[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3992 Introduced in House (IH)]
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114th CONGRESS
1st Session
H. R. 3992
To amend the Higher Education Act of 1965 to improve the determination
of cohort default rates and provide for enhanced civil penalties, to
ensure personal liability of owners, officers, and executives of
institutions of higher education, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 5, 2015
Ms. Maxine Waters of California (for herself, Ms. Lee, Ms. Hahn, Ms.
Schakowsky, Mr. Honda, Mr. Takano, Mr. McDermott, Mr. Al Green of
Texas, Mr. Welch, Mr. Blumenauer, Mr. Van Hollen, Ms. Kaptur, Ms. Judy
Chu of California, Mrs. Napolitano, Ms. Edwards, and Ms. Speier)
introduced the following bill; which was referred to the Committee on
Education and the Workforce
_______________________________________________________________________
A BILL
To amend the Higher Education Act of 1965 to improve the determination
of cohort default rates and provide for enhanced civil penalties, to
ensure personal liability of owners, officers, and executives of
institutions of higher education, and for other purposes.
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 of
2015''.
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. CIVIL PENALTIES.
(a) In General.--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) 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.
``(2) Student default risk.--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.
``(3) Substantial misrepresentation or other serious
violation.--The term `substantial misrepresentation or other
serious violation' means either 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 violation as follows that is determined to
constitute an unfair, deceptive, or abusive act or
practice:
``(i) A violation of section 487(a)(20).
``(ii) A violation of the default
manipulation regulations promulgated by the
Secretary under section 435(m)(3).
``(iii) Failure to comply with the program
review process described in section 498A.
``(iv) A violation of the program integrity
regulations promulgated by the Secretary under
this Act.
``(v) A violation of this Act that the
Secretary has determined, by regulation, to be
a serious violation for purposes of this
section.
``(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, 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) Use for student relief fund.--For each fiscal year,
an amount equal to 100 percent of the amounts recovered or
collected under this section shall be deposited into the
Student Relief Fund established under subsection (k).
``(2) Report.--The Secretary shall regularly publish, on
the website of the Department, a detailed description that
includes the amount of funds that were used for the Student
Relief Fund under paragraph (1).
``(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) 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.
``(3) 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.
``(4) 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 of 2015.
``(5) 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;
``(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.''.
(b) Program Review and Data.--Section 498A(b)(8) of the Higher
Education Act of 1965 (20 U.S.C. 1099c-1(b)(8)) is amended by inserting
``and to the applicable State attorney general if the institution is
found to have not complied with the program review process under this
section'' after ``under review''.
SEC. 4. PERSONAL LIABILITY FOR OFFICERS OF INSTITUTIONS.
Section 498(e) of the Higher Education Act of 1965 (20 U.S.C.
1099c(e)) is amended--
(1) in paragraph (4), by striking ``The Secretary'' and
inserting ``Except as provided in paragraph (7), the
Secretary''; and
(2) by adding at the end the following:
``(7) Notwithstanding paragraph (4), if the Secretary has taken an
enforcement action against a proprietary institution of higher
education (as defined in section 102(b)), (which may include heightened
oversight activities such as heightened cash monitoring, provisional
certification, or requirements to obtain approval for new educational
programs and locations), the Secretary may hold an executive officer of
the institution personally liable for financial losses related to such
action to the Federal Government, student assistance recipients, and
other program participants for funds under this title.''.
SEC. 5. GOVERNMENT CLAIMS FOR DISCHARGE.
(a) FFEL and Direct Loan Programs.--Section 437(c)(1) of the Higher
Education Act of 1965 (20 U.S.C. 1087(c)(1)) is amended in the first
sentence by striking ``against the institution and its affiliates and
principals'' and inserting ``against the institution, its affiliates
and principals, and any executive officer or board member of the
institution''.
(b) Federal Perkins Loans.--Section 464(g)(1) of the Higher
Education Act of 1965 (20 U.S.C. 1087dd(g)(1)) is amended by striking
``against the institution and the institution's affiliates and
principals'' and inserting ``against the institution, the institution's
affiliates and principals, and any executive officer or board member of
the institution''.
SEC. 6. PROGRAM PARTICIPATION AGREEMENT.
Section 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) In the case of a proprietary institution of higher
education (as defined in section 102(b)), such institution will
prohibit any individual who has been found guilty of defrauding
students from being a member of the board of directors, the
chief executive officer, or other executive officer of the
institution.''.
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