113 S406 IS: Students First Act of 2013
U.S. Senate
2013-02-28
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.This Act may be cited as the
Students First Act of
2013
.
2.
(a)Section 498A of the
Higher Education Act of 1965 (20 U.S.C. 1099c–1) is amended to read as
follows:
498A.
(a)In
this section:
(1)
(A)The term default manipulation means the
knowing and willful engagement in practices designed to evade sanctions
resulting from the application of a default rate determination to an
institution, such as branching, consolidation of campuses or Office of
Postsecondary Education Identification codes that designate campuses, change of
ownership or control, serial forbearance, or any similar device or practice, as
determined by the Secretary.
(B)The
term default manipulation shall not include a practice carried out
in accordance with a default management plan that has been approved by the
Secretary.
(2)The term executive compensation means
the wages, salary, fees, commissions, fringe benefits, deferred compensation,
retirement contributions, options, bonuses, property, and any other form of
remuneration that the Secretary determines is appropriate, given to employees
who are among the 25 highest compensated employees for the taxable year.
(3)The term Federal funds means funds provided
directly to an institution or to a student attending such institution under any
of the following provisions of law:
(A)This
title.
(B)Chapter 30, 31,
32, 33, 34, or 35 of title 38, United States Code.
(C)Chapter 101, 105,
106A, 1606, 1607, or 1608 of title 10, United States Code.
(D)Section 1784a,
2005, or 2007 of title 10, United States Code.
(E)Title I of the
Workforce Investment Act of 1998 (29 U.S.C. 2801 et seq.).
(F)The Adult
Education and Family Literacy Act (20 U.S.C. 9201 et seq.).
(4)Recruiting and
marketing activities
(A)The term recruiting and marketing activities
means—
(i)advertising and
promotion activities, including naming rights, paid announcements in
newspapers, magazines, or electronic media, on radio, television, or
billboards, or through any other public medium of communication, or paying for
displays or promotions at job fairs, military installations, or college
recruiting events;
(ii)efforts to
identify and attract prospective students, either directly or through a
contractor or other third party, including contact concerning a prospective
student's potential enrollment or application for a grant or loan or work
assistance under this title, or participation in preadmission or advising
activities, including—
(I)paying employees
responsible for overseeing enrollment and for contacting potential students in
person, by phone, by email, or by other internet communications regarding
enrollment; and
(II)soliciting an
individual to provide contact information to an institution of higher
education, including websites established for such purpose and funds paid to
third parties for such purpose; and
(iii)such other
activities as the Secretary may prescribe, including paying for promotion or
sponsorship of education or military-related associations.
(B)Any
activity that is required as a condition of receipt of funds by an institution
under this title or is specifically authorized under this title, shall not be
considered to be a recruiting or marketing activity under subparagraph
(A).
(5)The term relevant Federal agency
means—
(A)the Department of
Education;
(B)the Department of
Veterans Affairs;
(C)the Department of
Defense;
(D)the Consumer
Financial Protection Bureau;
(E)the Federal Trade
Commission; or
(F)any other Federal
agency that provides Federal student assistance or that the Secretary
determines appropriate.
(6)Relevant State
entity or agencyThe term relevant State entity or
agency means—
(A)an appropriate
State licensing or authorizing agency;
(B)a State Attorney
General; or
(C)any other State
entity or agency that the Secretary determines appropriate.
(7)The term serial forbearance means
repeatedly attempting to move students’ loans into forbearance or default
management, especially when the forbearance and default management is not in
the best, long term financial interests of the student.
(8)The term student default risk means a risk that
is reflected as a percentage that is calculated by taking an institution's
3-year cohort default rate, as defined in section 435(m), for the most recent
fiscal year available, and multiplying it by the percentage of students
enrolled at such institution receiving a Federal student loan authorized under
this title during the previous academic year.
(b)Program reviews
for institutions participating under title IV
(1)The Secretary shall conduct program reviews, including
on-site visits, of each institution of higher education participating in a
program authorized under this title that poses a significant risk of failure to
comply with this title, as described in paragraphs (2) and (3).
(2)
(A)The Secretary shall, on an annual basis, conduct program
reviews of each institution of higher education participating in a program
authorized under this title that meets 1 or more of the following
criteria:
(i)As of the date of
the determination—
(I)more than 15
percent of the students enrolled at the institution have received a Federal
Direct Unsubsidized Stafford Loan during the previous year; and
(II)the institution
has a cohort default rate, as defined in section 435(m), that is more than
twice the average cohort default rate of all institutions participating in
programs authorized under this title.
(ii)As of the date
of the determination—
(I)the institution
has a cohort default rate, as defined in section 435(m), that exceeds the
national average; and
(II)the institution
has a cohort default rate, as so defined, in dollar volume that places the
institution in the highest 1 percent of institutions participating in programs
authorized under this title.
(iii)In the case of
proprietary institutions of higher education, the institution received more
than 85 percent of the institution’s revenues from Federal funds, as defined in
subsection (a), during the 2 most recent years for which data is
available.
(iv)The institution
is among the top 1 percent of institutions participating in programs authorized
under this title in terms of numbers or rates of complaints related to Federal
student financial aid, educational practices and services, or recruiting and
marketing practices, as reported in the system for collecting and tracking
student complaints established under subsection (e)(4).
(v)As of the date of
the determination, the institution is among the top 1 percent of institutions
in terms of low graduation rates of all institutions participating in programs
authorized under this title.
(vi)The institution
spends more than 20 percent of the institution’s revenues on recruiting and
marketing activities and executive compensation.
(vii)The
institution’s enrollment has increased by more than 50 percent in 2 years or
has more than doubled in 5 years.
(viii)The
institution has engaged in default manipulation.
(ix)In the period
immediately following the cohort default rate period, the institution’s loan
defaults increase by 50 percent or more.
(x)The institution
is found to have deficiencies, or compliance problems, under this title, or is
at significant risk of failing to comply with applicable Federal or State laws,
by a relevant Federal agency or a relevant State entity or agency, including
the Comptroller General of the United States.
(xi)The institution
has been put on probation or show cause by its accrediting agency.
(xii)The institution
or the institution's executives have publically acknowledged or disclosed that
the institution is in violation or noncompliance with any provision of this
title.
(B)Publication of
institutions reviewedThe Secretary shall—
(i)post, on a
publically available website, the name of each institution of higher education
that is reviewed under subparagraph (A);
(ii)indicate, on
such website, with respect to each such institution, which of the mandatory
review criteria, outlined in subparagraph (A), such institution met; and
(iii)indicate on the
Department’s College Navigator website the name of each institution of higher
education that is reviewed under subparagraph (A).
(C)Institutional
disclosure of reviewEach institution of higher education that is
reviewed under subparagraph (A) shall—
(i)post on the home
page of the institution's website that the institution will be subject to a
mandatory program review and why the institution is being reviewed and shall
maintain such posting and explanation for 1 year or until the Department has
issued its final program review report under subsection (c)(5)(C), whichever
occurs sooner;
(ii)provide a clear,
conspicuous disclosure of the information described in clause (i) to students
who inquire about admission to the institution or submit an application for
admission to the institution prior to the student signing an enrollment
agreement with the institution, for 1 year or until the Department has issued
its final program review report under subsection (c)(5)(C), whichever occurs
sooner; and
(iii)include the
information described in clause (i) on materials of acceptance or admission
submitted to each student before the student enrolls in the institution, for 1
year or until the Department has issued its final program review report under
subsection (c)(5)(C), whichever occurs sooner.
(3)
(A)The Secretary shall use a risk-based approach to select
on an annual basis not less than 2 percent of institutions of higher education
participating in a program authorized under this title that are not reviewed
under paragraph (2), for a program review. This approach shall prioritize
program reviews of institutions that—
(i)have received
large increases in funding under this title during the 5-year period preceding
the date of the determination;
(ii)have a large
proportion of overall revenue from Federal funds, as defined in subsection
(a);
(iii)have a
significant fluctuation in Federal Stafford Loan volume, Federal Direct
Stafford Loan volume, or Federal Pell Grant award volume, or any combination
thereof, in the year for which the determination is made, compared to the year
prior to such year, that is not accounted for by the changes in the Federal
Stafford Loan program, the Federal Direct Stafford Loan program, or the Federal
Pell Grant program, or any combination thereof;
(iv)have experienced
sharp increases in enrollment in absolute numbers or rate of growth;
(v)have high rates
of defaults, relative to all other institutions of higher education
participating in a program authorized under this title, for loans issued under
this title over the lifetime of the loans;
(vi)have high
default rates, in dollar volume, or high cohort default rates for loans issued
under this title;
(vii)have a student
default risk that is more than 2 times the national average student default
risk for all institutions participating in a program under this title;
(viii)have a high
proportion or high rate of complaints related to Federal student financial aid,
educational practices and services, or recruiting and marketing practices, as
reported in the system for collecting and tracking student complaints
established under subsection (e)(4);
(ix)have extremely
low graduation rates;
(x)are in poor
financial health according to financial responsibility standards described in
section 498(c);
(xi)are spending
more than 15 percent of the institution's revenues on recruiting and marketing
activities and executive compensation;
(xii)in the case of
proprietary institutions of higher education, have large profit margins and
profit growth;
(xiii)have been put
on notice or warning by its accrediting agency;
(xiv)in the case of
proprietary institutions of higher education, have experienced a change in
ownership of the institution, including a buyout;
(xv)in the case of
proprietary institutions of higher education, have acquired a nonprofit
institution of higher education at any point during the 1-year period preceding
the date of the determination; or
(xvi)were for-profit
institutions of higher education and have become non-profit institutions of
higher education at any time during the 1-year period preceding the date of the
determination.
(B)In this paragraph, the term change in
ownership means 1 person or more than 1 person acting as a group,
acquiring an ownership interest or a majority of the stock of the institution
that, in the aggregate, constitutes more than 50 percent of the total fair
market value or total voting power, as applicable, of such institution.
(4)Additional
program reviewsThe Secretary may also conduct additional program
reviews of institutions of higher education participating in a program
authorized under this title that are not determined to pose a significant risk
of failure to comply with provisions of this title.
(5)Public
disclosure of violationsThe Secretary shall—
(A)post, on a
publically available website, the name of each institution of higher education
that is found to have violated a provision of this title knowingly and
willfully or with gross negligence;
(B)indicate on such
website, with respect to each such institution, which of the provisions of this
title the institution violated; and
(C)maintain such
posting until the date the institution of higher education rectifies the
violation or the date that is 1 year after the date the Secretary issues the
final program review report under subsection (c)(5)(C) with respect to such
institution, whichever date is later.
(6)Institutional
disclosure of violationsEach institution of higher education
that is found to have violated a provision of this title knowingly and
willfully or with gross negligence shall—
(A)not later than 15
days after the date of issuance of the final program review report containing
the finding, post on the home page of the institution’s website that the
institution has been found to have violated a provision of this title knowingly
and willfully or with gross negligence, including the provision the institution
was found to have violated;
(B)maintain such
posting until the date the institution rectifies the violation or the date that
is 1 year after the date the Secretary issues the final program review report
under subsection (c)(5)(C) with respect to such institution, whichever date is
later; and
(C)include the
information described in subparagraph (A) on materials of acceptance or
admission submitted to each student before the student enrolls in the
institution until the date the institution rectifies the violation or the date
that is 1 year after the date the Secretary issues the final program review
report under subsection (c)(5)(C) with respect to such institution, whichever
date is later.
(c)Characteristics
of program reviews
(1)The
Secretary may give not more than 72 hours notice to an institution of higher
education that will undergo a program review pursuant to subsection (b) of such
review.
(2)Without sharing personally identifiable information
and in accordance with section 444 of the General Education Provisions Act (20
U.S.C. 1232g, commonly known as the Family Educational Rights and Privacy
Act of 1974), the Secretary shall share all final program review results
conducted under this section with relevant Federal agencies and relevant State
entities or agencies, and appropriate accrediting agencies and associations, to
enable such agencies, entities, and associations to determine the eligibility
of institutions for funds or accreditation.
(3)To the extent practicable, the Secretary shall coordinate
program reviews conducted under this section with other reviews and audits
conducted by the Department, and with relevant Federal agencies and relevant
State entities or agencies.
(4)When conducting program reviews under this section, the
Secretary shall assess the institution of higher education's compliance with
the provisions of this title. The program reviews shall include, at a minimum,
the following:
(A)With regard to
the institutional information, the Secretary shall assess financial capability,
administrative capability, and program integrity, including whether the
institution—
(i)knowingly and
willfully misused Federal student aid from any source;
(ii)violated section
487(a)(20);
(iii)engaged in
substantial misrepresentation of the nature of its educational program, its
financial charges, or the employability of its graduates; or
(iv)violated the
Department’s program integrity regulations.
(B)With regard to
student information, the Secretary shall examine—
(i)graduation rates
compared with all other institutions participating in a program authorized
under this title;
(ii)student
complaints, including interviews with current and former students, faculty and
staff, and accrediting agencies; and
(iii)information
from the complaint data system established under subsection (e)(4).
(5)
(A)The
Secretary shall provide training to personnel of the Department designed to
improve the quality of financial and compliance audits and program reviews
conducted under this section, including instruction about appropriately and
effectively conducting such audits and reviews for institutions of higher
education from different sectors of higher education. In providing the
training, the Secretary shall not use funds appropriated to carry out this
title.
(B)Carrying out
program reviewsIn carrying out program reviews under this
section, the Secretary shall—
(i)establish
guidelines designed to ensure uniformity of practice in the conduct of such
reviews;
(ii)make available
to each institution of higher education participating in a program authorized
under this title complete copies of all review guidelines and procedures used
in program reviews, except that internal training materials for Department
staff related to identifying instances of fraud, misrepresentation, or
intentional noncompliance shall not be disclosed;
(iii)permit an
institution of higher education to correct or cure an administrative,
accounting, or recordkeeping error within 90 days of the issuance of the final
program review report, if the error is not part of a pattern of error and there
is no evidence of fraud or misconduct related to the error;
(iv)without sharing
personally identifiable information and in accordance with section 444 of the
General Education Provisions Act (20 U.S.C. 1232g, commonly known as the
Family Educational Rights and Privacy Act of 1974), inform the
relevant Federal agencies and relevant State entities or agencies, and
accrediting agency or association, whenever the Secretary finds a violation of
this title or sanctions an institution of higher education under this section,
section 498, or section 432; and
(v)provide to an
institution of higher education 90 calendar days to review and respond to any
program review report and relevant materials related to the report before any
final program review report is issued.
(C)Final program
review report
(i)Not later than 180 calendar days after issuing a program
review report under this section, the Secretary shall review and consider an
institution of higher education’s response, and issue a final program review
report or audit determination. The final report shall include—
(I)a written
statement addressing the institution of higher education’s response;
(II)a written
statement of the basis for such report or determination; and
(III)a copy of the
institution’s response.
(ii)The
Secretary shall maintain and preserve at all times the confidentiality of any
program review report until a final program review report is issued, other than
to inform the relevant Federal agencies and relevant State entities or
agencies, and accrediting agency or association, as required under this
section.
(iii)Reports
disclosed to the institutionThe Secretary shall promptly
disclose each program review report to the institution of higher education
under review.
(iv)Removal of
personally identifiable informationAny personally identifiable
information from the education records of students shall be removed from any
program review report before the report is shared with any relevant Federal
agency, State entity or agency, or accrediting agency or association.
(D)Follow-up
reviews after violationsThe Secretary shall conduct follow-up
reviews of each institution of higher education that has been found in
violation of a provision of this title not later than 1 year after the date of
such finding. Such follow-up reviews may only assess whether the institution of
higher education has corrected violations found in a previous program
review.
(d)
(1)The Secretary shall immediately sanction any institution
of higher education that, after the full program review process under this
section, is found to have violated a provision of this title.
(2)
(A)
(i)Not later than 180 days after the date of enactment of
the Students First Act of 2012, the Secretary shall establish in regulations,
without regard to sections 482(c) and 492, section 437 of the General Education
Provisions Act, and section 553 of title 5, United States Code, a comprehensive
methodology and criteria for sanctions against institutions of higher education
that, after the full program review process under this section, are found to
have violated a provision of this title.
(ii)The sanctions described in clause (i) shall—
(I)be in addition to
other sanctions available to the Secretary under this Act; and
(II)take into
account—
- (aa)the severity of
the violation of this title;
- (bb)whether the
institution violated this title knowingly and willfully or with gross
negligence;
- (cc)whether the
violation represents a persistent and documented pattern of violating this
title; and
- (dd)the extent of
the harm or potential harm that such violations caused or had the potential to
cause upon students and borrowers.
(B)Sanctions for
failure to comply with the program review processThe Secretary
may sanction an institution that fails to fully comply with the program review
process described in this section, including the reporting requirements
described in paragraphs (2)(C) and (6) of subsection (b).
(C)The
Secretary may waive sanctions described in subparagraph (A) with respect to an
institution that has committed a minor violation of a provision of this title
if—
(i)the violation was
not committed knowingly and willfully or with gross negligence; and
(ii)the violation
has been rectified by such institution not later than 60 days after publication
of the institution's final program review report.
(3)Revocation of
title iv eligibilityNotwithstanding section 487(d)(2), the
Secretary shall revoke the eligibility to participate in student aid programs
under this title of an institution of higher education that, after undergoing a
program review, is determined to have—
(A)knowingly and
willfully misused Federal student aid from any source;
(B)violated section
487(a)(20);
(C)engaged in
substantial misrepresentation of the nature of its educational program, its
financial charges, or the employability of its graduates; or
(D)violated the
Department’s program integrity regulations.
(4)Sanctions for
officers of institutions
(A)In
this paragraph, the term officer of an institution of higher
education includes the President, Chief Executive Officer, and Chief
Financial Officer of an institution of higher education.
(B)The
Secretary shall extend sanctions, including financial penalties, to an officer
of an institution of higher education that participates in a program under this
title that knowingly and willfully or with gross negligence, violates a
provision of this title. Such sanctions shall include—
(i)prohibiting an
officer of an institution of higher education that has knowingly and willfully
or with gross negligence violated a provision of this title from being employed
by such institution or another institution of higher education that
participates in a program under this title for a period of 5 years from the
date of the determination of the violation; and
(ii)assessing a
financial penalty against an officer of an institution of higher education that
has knowingly and willfully or with gross negligence violated a provision of
this title that is equal to the officer's annual compensation for the year for
which the determination is made.
(5)Financial
penalties for institutions
(A)With respect to each institution of higher education for
which the Secretary has revoked eligibility to participate in student aid
programs under this title or has determined to have violated this title
knowingly and willfully or with gross negligence, the Secretary shall assign
penalties of not less than 20 percent of the amount of funds received by the
institution from Federal funds, as defined in subsection (a), for the last year
for which data are available, which, notwithstanding any other provision of
law, shall be retained by the Secretary and placed in the Student Relief Fund
established by the Secretary under subparagraph (C).
(B)Penalties for
institutions that do not have title iv eligibility
revokedNotwithstanding any other provision of law, with respect
to each institution of higher education that has violated a provision of this
title and for which the Secretary has determined has harmed a student or the
taxpayers but is not an institution described in subparagraph (A), the
Secretary shall assign penalties of not more than $100,000, which shall be
retained by the Secretary and placed in the Student Relief Fund established by
the Secretary under subparagraph (C).
(C)
(i)The
Secretary shall establish a Student Relief Fund that shall be used, subject to
the availability of funds, to provide financial relief, in a manner determined
by the Secretary and which may include relief such as tuition reimbursement or
full or partial loan forgiveness, to any student enrolled in an institution of
higher education that has failed to comply with the standards and agreements
created for program participation eligibility under section 487 or has been
sanctioned under this subsection.
(ii)Authorization
of appropriationsIn addition to funds derived from financial
penalties assessed pursuant to subparagraph (A), there are authorized to be
appropriated such sums as may be necessary to carry out this
subparagraph.
(6)Notwithstanding any other provision of this title, an
institution of higher education that has been sanctioned by the Secretary under
this subsection or any other provision of this title may not have such
sanctions lifted until the Secretary has conducted a subsequent follow-up
review and found the institution to be in compliance with this title.
(e)Data collection
and complaint tracking
(1)Establishment
of databaseThe Secretary shall establish and operate a central
database of information on institutional accreditation, eligibility, and
certification that includes all relevant information—
(A)available to the
Department;
(B)made available to
the Secretary by the heads of relevant Federal agencies;
(C)from accrediting
agencies or associations; and
(D)available from a
guaranty agency.
(2)In order to carry out the responsibilities described in
paragraph (1), the Secretary shall develop a plan to carry out and collect all
relevant information.
(3)The Secretary shall make the information obtained
pursuant to paragraph (1) readily available to the relevant Federal agencies
and relevant State entities or agencies, all institutions of higher education,
guaranty agencies, States, and other organizations participating in the
programs authorized under this title.
(4)
(A)Establishment
of complaint tracking systemThe Secretary shall establish a
single, toll-free telephone number, a website, and a database, to facilitate
the centralized collection of, monitoring of, and response to student and staff
complaints regarding Federal student financial aid, educational practices and
services, and recruiting and marketing practices.
(B)Establishment
of complaint tracking officeThe Secretary shall establish within
the Department an office whose functions shall include establishing,
administering, and disseminating widely information about the complaint
tracking system established under subparagraph (A).
(C)Sharing
information with federal agenciesThe Secretary shall coordinate
with relevant Federal agencies to collect complaints from and route complaints
to such agencies, as appropriate, with respect to educational products or
services.
(D)Participation
of institutions
(i)The Secretary shall communicate with an institution of
higher education about complaints received through the complaint tracking
system with respect to such institution.
(ii)Without
sharing any personally identifiable information and in accordance with section
444 of the General Education Provisions Act (20 U.S.C. 1232g, commonly known as
the Family Educational Rights and Privacy Act of 1974), the
Secretary shall provide a summary to an institution of higher education, at
least once a year, of the numbers and types of complaints that have been filed
with respect to such institution.
(iii)Sharing
individual complaintsNotwithstanding any other provision of law,
the Secretary may share a complaint and the information of the individual
submitting the complaint with the institution against which the complaint has
been filed, if such individual who has filed the complaint affirms that the
Secretary may share that individual's personal information and complaint with
the institution.
(iv)Responses from
institutionsThe Secretary shall—
(I)provide an
institution with 90 days to respond to a complaint filed with respect to the
institution with the complaint tracking system established under subparagraph
(A); and
(II)consider such
response and any resolution of the complaint when utilizing the information
from the complaint during a program review.
(5)The Secretary shall share consumer complaint information
with, and collect such information from, relevant Federal agencies and relevant
State entities or agencies regarding educational products or services, in
accordance with applicable data privacy laws and regulations, except that any
personally identifiable information from the education records of students
shall not be shared.
(6)The
Secretary shall publish on a publically accessible website information and
analyses about complaint numbers, complaint types, and, where applicable,
information about the resolution of complaints collected under this
subsection.
.
(b)Program
participation agreementsSection 487(a) of the Higher Education
Act of 1965 (20 U.S.C. 1094(a)) is amended by adding at the end the
following:
(30)The President,
Chief Executive Officer, and Chief Financial Officer of the institution shall
each—
(A)personally sign
each program participation agreement for the institution; and
(B)be liable for the
institution’s compliance with such agreement and with the provisions of this
title, as provided in section
498A(d)(4).
.