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There has been constant pressure on the Congress the past few months by for-profit colleges who feel threatened by the possibility of being cut off from millions of Federal student aid dollars. This is in fact the largest source of income for companies.

At least ninety percent of their revenue is generated from the student loans and grants offered by the Education Department. Under the law, for profit colleges may lose eligibility for these grants and loans.

Santa Ana running the Corinthian Colleges Inc in California and Apollo Group Inc, operating the largest US for profit college namely the University of Phoenix say that next year they may have to violate the limit.

Of late, government has been investigating federal fund usage and sales practices of these institutions which in turn have resulted in fewer student enrollments. There are enhanced efforts by the companies to get congress to eliminate the revenue cap. There are efforts ongoing by for profit colleges to enable compliance for the next fiscal year by exemption or extension of the 90/10 rule.

According to Washington based Height Analytics’ analyst Jarrel Price, the ongoing effort to change this rule is one of the most significant battles in Congress for this industry. Price also said that most institutions will be forced to violate the rule if Congress is unable to be pushed enough by the industry.

According to this law, at least ten percent of the revenue must be generated by for profit colleges from sources other than the Education Department. This law was brought into effect especially to ensure that there is no fraud at these colleges and they maintain quality education. This rule essentially discourages investment of personal money by students as tuition fee.

According to University of Phoenix, the 90/10 rule does not effectively measure education quality which can be better gauged through default rates, graduation rates, financial ratios and compliance audits.

Apollo says that at least 88% of the college’s revenue is from the Federal student loans and grants. Even as Pell Grants and student loans are made available increasingly by the Education Department, for profit colleges are nearing the 90% cap said Association of Private Sector Colleges & Universities President Harris Miller.

Representing this Washington based trade group, Miller said that it is imperative for Congress to act quickly to ensure that students are not denied education as schools struggle to continue operations.

Student enrollment continue to drop at the for profit colleges compounding their problems. As on Jan 7th, Strayer Education Inc, an Arlington based for-profit college saw a drop of 20% in the new semester enrollment as compared to last year.

Similarly, Apollo faced a 42 percent drop in new student enrollment for the three months that ended in November. During the global economic crisis, when job training was essential for unemployed workers, an exemption of up to $2000 per student was granted to the 90/10 rule. End of June will see this exemption expiring.

This may eventually lead to violation of the rule by education companies that will be forced to raise student tuition fee above the limits specified by the Federal government.