Key among the POST Act of 2024’s provisions is the “85/15 Rule.” This revises an existing requirement, stipulating that proprietary colleges must obtain at least 15% of their revenue from non-federal education funds. In simpler terms, not all their funds can come from Uncle Sam. This is designed to ensure that such schools have a sustainable business model that isn’t overly reliant on federal dollars.
Delving into the specifics, the new rule will affect how proprietary institutions calculate their revenue. They must adhere to what’s known as the “cash basis of accounting,” and only certain types of revenue can count towards that 15%. For instance, tuition, fees, and certain educational activities can be counted. However, government loans and other federal aid brackets can’t be treated as golden tickets to fiscal compliance.
Potentially affected are not just the schools themselves but also the students who might now find their institutions striving for different financial activities or partnerships to meet the new criteria. This could, in some cases, translate to more robust educational services as institutions seek non-governmental revenue sources to satisfy the rule.
The POST Act also clarifies that scholarships from these institutions can only count as revenue if they come from external sources, completely detached from any institutional ties. Loans from the institutions themselves are not included in revenue, save for specific and rigorously defined circumstances.
Should a proprietary institution fall short of the 85/15 Rule in any given fiscal year, it’s not merely a slap on the wrist. The POST Act stipulates a daunting period of at least two institutional fiscal years during which the school in question must demonstrate compliance without federal assistance to requalify. This rigorous standard serves as a stern warning and a sturdy backbone to the legislation’s purpose.
Moreover, the bill impressively mandates transparency. Each year, starting from July 1, 2026, the Secretary of Education must report to Congress detailing the percentage of revenue these institutions receive from federal educational assistance compared to other sources.
But why does this legislation matter? Beyond the jargon and percentages lies a core concern: ensuring that for-profit institutions don’t become bloatware, feasting on federal funds without offering substantial quality or economic independence. By enforcing the 85/15 Rule, the POST Act attempts to root out institutions that might exploit the federal funding system, thereby protecting taxpayers’ money and intending to promote a higher standard of education for students.
As with any substantial policy change, the POST Act carries potential ripples. On the positive side, students could benefit from institutions focused more on quality and less on chasing federal dollars. The transparency and stricter financial discipline might see better-aligned educational services, facilities, and faculty.
However, the transition could be challenging. Proprietary institutions might contend with financial strain as they recalibrate their business models to meet the new requirements. Smaller schools, in particular, could find it difficult to adapt quickly, potentially leading them to shutter their doors. There’s also the possibility of increased fees for students as institutions seek to balance their books.
This legislative pivot doesn’t exist in isolation; it addresses broader concerns about the efficacy and ethics of for-profit educational enterprises. Critics have long argued that some proprietary institutions prioritize profits over genuine educational outcomes. By making it mandatory for these institutions to derive a greater share of their revenue from non-governmental sources, the bill wades into the ongoing debate over the role and regulation of for-profit colleges.
What comes next? The bill’s pathway includes referral to the House Committee on Education and the Workforce. From there, it will need to navigate the legislative gauntlet of debate, potential amendments, and votes from both the House and the Senate before reaching the President’s desk.
In the grand theatre of higher education reform, the POST Act of 2024 aims to be more than a player in the background. By redefining how proprietary institutions must manage their finances, it strides into the spotlight, promising to reshape educational opportunities and protect taxpayer investments. Even as it raises the curtain on potential discomfort for institutions, it ushers forth the hope for heightened accountability and a reinforced commitment to students’ futures.
