Research firm sees little risk in changing the 90-10 rule

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A change to the 90-10 rule in the coronavirus relief program that passes through Congress is unlikely to affect many for-profit institutions, a BMO Equity Research analysis said Monday.

A provision in the relief bill approved by the Senate that is expected to pass the House would change the way GI Bill dollars are counted under a rule on for-profit institutions.

Currently, colleges and universities are required to derive at least 10% of their revenues from sources other than the federal government. The rule counts the money that silver service members and veterans use for their education towards meeting the minimum 10 percent requirement. Critics say this prompts for-profit organizations to target veterans and the military.

The relief bill would change the rule to count GI Bill dollars as federal funds.

“Most institutions easily comply” with the rule, according to BMO’s analysis. Only three for-profit organizations, representing 0.1% of for-profit institutions, had more than 90% of their revenues from federal sources in the 2018-19 school year, according to the report.

Of the publicly traded companies tracked by the investment research firm, the Hondros College of American Public Education Inc. is the closest to non-compliance, with 82% of its revenue coming from federal sources – “well below of the current threshold “.

Even with the change, “there is a lot these schools can do to avoid the threshold, including expanding non-Title IV sources (eg, corporate partnerships),” the report says. “As such, we believe there is little risk among our covered businesses in terms of non-compliance.”


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