The fight over how Washington regulates higher education took a sharp turn Monday as Republican Sen. Jim Banks of Indiana rolled out new legislation aimed squarely at a decades-old rule he says has been reshaped to squeeze career-focused schools and limit access for military students.
Banks’ proposal, titled the Promoting Access and Revenue Integrity Through Institutional Transparency (PARITY) Act, targets the so-called “90/10 rule,” a provision in the Higher Education Act that requires proprietary institutions to draw at least 10% of their revenue from non-federal sources. For years, that calculation excluded benefits like the GI Bill, effectively allowing schools to count those funds toward the non-federal share.
That changed in 2021. A provision embedded in the American Rescue Plan expanded the definition of federal funding to include GI Bill benefits. The adjustment pushed many career and technical schools closer to the 90% ceiling, raising the risk of penalties or loss of eligibility for federal aid if they exceed it.
Banks argues the update created an uneven playing field. Public and nonprofit colleges are not subject to the same revenue cap, a distinction he and his allies say distorts competition. His bill would roll back the Biden-era revision and restore the earlier interpretation of funding sources.
Supporters of the legislation, including several military advocacy groups, contend the current framework has unintended consequences. In a letter backing the bill, organizations warned that counting GI Bill benefits as federal aid pressures schools to limit enrollment of veterans and active-duty service members to avoid breaching the cap. They argue that outcome runs counter to the purpose of those benefits.
Data cited in the same letter attempts to underscore the disparity. If the 90/10 formula were applied across all higher education institutions, it claims a large share of public colleges would fall out of compliance—roughly 80% of two-year schools and 40% of four-year institutions.
Critics of the rollback see the issue differently. Some groups that supported tightening the rule argue the earlier system created incentives for aggressive recruiting of military students, particularly by for-profit colleges seeking to balance their revenue streams. They point to past concerns that some institutions relied heavily on federal aid while steering students toward additional private loans.
The 90/10 rule itself dates back to 1992, when it was introduced as an 85/15 threshold before later being tightened. Its stated purpose has remained consistent: to ensure that programs can attract a portion of funding from sources other than federal aid, a measure intended to signal market viability and reduce the risk of fraud or abuse.
Over time, the rule has been expanded and reinforced through additional regulations. The Obama administration added “gainful employment” requirements tied to graduates’ outcomes and strengthened borrower protections for students who claimed they were misled.
