OPINION: Profits grew while students were hurt by a law intended to protect them – The Hechinger Report
The “90/10” rule should be abolished
What would you say if I suggested that the elimination of just one regulation could save students thousands of dollars in student debt? Ever heard of the 90/10 rule? It applies only to for-profit colleges and requires that no more than 90% of their revenue come from federal sources. Congress passed the regulation in 1992.
The rule was designed to protect students from “bad” schools. But, after nearly 40 years in the for-profit college business, I would posit that 90/10 has done just the opposite. I believe it is the cause of students’ excessive debt — from the direct loans they took out from for-profit colleges and private lenders.
They are known as “gap” loans and are used to pay the gap between tuition and fees not covered by other grants and loans. Most people don’t make the connection that 90/10 caused, or at least enabled, these kinds of loans, which are usually taken out on top of federal ones.
Before the 90/10 rule was introduced, competitive market forces were a factor in the for-profit college sector. The majority of for-profit colleges charged tuition that was less than the maximum students were allowed to receive in federal financial aid, which includes Pell Grants, available to low-income students, and federal student loans.