[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2993 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2993

To amend the Higher Education Act of 1965 to improve the determination 
 of cohort default rates and provide for enhanced civil penalties, and 
    to authorize the establishment of an institutional risk-sharing 
                              commission.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 10, 2014

Mr. Murphy (for himself and Mr. Harkin) introduced the following bill; 
     which was read twice and referred to the Committee on Health, 
                     Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
To amend the Higher Education Act of 1965 to improve the determination 
 of cohort default rates and provide for enhanced civil penalties, and 
    to authorize the establishment of an institutional risk-sharing 
                              commission.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Students Before Profits Act''.

SEC. 2. IMPROVED DETERMINATION OF COHORT DEFAULT RATES.

    Section 435 (20 U.S.C. 1085) is amended--
            (1) in subsection (a)(2), by adding at the end the 
        following:
            ``(E)(i) In any case where the Secretary has determined 
        that the institution has engaged in default manipulation, the 
        Secretary--
                    ``(I) shall recalculate the cohort default rate for 
                the institution under this section using corrected data 
                and information, for all fiscal years for which the 
                default manipulation has occurred; and
                    ``(II) using the recalculated cohort default rate, 
                shall redetermine whether the institution is ineligible 
                to participate in a program under this title.
            ``(ii) In this section, the term `default manipulation' 
        means engaging in a device or practice, such as branching, 
        consolidation of campuses, consolidation or manipulation of the 
        identification codes used by the Office of Postsecondary 
        Education to designate campuses and institutions, change of 
        ownership or control, serial forbearance, or any similar device 
        or practice (as determined by the Secretary) when, but for the 
        device or practice, one or more campuses of an institution of 
        higher education would be at risk of cohort default rate 
        sanctions under this section or student default risk sanctions 
        under section 489A.''; and
            (2) in subsection (m)(3), by striking ``through the use 
        of'' and all that follows through the period at the end and 
        inserting ``through default manipulation.''.

SEC. 3. INSTITUTIONAL RISK-SHARING COMMISSION.

    (a) Establishment of Commission.--
            (1) In general.--The Secretary of Education shall establish 
        an Institutional Risk-Sharing Commission (referred to in this 
        section as the ``Commission'') whose members shall be selected 
        by the Secretary and comprised of the following relevant 
        stakeholders:
                    (A) 2 representatives of national or regional 
                student advocacy organizations with a track record of 
                engagement and expertise on issues related to college 
                costs, consumer protection, and institutional 
                accountability and an alternate member.
                    (B) 1 student representative who is attending an 
                institution of higher education on the date of the 
                selection and an alternate member.
                    (C) 1 member of the Bureau of Consumer Financial 
                Protection with demonstrated knowledge of student loan 
                borrowing and an alternate member.
                    (D) 2 administrative officers from different types 
                of institutions of higher education and an alternate 
                member.
                    (E) 1 higher education researcher and an alternate 
                member.
                    (F) 1 State postsecondary education data system 
                director and an alternate member.
                    (G) 1 representative from the National Center for 
                Education Statistics and an alternate member.
                    (H) 1 representative from the Government 
                Accountability Office and an alternate member.
                    (I) 1 representative from the Department of the 
                Treasury and an alternate member.
            (2) Functions.--Each member selected under paragraph (1) 
        shall participate for the purpose of determining agreement by 
        majority vote on the Commission on the report and its contents 
        described in subsection (b)(4). Each alternate member shall 
        participate for the purpose of determining the majority vote in 
        the absence of the member. Either the member or an alternate 
        member may speak during the negotiations. In the event that the 
        Commission is unable to form agreement on the contents of the 
        report by majority vote, the contents of the report shall be 
        determined by a plurality vote.
    (b) Study.--
            (1) In general.--Not later than 270 days after the date 
        that all members of the Commission have been selected under 
        subsection (a), the Commission shall complete a study and 
        develop recommendations for implementation of a new risk-
        sharing system for institutions of higher education that 
        participate in the Federal Direct Loan Program under part D of 
        title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a 
        et seq.) through which institutions would be held financially 
        accountable for poor student outcomes.
            (2) Content of study.--In conducting the study required 
        under paragraph (1), the Commission shall, at a minimum, 
        consider the following issues:
                    (A) Identifying an annual measure or set of 
                measures for the risk-sharing system that would provide 
                the most accurate assessment of an institution's level 
                of success or failure at providing their students with 
                basic educational outcomes, such as degree completion, 
                ability to repay loans made, insured, or guaranteed 
                under title IV of the Higher Education Act of 1965 (20 
                U.S.C. 1070 et seq.), post-graduation employment, and 
                post-graduation earnings. Such possible measures may 
                include cohort default rates, loan repayment rates, 
                graduation rates, graduate earnings, and other measure 
                that the Commission considers an accurate reflection of 
                student outcomes, regardless of the feasibility of 
                access to the data required to implement collection of 
                such measures.
                    (B) What specific metrics would require the lowest 
                performing institutions to make annual payments into 
                the risk-sharing system, and what metrics would exempt 
                institutions from making an annual risk-sharing payment 
                based on performance measures that exceeded a minimum 
                level (which level would be identified by the 
                Commission).
                    (C) How the payments for each institution should be 
                calculated, including whether the use of a percentage 
                of Federal Direct Loans disbursed the year prior to 
                identification, the percentage of loans in default, or 
                any other calculation should be used.
                    (D) Whether a sliding scale of payments should be 
                required of institutions based on their performance on 
                the identified measures.
                    (E) Any legislative safeguards or mechanisms to 
                ensure that an institution required to participate in 
                the risk-sharing system would not pass any prospective 
                costs directly or indirectly onto students, or limit 
                access to low-income students.
                    (F) How an institution's level of access to low-
                income students (such as measured by the percentage of 
                students enrolled at the institution who receive 
                Federal Pell Grants under subpart 1 of part A of title 
                IV of the Higher Education Act of 1965 (20 U.S.C. 1070a 
                et seq.)) and affordability (as measured by average net 
                price) should be considered in the risk-sharing system.
                    (G) Specifying a means for the risk-sharing system 
                payments to go primarily towards students in default, 
                additional aid to low-income students, or any other 
                form of aid to student borrowers most in need, 
                including after degree completion.
                    (H) Whether any extraordinary consideration exists 
                that warrants allowing a waiver process through which a 
                very limited number of institutions would be eligible 
                to apply for a waiver from a risk-sharing payment on a 
                yearly basis, and under what conditions.
            (3) Outside recommendations.--As part of the study required 
        under paragraph (1), the Commission shall develop a public 
        process for soliciting recommendations for the risk-sharing 
        system and shall consider these recommendations as part of the 
        study. The Commission shall factor in any financial or other 
        interests of any submitting party in weighing and considering 
        such recommendations.
            (4) Report.--
                    (A) Content.--Not later than 90 days after 
                completing the study required under paragraph (1), the 
                Commission shall issue, by majority vote, or if unable 
                to achieve a majority vote, then a plurality vote, a 
                report regarding its recommendations for a risk-sharing 
                system. The report shall include the following:
                            (i) A description of the Commission's 
                        findings as to the issues described in 
                        paragraph (2).
                            (ii) A data analysis using the Commission's 
                        recommended metrics that demonstrates how each 
                        institution of higher education that 
                        participates in the Federal Direct Loan Program 
                        under part D of title IV of the Higher 
                        Education Act of 1965 (20 U.S.C. 1087a et seq.) 
                        as of the period of the Commission's study 
                        would fare under the proposed risk-sharing 
                        system, including projections for the amounts 
                        of payments the lowest performing institutions 
                        would have to pay.
                            (iii) An evaluation of the feasibility and 
                        unintended consequences of implementing the 
                        recommended risk-sharing system, including any 
                        legislative or regulatory action needed to 
                        implement such a system.
                    (B) Availability.--The report described in 
                subparagraph (A) shall be--
                            (i) provided to the Secretary of Education, 
                        the Committee on Health, Education, Labor, and 
                        Pensions of the Senate, and the Committee on 
                        Education and the Workforce of the House of 
                        Representatives; and
                            (ii) made publicly available.
    (c) Securing Information and Privacy.--
            (1) In general.--Subject to paragraph (2), the Commission 
        may secure directly from any Federal department or agency such 
        information as the Commission considers necessary to carry out 
        its duties under this section. The Commission may request the 
        head of any State or local department or agency to furnish such 
        information to the Commission.
            (2) Privacy.--Any Federal department or agency, State or 
        local department or agency, or institution of higher education 
        in providing information to the Commission under this section 
        shall not share any personally identifiable information and 
        shall act 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'').

SEC. 4. CIVIL PENALTIES.

    Part G of title IV of the Higher Education Act of 1965 (20 U.S.C. 
1088 et seq.) is amended by inserting after section 489 the following:

``SEC. 489A. CIVIL PENALTIES AND OTHER REMEDIES.

    ``(a) Definitions.--In this section:
            ``(1) Substantial misrepresentation or other serious 
        violation.--The term `substantial misrepresentation or other 
        serious violation' means any of the following:
                    ``(A) A substantial misrepresentation regarding--
                            ``(i) the nature of the educational program 
                        of an institution of higher education;
                            ``(ii) the financial charges of the 
                        institution;
                            ``(iii) the space availability in a program 
                        of the institution for which a student is 
                        considering enrollment;
                            ``(iv) the admission requirements of the 
                        institution;
                            ``(v) the transferability of credits from 
                        the institution;
                            ``(vi) whether a program of the institution 
                        meets the necessary standards to qualify 
                        students to sit for licensing examinations, or 
                        obtain certification required as a precondition 
                        for employment, in the State in which the 
                        students reside;
                            ``(vii) the passage rates of students at 
                        the institution in obtaining certification 
                        requirements;
                            ``(viii) the passage rates of students who 
                        sit for licensing examinations; or
                            ``(ix) the employability of the graduates 
                        of the institution.
                    ``(B) A knowing and willful misuse of Federal 
                student aid from any source.
                    ``(C) A violation of section 487(a)(20).
                    ``(D) A violation of the default manipulation 
                regulations promulgated by the Secretary under section 
                435(m)(3).
                    ``(E) Failure to comply with the program review 
                process described in section 498A, including any 
                disclosure requirement described in paragraph (2) or 
                (5) of section 498A(b).
                    ``(F) A violation of the program integrity 
                regulations promulgated by the Secretary under this 
                Act.
                    ``(G) A violation of this Act that the Secretary 
                has determined, by regulation, to be a serious 
                violation for purposes of this section.
            ``(2) Officer of an institution of higher education.--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 or their 
        equivalents.
    ``(b) Sanctions for Substantial Misrepresentations or Serious 
Violations.--
            ``(1) Civil penalties.--
                    ``(A) In general.--The Secretary may impose a civil 
                penalty upon an eligible institution upon making a 
                determination, after reasonable notice and opportunity 
                for a hearing, that an eligible institution has engaged 
                in a substantial misrepresentation or other serious 
                violation.
                    ``(B) Amount of civil penalties.--A civil penalty 
                imposed for a violation under subparagraph (A) shall be 
                not less than $100,000 or--
                            ``(i) in the case of a first violation, an 
                        amount equal to the product of $1,000,000 
                        multiplied by the institution's student default 
                        risk, whichever is larger;
                            ``(ii) in the case of a second violation, 
                        an amount equal to the product of $2,000,000 
                        multiplied by the institution's student default 
                        risk, whichever is larger; and
                            ``(iii) in the case of a third or 
                        subsequent violation, an amount equal to the 
                        product of $3,000,000 multiplied by the 
                        institution's student default risk, whichever 
                        is larger.
                    ``(C) Treatment of multiple institutions.--For the 
                purpose of determining the number of violations under 
                subparagraph (B), any violation by a particular 
                institution will accrue against all identification 
                codes used by the Office of Postsecondary Education to 
                designate campuses and institutions affiliated with the 
                institution, and within the period of participation for 
                the institution, as defined in section 668.13(b) of 
                title 34, Code of Federal Regulations, or any successor 
                regulation.
    ``(c) Sanctions for Other Violations of This Title.--Upon 
determination, after reasonable notice and opportunity for a hearing, 
that an eligible institution has engaged in a violation of any other 
provision of this title, including the failure to carry out any 
provision of this title, that is not a significant misrepresentation or 
other serious violation, the Secretary may impose a civil penalty upon 
such institution of not more than $100,000 (subject to such adjustments 
for inflation as may be prescribed in regulation) for each such 
violation.
    ``(d) Civil Penalties and Sanctions for Officers of Institutions.--
Upon determination, after reasonable notice and an opportunity for a 
hearing on the record, that an officer of an institution of higher 
education that participates in a program under this title has knowingly 
and willfully, or with gross negligence, violated a provision of this 
title, the Secretary may sanction the officer. Such sanctions may 
include the following:
            ``(1) Prohibiting the institution of higher education that 
        has employed the officer of an institution of higher education 
        and that participates in a program under this title, or any 
        other institution of higher education that participates in a 
        program under this title, from employing the officer, except 
        that any such prohibition under this subsection shall not be 
        for a period of more than 5 years from the date of the 
        determination of the violation.
            ``(2) Assessing a civil penalty against an officer of an 
        institution of higher education who has knowingly and 
        willfully, or with gross negligence, violated a provision of 
        this title, except that any such civil penalty under this 
        subsection shall not be greater than the amount of the 
        officer's compensation for each year for which the violations 
        are determined to have occurred. For purposes of this 
        paragraph, an officer's compensation shall include proceeds of 
        any sales of stock and any incentive-based compensation 
        (including stock options awarded as compensation) based on 
        information required to be reported to the Secretary or any 
        other Federal agency during the period in which the violations 
        are determined to have occurred.
    ``(e) Limitation, Suspension, or Termination of Eligibility 
Status.--
            ``(1) In general.--Upon determination, after reasonable 
        notice and opportunity for a hearing, that an eligible 
        institution has engaged in a violation of any provision of this 
        title (including the failure to carry out any provision of this 
        title or any regulation prescribed under such provision) or a 
        violation of any applicable special arrangement, agreement, or 
        limitation, the Secretary may limit, suspend, or terminate the 
        participation in any program under this title of an eligible 
        institution, subject to the requirements of paragraph (2).
            ``(2) Suspension procedures.--No period of suspension under 
        this section shall exceed 60 days unless the institution and 
        the Secretary agree to an extension or unless limitation or 
        termination proceedings are initiated by the Secretary within 
        that period of time.
    ``(f) Emergency Action.--
            ``(1) In general.--The Secretary may take an emergency 
        action against an institution, under which the Secretary shall, 
        effective on the date on which a notice and statement of the 
        basis of the action is mailed to the institution (by registered 
        mail, return receipt requested), withhold funds from the 
        institution or its students and withdraw the institution's 
        authority to obligate funds under any program under this title, 
        if the Secretary--
                    ``(A) receives information, determined by the 
                Secretary to be reliable, that the institution is 
                violating any provision of this title, any regulation 
                prescribed under this title, or any applicable special 
                arrangement, agreement, or limitation;
                    ``(B) determines that immediate action is necessary 
                to prevent misuse of Federal funds; and
                    ``(C) determines that the likelihood of loss 
                outweighs the importance of the procedures prescribed 
                in subsection (e) for limitation, suspension, or 
                termination.
            ``(2) Time limitation.--An emergency action described in 
        paragraph (1) shall not exceed 30 days unless limitation, 
        suspension, or termination proceedings are initiated by the 
        Secretary against the institution within that period of time.
            ``(3) Opportunity to show cause.--The Secretary shall 
        provide an institution that is the subject of an emergency 
        action under this subsection an opportunity to show cause, if 
        the institution so requests, that the emergency action is 
        unwarranted and should be lifted.
    ``(g) Lifting of Sanctions.--Notwithstanding any other provision of 
this title, an institution of higher education that has been sanctioned 
by the Secretary under this section or any other provision of this 
title may not have such sanctions lifted until the Secretary has 
conducted a subsequent program review under section 498A and has found 
the institution to be in compliance with this title.
    ``(h) Single Course of Conduct; Compromise Authority.--
            ``(1) Same course of conduct.--For purposes of this 
        section, acts and omissions relating to a single course of 
        conduct shall be treated as a single violation.
            ``(2) Compromise authority.--Any civil penalty under this 
        section may be compromised by the Secretary. In determining the 
        amount of such penalty, or the amount agreed upon in 
        compromise, the Secretary shall consider--
                    ``(A) the appropriateness of the penalty to the 
                size of the institution of higher education subject to 
                the determination; and
                    ``(B) the gravity of the violation, failure, or 
                misrepresentation.
    ``(i) Collection of Penalty.--The amount of any penalty under this 
section may be deducted from any sums owing by the United States to the 
institution charged.
    ``(j) Disposition of Amounts Recovered.--
            ``(1) In general.--Amounts collected under this section 
        shall be transferred to the Secretary, who shall determine the 
        distribution of collected amounts, in accordance with 
        paragraphs (2) and (3).
            ``(2) Use for program integrity efforts and program 
        reviews.--
                    ``(A) In general.--For each fiscal year, an amount 
                equal to not more than 50 percent of the amounts 
                recovered or collected under this section--
                            ``(i) shall be available to the Secretary 
                        to carry out program reviews under section 498A 
                        and other efforts by the Secretary related to 
                        program integrity under part H; and
                            ``(ii) may be credited, if applicable, for 
                        that purpose by the Secretary to any 
                        appropriations and funds that are available to 
                        the Secretary for obligation at the time of 
                        collection.
                    ``(B) Supplement not supplant.--Amounts made 
                available under subparagraph (A) shall be used to 
                supplement and not supplant any other amounts available 
                to the Secretary for the purpose described in such 
                subparagraph.
                    ``(C) Availability for funds.--Any amounts 
                collected under this section that are made available 
                under subparagraph (A) shall remain available until 
                expended.
            ``(3) Use for student relief fund.--For each fiscal year, 
        an amount equal to not less than 50 percent of the amounts 
        recovered or collected under this section shall be deposited 
        into the Student Relief Fund established under subsection (k).
            ``(4) Report.--The Secretary shall regularly publish, on 
        the website of the Department, a detailed description that 
        includes--
                    ``(A) the amount of funds that were distributed for 
                the purposes described in paragraph (2) and the amount 
                used for the Student Relief Fund under paragraph (3); 
                and
                    ``(B) how funds were distributed among the purposes 
                described in paragraph (2)(A)(i).
    ``(k) Student Relief Fund.--
            ``(1) Establishment.--The Secretary shall establish a 
        Student Relief Fund (referred to in this subsection as the 
        `Fund') that shall be used, subject to the availability of 
        funds, to provide financial relief to any student enrolled in 
        an institution of higher education that--
                    ``(A) has failed to comply with an eligibility 
                requirement under section 101 or 102 or an obligation 
                incurred under the terms of the program participation 
                agreement under section 487; or
                    ``(B) has been sanctioned under subsection (b) or 
                (c).
            ``(2) Determination of relief.--The Secretary, in 
        consultation with Director of the Bureau of Consumer Financial 
        Protection--
                    ``(A) shall determine the manner of relief to be 
                provided under paragraph (1), which may include tuition 
                reimbursement or full or partial loan forgiveness; and
                    ``(B) may issue regulations regarding how the 
                amounts in the Fund will be distributed among students 
                eligible for the funds.
            ``(3) Treatment and availability of funds.--
                    ``(A) Funds that are not government funds.--Funds 
                obtained by or transferred to the Fund shall not be 
                construed to be Government funds or appropriated 
                monies.
                    ``(B) Amounts not subject to apportionment.--
                Notwithstanding any other provision of law, amounts in 
                the Fund shall not be subject to apportionment for 
                purposes of chapter 15 of title 31, United States Code, 
                or under any other authority.
                    ``(C) No fiscal year limitation.--Sums deposited in 
                the Fund shall remain in the Fund and be available for 
                expenditure under this subsection without fiscal year 
                limitation.
            ``(4) Investments.--
                    ``(A) Amounts in fund may be invested.--The 
                Secretary of Education may request the Secretary of the 
                Treasury to invest the portion of the Fund that is not, 
                in the discretion of the Secretary of Education, 
                required to meet the current needs of the Fund.
                    ``(B) Eligible investments.--Investments shall be 
                made by the Secretary of the Treasury in obligations of 
                the United States or obligations that are guaranteed as 
                to principal and interest by the United States, with 
                maturities suitable to the needs of the Fund as 
                determined by the Secretary on the record.
                    ``(C) Interest and proceeds credited.--The interest 
                on, and the proceeds from the sale or redemption of, 
                any obligations held in the Fund shall be credited to 
                the Fund.
            ``(5) Regulations.--The Secretary shall prescribe 
        regulations to implement the requirements of this section 
        within 1 year after the date of enactment of the Students 
        Before Profits Act.
            ``(6) Authorization of appropriations.--In addition to 
        funds derived from financial penalties assessed pursuant to 
        subsection (j), there are authorized to be appropriated such 
        sums as may be necessary to carry out this subsection for 
        fiscal year 2015 and each of the 5 succeeding fiscal years.
    ``(l) State Enforcement.--
            ``(1) In general.--Any violation of subsection (b), 
        including the regulations promulgated under such subsection, 
        shall be a cause of action enforceable by the State, through 
        the attorney general (or the equivalent thereof) of the State, 
        in any district court of the United States in that State or in 
        a State court that is located in that State and that has 
        jurisdiction over the defendant. The State may seek any relief 
        provided under paragraph (4)(B) for such violation, or any 
        remedies otherwise provided under law.
            ``(2) Notice required.--
                    ``(A) In general.--Before initiating any action in 
                a court or other administrative or regulatory 
                proceeding against any institution of higher education 
                as authorized by paragraph (1) to enforce any provision 
                of this subsection, including any regulation 
                promulgated by the Secretary under this subsection, a 
                State attorney general shall timely provide a copy of 
                the complete complaint to be filed and written notice 
                describing such action or proceeding to the Secretary, 
                except as provided in subparagraph (B).
                    ``(B) Emergency action.--If prior notice is not 
                practicable, the State attorney general shall provide a 
                copy of the complete complaint and the notice to the 
                Secretary immediately upon instituting the action or 
                proceeding.
                    ``(C) Contents of notice.--The notification 
                required under this paragraph shall, at a minimum, 
                describe--
                            ``(i) the identity of the parties;
                            ``(ii) the alleged facts underlying the 
                        proceeding; and
                            ``(iii) whether there may be a need to 
                        coordinate the prosecution of the proceeding so 
                        as not to interfere with any action, including 
                        any rulemaking, undertaken by the Secretary or 
                        another Federal agency.
            ``(3) Regulations.--The Secretary shall prescribe 
        regulations to implement the requirements of this subsection 
        and periodically provide guidance in order to further 
        coordinate actions with the State attorneys general.
            ``(4) Preservation of state authority.--
                    ``(A) State claims.--Nothing in this subsection 
                shall be construed as altering, limiting, or affecting 
                the authority of a State attorney general or any other 
                regulatory or enforcement agency or authority to bring 
                an action or other regulatory proceeding arising solely 
                under the law in effect in that State.
                    ``(B) Relief.--
                            ``(i) In general.--Relief under this 
                        subsection may include, without limitation--
                                    ``(I) rescission or reformation of 
                                contracts;
                                    ``(II) refund of moneys or return 
                                of real property;
                                    ``(III) restitution;
                                    ``(IV) disgorgement or compensation 
                                for unjust enrichment;
                                    ``(V) payment of damages or other 
                                monetary relief pursuant to the 
                                requirements of paragraph (2);
                                    ``(VI) public notification 
                                regarding the violation, including the 
                                costs of notification; and
                                    ``(VII) limits on the activities or 
                                functions of the person.
                            ``(ii) Exclusion.--Relief under this 
                        subsection shall not include the ability to 
                        suspend or terminate the eligibility status of 
                        an institution of higher education for programs 
                        under this title.''.
                                 <all>