New 85/15 Rule Hits For-Profit Colleges: Federal Aid Eligibility Tied to Non-Government Revenue

The Protecting Our Students and Taxpayers Act of 2025 (POST Act) is shaking up how for-profit colleges stay in business—specifically, how they get access to federal student aid money, like Pell Grants and federal loans. This bill introduces a strict new “85/15 rule.” Essentially, if a for-profit school wants to keep receiving federal funds, it must prove that at least 15% of its total revenue comes from sources other than federal education assistance. If they fail this test, they’re cut off from federal aid for two full school years.

The New Math: Why 15% is the Magic Number

This isn't just about a new number; it’s about forcing proprietary schools to diversify their funding. Currently, many for-profit colleges rely almost exclusively on Uncle Sam’s checkbook—meaning taxpayer dollars—to stay afloat. The POST Act requires them to prove they can attract revenue from independent sources, which could signal that their education is valuable enough to draw private investment or tuition payments not backed by federal aid. The bill gets granular, requiring schools to use the cash basis of accounting and defining exactly what counts as federal money and what counts as that crucial 15% non-federal revenue.

Where the Fine Print Hits Hardest

The bill closes several financial loopholes that schools might use to meet the 15% threshold. For example, if a school gives a student an institutional loan, that loan only counts as non-federal revenue if the student is actively making documented payments on it during the fiscal year. They can’t just write a loan and count it as income. Similarly, Income Share Agreements (ISAs)—where students pay a percentage of their future income—only count if the school clearly outlines the maximum payment and time frame, ensuring the interest and fees earned aren't used to inflate the 15% number. If you’re a student, these rules are designed to prevent schools from using tricky financing deals to look financially healthier than they are.

Real-World Impact: What Happens When the Money Stops?

If a school misses that 15% mark, the penalty is severe: two years without federal aid. For a student currently enrolled in a program at one of these schools, this could be disruptive. Since most students at these institutions rely heavily on federal aid, a school losing its eligibility could face immediate financial collapse, potentially forcing students to transfer mid-program, lose credits, or face program closure. This is a high-stakes move aimed at weeding out schools that are overly dependent on government funding, but it carries a risk for the students currently attending them. On the taxpayer side, the bill mandates that the Secretary of Education report annually to Congress, detailing the exact revenue breakdown for every for-profit college receiving Title IV aid. This means we finally get a clear, annual look at which schools are running almost entirely on federal money, providing much-needed oversight.

Compliance and the Clock

The changes aren't immediate. The new rules take effect during the second full academic “award year” after the bill becomes law. This gives institutions about a year and a half to two years to adjust their business models and accounting practices. However, the compliance burden will be significant. The detailed accounting required to track and prove the source of every dollar—especially concerning institutional loans, ISAs, and scholarships—means these schools will need serious administrative firepower to stay on the right side of the law. This is a clear signal that the era of easy federal money for for-profit colleges is coming to an end, demanding greater accountability in exchange for taxpayer dollars.