The relationship between 3-year cohort default rates, graduation rates, student demographic characteristics, and 90/10 status in the proprietary school sector

Public Law 105-244 of the 1998 Higher Education Act Amendments established that proprietary institutions must derive at least 90% (the "90/10 rule") of their revenue from sources other than federal student aid (Title IV funding). Schools that violate the 90/10 rule for 2 consecutive years lose access to Title IV funding (U.S. Department of Education, 2016a). A descriptive correlational design using logistic regression was used to examine whether certain factors were significant predictors of 90/10 status---defined as a school either having a very high 90/10 status (≥ 85% 90/10 rate) or a not very high 90/10 status (< 85% 90/10 rate). The population included 1,324 proprietary institutions. Three-year cohort default rates were found to be a significant predictor of 90/10 status, with every 1 percentage point increase in default rates increasing a school's odds of having a very high 90/10 status by 6% (odds ratio of 1.06). To a lesser extent, graduation rates were found to be a significant predictor of 90/10 status, with every 1 percentage point increase in graduation rates decreasing a school's odds of having a very high 90/10 status by 1% (odds ratio of .99). An increase in the proportion of students enrolled that received Pell Grants was found to increase a school's odds of having a very high 90/10 status (odds ratio of 1.03). Increases in the proportion of African American and Hispanic students were also found to increase a school's odds of having a very high 90/10 status (odds ratio of 1.02 for both). An increase in the proportion of Asian students was found to decrease a school's odds of having a very high 90/10 status (odds ratio of .99). The proportion of female students and the proportion of American Indian students were not found to be significant predictors of 90/10 status. The findings suggest that improving 3-year cohort default rates and graduation rates decreases a school's odds of having a very high 90/10 status. The results indicate that the 90/10 rule disincentives proprietary institutions from serving low-income and ethnic minority students.