SchoolVision Blog

90/10 Compliance for Cosmetology Schools: What you need to know

Posted by SM Pack on Oct 25, 2018 11:59:36 AM

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The 90-10 rule refers to a U.S. regulation that governs for-profit higher education. It caps the percentage of revenue that a proprietary school can receive from federal financial aid sources at 90%; the other 10% of revenue must come from alternative sources. 

This calculation must be included as a footnote to the institution’s audited financial statement (which must be provided annually), and helps control their threshold of title IV funds by knowing what their income is from other sources.

Failure to meet the standard for two consecutive years means the school will lose Title IV eligibility (for a period of not less than two years).  The repercussions are devastating, often forcing institutions to close their doors indefinitely.  This is not only bad for business, but it perpetuates the gap in economic stability by not offering educational programs to the workforce.

Despite the ill-fated demise that constantly lingers among administrators, there is light at the end of the tunnel: SchoolVision fully supports compliance programs of any school, large or small, and ensures optimal compliance through customized, automated reports.  Let's take a look at how SchoolVision helps schools with 90/10 reporting: 

90/10 Tracking with SchoolVision Point-Of-Sale 

From cosmetology, to automotive, to massage, and more, departments that serve the public and capture sales data need a school-focused point of sale that can properly report 90/10 contributions from those services. Every sale must be distinguished as revenue if services rendered are a part of the academic process, which in turn, can help create a "cushion" by upping the ratio of revenue to title IV funds.  

According to 34 CFR 668.28(a)(3), you may count revenue from activities conducted by the institution that are necessary for the education and training of its students provided those activities are:

(A) Conducted on campus or at a facility under the institution's control;
(B) Performed under the supervision of a member of the institution's faculty; and
(C) Required to be performed by all students in a specific educational program at the institution.

90_10-stream

The more income from student services (not product sales), the more federal aid money an institution is allowed; basically upping the numbers for title IV income (which is a good thing):

Cosmetology schools not only offer services as part of the academic process; they must also use products to help deliver the intended services with color treatments, styling products, and tools (scissors, hair dryers, combs, etc.).  This can become a thin line to walk when maintaining compliance, which begs the following question:

"Can a cosmetology school count revenues from the retail sales of hair styling products and accessories that are made on the clinic floor?" 

According to the DOE:

 "Although 34 CFR 668.28(a)(3) would seem to leave this possibility open, both FSA and ED/OIG have taken the position that the provision should be construed narrowly and the revenues from the sales of retail products has been disallowed in some circumstances even when the school presented evidence of the connection of these activities to the curriculum."

inventory

90/10 Tracking with SchoolVision Inventory & Dispensary

What that means for you:  While you can't realistically (or safely) report retail product sales as revenue, you can report the use of products for educational purposes.  This is best suited with SchoolVision's Inventory & Dispensary.  Using our Inventory & Dispensary software helps you see in real time what products students are using and purchasing for educational purposes, in turn, generating a compliant source of revenue for your school. 

 90/10 equation

Knowing your school's 90/10 status allows you to best determine how new students can be admitted into the next enrollment period, how to allocate private funds, and ultimately grow the institution.  

 

Sources:

www.gpo.gov - government publishing office 

www.ed.gov - department of education

 www.fsa.gov - federal student aid 

 tuition, fees, other institutional charges, necessary school activities are all considered other sources of revenue for the school.  

insert FSA image: equation for 90/10 

 

Topics: Cosmetology, Point of Sale, Institution Management, Higher Education, inventory, compliance