POST Act: For-Profit Colleges Face Two-Year Ban if Federal Aid Exceeds 85% of Revenue

The Protecting Our Students and Taxpayers Act of 2025 (POST Act) is taking direct aim at the financial structure of for-profit colleges—the proprietary institutions—that rely heavily on federal student aid. This bill updates the long-standing “85/15 rule,” which dictates the maximum percentage of revenue a school can draw from federal student aid programs, such as Title IV funds, and still remain eligible to receive that money. Under the POST Act, proprietary schools must prove that at least 15 percent of their total revenue comes from sources other than federal student assistance. This change is designed to ensure these schools are viable educational institutions with diverse funding, not just conduits for federal aid.

The New Math: Where the Money Must Come From

This isn’t just a simple percentage change; the bill tightens the rules on what counts as non-federal revenue. If a school makes institutional loans to its students, that money only counts toward the required 15 percent if the student is actively paying it back during the fiscal year, and only if that loan is backed by a legitimate, separate promissory note. Even trickier are the rules for Income Share Agreements (ISAs), where a student agrees to pay a percentage of their future income in exchange for education funding. For ISAs, only the portion of the payment that represents the return of the original capital—not the profit or implied interest—can be counted as non-federal revenue. This means schools can’t rely on their own internal financing schemes or the interest they charge to meet the 15 percent threshold, forcing them to find genuinely independent revenue streams.

The Real-World Impact: High Stakes for Students and Schools

For schools currently hovering near the 85 percent federal funding limit, this new math is a game-changer that requires a significant pivot in their business model. But the biggest headline here is the penalty: If a proprietary school fails to meet the 15 percent non-federal revenue requirement for just one fiscal year, it immediately loses eligibility for all federal student aid for the next two full institutional fiscal years. Think of a mid-sized trade school where 90% of the students rely on Pell Grants or federal loans to pay tuition. If that school misses the 15% mark due to an accounting error or a bad enrollment year, it’s instantly cut off. This two-year ban is a severe sanction that could force the rapid closure of schools, potentially leaving thousands of students stranded mid-program without access to the federal aid they need to continue their education elsewhere. While the goal is to protect taxpayers from institutions that might be financially unstable, the immediate and unforgiving nature of the penalty puts current students at risk.

Transparency and the Paper Trail

To keep tabs on compliance, the POST Act requires the Secretary of Education to send an annual report to Congress detailing the exact revenue breakdown (federal vs. non-federal) for every proprietary school receiving federal aid. This mandated transparency, starting three award years after enactment, means that Congress and the public will have a clearer picture of which institutions are truly dependent on taxpayer dollars. Furthermore, the new rules take effect starting with the second full “award year” after the bill becomes law, giving institutions some lead time to adjust their accounting practices and financing structures before the clock starts ticking on the new 85/15 requirement.