Federal Accountability and Institutional Reform in Education Act of 1995 - Amends the Higher Education Act of 1965 (HEA) to revise the accountability provisions and reform certain programs of such Act. 
(Sec. 3) Revises provisions for student loan cohort default management.  Requires proof that the institution was contacted, under certain administrative and fiscal procedures.  Requires, under certain reimbursement provisions, a demonstration (rather than a certification) to the Secretary of Education that diligent attempts, including direct contact with the institution, have been made. 
Prohibits the Secretary from reimbursing or permitting any eligible lender, servicer, or guaranty agency (or its affiliates) who previously filed a claim for reimbursement on a loan to retain any proceeds from rehabilitation of a defaulted loan to the extent that such funds, when added to the amount of prior reimbursement, exceed the whole amount of the original principal of the loan.  Revises provisions relating to notice to the Secretary, payment of loss, and cohort default rate. 
Directs the Secretary to:  (1) report annually to the Congress that lenders, servicers and guaranty agencies have attested to their compliance with servicing and due diligence requirements; and (2) provide information on the successful practices of low-default lenders, servicers, and guaranty agencies to other financial, servicing, and guaranty institutions participating in HEA student aid programs, to encourage duplication of successful servicing and collection programs.  Requires that certain mitigating circumstances, which allow an institution to continue in the student loan insurance program despite its having a high default rate, be uniformly applied to all eligible institutions, requiring that they meet the following criteria:  (1) at least 50 percent of the students enrolled in eligible programs qualify for a Pell grant; (2) an institution's student completion rate is 60 percent or greater; and (3) the initial job placement rate of program graduates is 60 percent or greater. 
(Sec. 4) Revises the definition of proprietary institution of higher education, for purposes of eligibility for HEA student aid programs. 
Requires, for purposes of the requirement that such an institution have at least 15 percent of its revenues from sources that are not derived from funds provided under HEA student aid programs, a review by the institution's independent auditor using generally accepted accounting principles.  Requires further that revenues from sources that are not derived from HEA student aid program funds include revenues from programs of education or training that do not meet the definition of an eligible program, but are provided on a contractual basis under Federal, State, or local training programs, to business and industry, or to other eligible applicants.  Prohibits the Secretary from considering the financial information of any institution for a fiscal year that began on or before April 30, 1994. 
(Sec. 5) Revises accounting procedures for institutional program participation to require that specified information be based on an audited financial statement using any generally accepted accounting principles.
Output: Federal Accountability and Institutional Reform in Education Act of 1995