The year is 1972. The Godfather is the must-see film of the year. Bell bottom pants, mini skirts and knee socks darn the most fashion-forward. And Hewlett-Packard introduced the first scientific hand-held calculator for the low price of $395.
Also in 1972, for-profit colleges became eligible to receive federal student financial aid under Title IV of the Higher Education Act (HEA). At that time, there were no restrictions on the percentage of revenue that for-profit institutions could receive from federal sources. Over the next two decades, policymakers wrestled with the right accountability measure for this single sector of US higher education — resulting in a policy embedded in the 1992 reauthorization of the HEA: the 90/10 rule.
Modeled after the 85/15 rule, which was applicable to schools’ revenue from GI Bill funds under the Veterans Administration, the new rule was purported to be the single metric that would address rising student loan defaults borne by students attending for-profit schools. In the early 90’s (when we were watching A Few Good Men, electing Bill Clinton and using Microsoft Windows 3.1 on our personal computers), over 40% of student loan defaults came from for-profit school students, although less than a fourth of loans were originated to support students attending these institutions.
The first iteration of the 90/10 rule was actually the 85/15 rule and required a for-profit school to receive no more than 85% of its revenue from Title IV financial aid sources such as federal loans and Pell Grants. However, in 1998 (yes, the year of Titanic, a Clinton-Lewinsky scandal, and the founding of Google), lawmakers changed the 85/15 rule to the 90/10 rule and for-profit colleges could receive up to 90% of revenue from Title IV sources.
Earlier this year, Congress passed the American Rescue Plan and buried in the legislation was another attempt to modify the 90/10 rule. To better understand the new application of the rule and its future, I talked with Jane Oates, president of WorkingNation, a decade-long policy advisor to Senator Ted Kennedy (D-MA) and Assistant Secretary at the Department of Labor during the Obama administration. Jane and I talked about whether the days of the 90/10 rule are numbered — and if there are other metrics that could be applied more universally to higher education and would provide a stronger assurance of quality than a VW Beetle-era ratio.
Alison Griffin: The American Rescue Plan Act (ARPA), which was passed in March, received significant attention from higher education leaders for providing over $39 billion in aid to colleges and universities. However, buried in the legislation was a change to the “90-10” rule, which caps the amount of revenue for-profit higher education institutions can receive from Title IV aid at 90%. What was the exact change authorized under ARPA and what is its goal?
Jane Oates: Basically the change was to the Higher Education Act provision that requires proprietary institutions to demonstrate that 10% of their revenue comes from non-Title IV funds — Pell grants and federal loans. Historically, if a for-profit institution fell below that threshold, it was to be provisionally certified for two years. If the institution failed to meet the ratio for two consecutive years, it was denied Title IV eligibility for two years. Under ARPA, the 90% would be expanded to include federal funds beyond Title IV. Because of the complexity of the timing and the calculation, implementation of the new provision is contingent on negotiated rulemaking and any changes will start on or after January 1, 2023.
Griffin: What additional sources of federal aid might be counted under the new provision, and why would Congress seek to include these other funds?
Oates: When discussing this provision in past reauthorization deliberations, the major concern among policymakers was the inclusion of GI Bill funds, which has now garnered bipartisan support. However, under the new definition included in ARPA, it has been argued by some that the new ratio could not only count GI Bill funds, but potentially also include funds from federal programs such as dollars under the Workforce Innovation and Opportunity Act (WIOA), Trade Adjustment Assistance Act (TAAA), Temporary Assistance to Needy Families (TANF) training funds and the smaller programs associated with Supplemental Nutrition Assistance Program (SNAP), Housing and Urban Development (HUD) and other competitive grant programs.
Griffin: You mention the change could include funds that for-profit institutions receive from the Workforce Innovation and Opportunity Act (WIOA). Given the role of many for-profit institutions and their alignment with workforce and industry partners, should WIOA be included? Why or why not?
Oates: I am in total agreement that there should be outcome measures around placement in jobs, wages and retention in jobs when using WIOA and other government funds for training.
After all, job training providers under WIOA provide immediate access to programs that are supposed to align with the needs of employers, often in partnership with employers, and they provide job placement services. In many industries, the for-profit schools have provided programs with the competencies required by local businesses.
There is, of course, a perception that for-profit schools provide an inferior educational experience for a higher cost, and thus to demonstrate their quality, should have revenue from non-federal sources. But there is no factual basis to say that all for-profit programs are inferior, just as there is no factual basis to say that all non-profit programs are effective.
Policymakers should be looking for accountability metrics that better articulate the learner’s objective—whether that be a new job, promotion, or further education. I am not convinced that including WIOA in the 90/10 metric is the way to measure student outcomes among education program providers.
Griffin: As Washington works: a late bi-partisan amendment, led by Senators Carper (D-DE) and Moran (R-KS), was adopted and calls on the U.S. Department of Education to start a negotiated rulemaking session no earlier than this fall. That rulemaking session would lead to decisions about what counts in the 90/10 calculation that would take effect in 2023. Why did a delayed implementation of the new 90/10 rule garner broad support from both sides of the aisle?
Oates: As someone who worked for over a decade on a Congressional authorizing committee — the Senate Health Education Labor and Pensions Committee — watching significant policy change occur on an appropriations bill like ARPA is troubling. In fact, ARPA was more than an appropriations measure, but a reconciliation bill (more here about budget reconciliation) that was swiftly advanced by the majority party.
That quick action is taken without the same time and study that the issue would get during a comprehensive legislative reauthorization. Requiring negotiated rulemaking will allow all the facts to be presented. The unintended consequence of an effective for-profit enrolling fewer federal payers (veterans, WIOA recipients) could be incredibly limiting in terms of their employment options, while self-payers who are not reliant on federal funds would be able to attend the most successful programs. I can safely say that no one is looking to limit opportunities for veterans or Pell recipients.
Griffin: The Biden administration has indicated its intent for for-profit institutions to demonstrate value to learners in order to receive Title IV financial aid funds. In this context, how would you define ‘value,’ and what are the metrics that Congress should consider to align with the Administration’s proposal?
Oates: In the job training space there is clearly one definition of value—-placement and retention in a quality job. The provider should offer the training that attendees need to qualify for good jobs and the wrap-around services they need to be placed and successful in those jobs.
Griffin: How does a proposed new ‘value’ metrics framework intersect with 90/10? Is there a possibility that a values framework could ultimately replace the 90/10 rule?
Oates: My hope is that the negotiated rulemaking will define a value proposition that holds institutions accountable. I think concentrating on outcome measures and realigning the time and money that is spent in accounting oversight to continuous improvement of the program offerings and strengthening connections with employers would be much better for students.
Griffin: What could higher education learn from workforce development and industry sectors in defining these metrics?
Oates: All education needs to spend more time defining outcome measures as they relate to career readiness. That does not mean that liberal arts colleges should become technical schools; instead, all education should improve connections with the next steps that students will take into the world of work. That could mean reimagining work-study, expanding opportunities to work with faculty on research projects, or expanding internship and co-op experiences.
Griffin: What initiatives give you hope that we can look beyond a numerical ratio and get at the alignment between postsecondary education and workforce?
Oates: The world of work is changing every day, and we need a flexible education system that will facilitate life-long learning and success in that changing workplace. In my experience, that includes traditional and short-term learning opportunities in both the for-profit and non-profit sectors.
Some for-profit institutions have already expressed a willingness to hold themselves accountable and increase transparency and look beyond arcane metrics such as the 90/10 rule. Others have developed their own frameworks using rigorous, independently audited outcomes tracking. That is encouraging, and reflects a commitment to outcomes-oriented metrics such as what students are learning or economic mobility.
We are also beginning to see really exciting partnerships to meet the needs of both working learners and employers. Organizations like Guild Education are partnering with traditional colleges to create programs that make college far more feasible for working learners. Google is offering Grow with Google products at traditional institutions, just as Microsoft and Cisco have done in the past. This new expansive system is necessary to provide immediate, high-quality opportunities at scale. Quality has to be at the core of a system that is built to give all learners what they need to achieve their career goals, and accountability is when they get exactly what they paid for – whether with government money or their own dollars.