The U.S. Department of Education has issued new interpretive guidance that significantly impacts how proprietary institutions calculate revenue under the 90/10 rule. This change represents a major victory for schools offering non-Title IV programs via distance education.
What Changed?
In a reversal of its 2022 position, the Department now confirms that proprietary institutions can include revenue from non-Title IV eligible programs delivered through distance education in their 90/10 calculations. This applies to programs that meet one of the following criteria:
- Are approved or licensed by the appropriate state agency
- Are accredited by a Department-recognized accrediting agency
- Provide an industry-recognized credential or certification
The Background
In October 2022, the Department published final regulations implementing changes to the 90/10 rule required by the American Rescue Plan Act. In the preamble to those regulations—but not in the actual regulatory text—the Department stated it would prohibit institutions from counting revenue from ineligible programs offered through distance education.
The Department has now determined that this preamble language was procedurally improper and substantively unlawful. The interpretive rule makes clear that:
- Preamble text cannot create binding obligations that aren’t in the actual regulations
- The statute makes no distinction between distance education and in-person instruction for revenue calculation purposes
- Congress did not authorize the Department to exclude distance education revenue from the 90/10 calculation
What This Means for Your Institution
This interpretation provides immediate relief and new opportunities:
- Retroactive Application: Institutions may revise their 90/10 calculations for fiscal years that have already concluded
- Expanded Revenue Sources: Online certificate programs, continuing education courses, and workforce training delivered via distance education can count toward the 10% requirement again
- Strategic Flexibility: Schools can develop or expand distance education offerings without worrying about 90/10 implications
How McClintock Can Help
Our Title IV compliance experts and 90/10 modeling services can help you:
- Recalculate prior year ratios to include eligible distance education revenue
- Project the impact on the current year’s calculation for your institution
- Navigate the intersection of state authorization, accreditation, and 90/10 requirements
Important Note: McClintock is actively working to determine the best course of action for institutions that already passed 90/10 for their most recent fiscal years but now have the option to re-issue their reports. While revising calculations may not be necessary for schools that already met the requirement, there may be strategic advantages to consider. In addition, ED has to issue guidance on how an audit report which has been issued can be updated and submitted to ED for a change in the 90/10 calculation rate. We will provide guidance as we analyze the implications of this new interpretation.
With over 50 years of experience in Title IV compliance, McClintock & Associates stands ready to help you maximize the benefits of this important regulatory clarification.
Take Action Today
Schedule a consultation with our Title IV compliance experts to discuss how this change impacts your institution’s 90/10 calculation and explore strategies for optimizing your revenue mix.
Learn more about our 90/10 model to see how it can help you accurately project and manage your institution’s compliance with confidence.
