“Students First Act” Introduced In Senate, Aims At Strengthening Enforcement At Institutions Of Higher Education

On February 28, Senator Frank Lautenberg (D-NJ) introduced the “Students First Act” (S. 406), “A bill to amend the Higher Education Act of 1965 to provide for new program review requirements.”  The bill, which was referred to the Committee on Health, Education, Labor and Pensions (HELP), was co-sponsored by that committee’s chairman, Senator Tom Harkin (D-IA), as well as Senators Richard “Dick” Durbin (D-IL) and John “Jay” Rockefeller (D-WV).

While the text is not currently available, a press release explains that the bill:

Enhances the program review process, creating triggers that require the Department to conduct program reviews of institutions most at risk of violating federal law.  It also strengthens existing sanctions against colleges that violate requirements of federal student aid programs knowingly and willfully, and holds executives of those institutions personally accountable.

A “fact sheet” further summarizes the key provisions of the bill.  The key provisions include (1) automatic triggers to result in a program review (if an institution spends more than 20% of revenue on “recruitment and marketing” or receives more than 85% of its revenue from federal student aid sources); are (2) prioritization of program reviews for institutions based on “default rate, proportion of overall federal student aid revenue, increases in enrollment, student complaints, graduation rates, financial health, and profit margins”; (3) strengthens penalties for noncompliance (increases fines and may lower the bar for expulsion from the Title IV Program); (4) imposes personal liability on institution executives for noncompliance with Title IV; (5) and, most interestingly, “uses funds collected from penalties to provide relief to students who attended sanctioned institutions, including tuition reimbursement and loan forgiveness.”

Although all of these proposals have troubling elements (based on the summary), the last requirement is perhaps the most problematic.  It is, of course, important for the Department of Education to be able to impose a penalty for noncompliance beyond mere repayment of amounts owed to the Department.  This serves as an important deterrent.  The problem, however, is that in directing penalties be used for “tuition reimbursement and loan forgiveness,” the bill alters the interests of the Department.

As the bill summary explains, penalties will be assessed for violations of the “program integrity regulations” — which include topics such as the payment of prohibited incentive compensation (serious, yet not very common) to improper application of satisfactory academic progress rules (not uncommon) or failing to return Title IV funds for withdrawn students in a timely manner (fairly common and often clerical mistakes) — as well as “other Title IV violations.”  In sum, absent some text that significantly limits the ability of the Department to impose fines for any noncompliance, there doesn’t appear to be a violation that would not justify a penalty.  Further, with the added incentive of collecting revenue to provide student loan forgiveness for students at the penalized school, it would be surprising if fines were not far more common than they are at present.  Indeed, allowing the Department to provide loan forgiveness with funds obtaining through the imposition of penalties shifts the institutional interests of the Department away from merely guarding against waste of federal dollars by institutions of higher education.

Of course, the bill text may address these issues.  When we get the bill text we will pass it along, as I imagine there will be a number of issues addressed there that the Fact Summary is unable to cover in compete detail.  You can read the fact sheet after the jump.

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Protect Students and Taxpayers Cosponsor the Students First Act

Low and middle income students rely upon federal student aid to help make college affordable. However, some colleges and universities are taking advantage of these students, providing little or no meaningful education while misusing taxpayer dollars and sticking students with the bill. Some of these bad actors are aggressively marketing to vulnerable students in potentially illegal ways while more and more of their students drop out and default on their federal student loans.

While the Higher Education Act is designed to ensure that students are provided with a quality education and taxpayer investments in education are protected, the Department of Education does not adequately police and deter violations of federal law. Existing departmental “audits,” known as program reviews, do not examine schools most “at-risk” of failing to comply with the requirements schools must meet to continue to participate in federal student aid programs. Further, when violations are found, the department does not adequately sanction these schools to punish fraudulent behavior and deter similar violations.

The “Students First Act” will strengthen the Department of Education’s oversight of institutions of higher education that are taking advantage of students and taxpayers. The bill strengthens the program review process, creating triggers that require the department to conduct program reviews of institutions most at risk of violating federal law. The bill strengthens existing sanctions against colleges who violate requirements of federal student aid programs knowingly and willfully and holds executives of those institutions personally accountable.

Bill Summary
1. Strengthens Oversight of Bad Actor Colleges and Universities
a. Requires the department to conduct program reviews of institutions that are engaging in the most risky behavior, including engaging in serial forbearance and default rate manipulation, spending more than 20 percent of their revenue on recruiting and marketing and deriving more than 85 percent of revenue from federal student aid sources.
b. Directs the department to prioritize additional reviews based on criteria like default rate, proportion of overall federal student aid revenue, increases in enrollment, student complaints, graduation rates, financial health, and profit margins.
c. Requires institutions to disclose to prospective students when and why they have been subject to a mandatory review and when they have knowingly and willfully, or with gross negligence violated federal student aid requirements.
2. Enhances existing procedures for program reviews
a. Dictates that all reviews shall assess misuse of federal funds, incentive compensation, misrepresentation, graduation rates, student complaints, and feedback from faculty and staff as well as financial capability, administrative capability, and program integrity.
b. Ensures that program review personnel will receive appropriate training.
c. Ensures that final program review results are shared with appropriate federal and state entities including appropriate accrediting agencies and associations.
3. Creates mandatory penalties against institutions that violate federal student aid provisions.
a. Revokes eligibility from institutions that participate in incentive compensation, misrepresentation, or violate program integrity regulations. Requires the Department of Education to promulgate regulations that specify specific mandatory sanctions for other violations that are undertaken knowingly and willfully, or with gross negligence.
b. Imposes severe financial penalties on institutions whose eligibility has been revoked and increases fines for other Title IV violations.
c. Holds executives of schools personally responsible for adhering to Title IV.
4. Provides relief for students who have attended bad actor institutions – Uses funds collected from penalties to provide relief to students who attended sanctioned institutions, including tuition reimbursement and loan forgiveness.
5. Enhances Data Collection and Complaint Tracking
a. Strengthens existing central database of information on institutional accreditation, eligibility, and certification with information from the department, other agencies, accreditors, and associations.
b. Creates complaint tracking system to track and record student and staff complaints related to federal student financial aid, educational practices and services, and recruiting and marketing practices.

DLA PIPER

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