HEA program Federal funds it
disburses, or delivers, to or on behalf of 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, regardless of whether the

institution credits the funds to the student's account or pays the funds directly to the student, except to

the extent that the student's tuition, fees, or other charges are satisfied by -

(i) Grant funds provided by—

(A) Nnon-Federal public agencies, provided the Federal portion of the grant funds 

does not exceed 25 percent. If the Federal portion does exceed 25 percent, then the 

Federal portion of the grant must be included as Federal Funds under this section.

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 underthis section. If the Federal funds 

cannot be determined no amount of the grant funds may be included under this

section; or

(B) Pprivate sources unrelated toindependent of 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 or 

government employees 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 mustmay include the following

institutional aid as revenue:

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

or after July 1, 2008 and prior to July 1, 2012, include as revenue the net present value of the

loans made to students during the fiscal year, as calculated under paragraph (b) of this section,

if the loans -– include as revenue only the amount of 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) For loans made to students before July 1, 2008, include as revenue only the amount of

payments made on those loans that the institution received during the fiscal year.

(iii) For loans made to students on or after July 1, 2012, include as revenue only the amount of

payments made on those loans that the institution received during the fiscal year.
(v) For scholarships provided by the institution in the form of monetary aid or tuition discount

and based on the academic achievement or financial need of its students, include as revenue

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) Ddesignated funds from an outside source that is unrelated to the institution, its

owners, or affiliates; or

(B) Iincome earned on those funds.

(6) Revenue generated from loan funds in excess of loan limits prior to the Ensuring Continued Access to

Student Loans Act of 2008 (ECASLA). For each student who receives an unsubsidized loan under the FFEL

or Direct Loan programs on or after July 1, 2008 and prior to July 1, 2011, the amount of the loan

disbursement for a payment period that exceeds the disbursement for which the student would have

been eligible for that payment period under the loan limit in effect on the day prior to enactment of the

ECASLA is included and deemed to be revenue from a source other than Title IV, HEA program funds but

only to the extent that the excess amount pays for tuition, fees, or institutional charges remaining on

the student's account after other Title IV, HEA program funds are applied.

(67) 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 tTitle IV, HEA program funds;

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

Secretary under § 668.22. If any funds from the loan disbursement used in the return calculation

under § 668.22 were counted as non-title IV revenue under paragraph (a)(6) of this section, the

amount of Title IV, HEA program funds refunded or returned under § 668.22 is considered to

consist of pre-ECASLA loan amounts and loan amounts in excess of the loan limits prior to

ECASLA in the same proportion to the loan disbursement; or

(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; or

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

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

recourse.

(vii) Any funds, including loans, provided by a third party related to controlled by 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

thanTitle IV, HEA program 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; or

(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;.; and

(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 It must notify the Secretary no later than 45 days after the end of its fiscal year that it failed to

meet this requirement; and

(54) 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, except during a period in which the institution was 

unaware that it failed because it had not been informed of off-balance sheet revenue that must be 

included when calculating its 90/10 revenue ratio.