SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Pay for Student Success Act''.

SEC. 2. AUTHORIZATION OF PAY-FOR-SUCCESS PROJECTS.

    Part B of title VII of the Higher Education Act of 1965 (20 U.S.C. 
1138 et seq.) is amended--
            (1) by redesignating section 745 as section 746; and
            (2) by inserting after section 744 the following:

``SEC. 745. PAY-FOR-SUCCESS PROJECTS.

    ``(a) Definitions.--In this section:
            ``(1) Pay-for-success project.--The term `pay-for-success 
        project' refers to a performance-based contract under this 
        section in which--
                    ``(A) the eligible entity pursues innovative 
                strategies for improving outcomes and conducts a 
                rigorous evaluation of the results to determine 
                effectiveness;
                    ``(B) the Secretary and the eligible entity agree 
                to target outcomes;
                    ``(C) the Federal Government imposes minimal 
                administrative requirements on the eligible entity to 
                allow for maximum flexibility to improve efficiency and 
                effectiveness; and
                    ``(D) the eligible entry may receive additional 
                funding under this section if the eligible entity 
                achieves successful outcomes as demonstrated through a 
                rigorous independent evaluation approved by the 
                Director of the Institute of Education Sciences.
            ``(2) Eligible entity.--The term `eligible entity' means--
                    ``(A) an institution of higher education;
                    ``(B) a nonprofit organization;
                    ``(C) a consortium composed of an institution of 
                higher education and a nonprofit organization; or
                    ``(D) an entity described in subparagraph (A), (B), 
                or (C) in partnership with--
                            ``(i) a local educational agency;
                            ``(ii) a business;
                            ``(iii) a State educational agency; or
                            ``(iv) a State department of higher 
                        education.
    ``(b) Pay-for-Success Projects Authorized.--From the amounts 
appropriated under section 746, the Secretary shall enter into 
contracts with eligible entities for pay-for-success projects that 
develop, implement, evaluate, and promote innovative strategies for 
increasing the postsecondary education retention and completion rates 
of--
            ``(1) students who receive Federal Pell Grants; and
            ``(2) first-generation postsecondary students.
    ``(c) Application.--
            ``(1) In general.--An eligible entity desiring a contract 
        under this section shall submit to the Secretary an application 
        at such time and in such form as the Secretary may require.
            ``(2) Contents.--The application described in paragraph (1) 
        shall include--
                    ``(A) a description of the eligible entity's 
                strategy for improving the retention and completion 
                rate, at one or more institutions of higher education, 
                for students who receive Federal Pell Grants or first-
                generation postsecondary students;
                    ``(B) an identification of the target population 
                for the pay-for-success project and of the target 
                outcomes to be achieved;
                    ``(C) an identification of the independent entity 
                that will carry out a robust, rigorous evaluation 
                approved by the Director of the Institute of Education 
                Sciences to determine the effectiveness of the pay-for-
                success project, and a description of the methodology 
                that the entity will use for this evaluation, including 
                the timeline for completion; and
                    ``(D) the total cost of the pay-for-success project 
                and an assurance that the eligible entity will meet the 
                funding requirement described in subsection (d), and an 
                identification of the sources of the funding.
    ``(d) Project Funding.--
            ``(1) In general.--Each eligible entity receiving a 
        contract under this section shall demonstrate that the eligible 
        entity will provide for the project funds, in cash or through 
        in-kind contributions, from non-Federal sources in an amount 
        equal to 90 percent of the total cost of the pay-for-success 
        project.
            ``(2) Federal support.--The Secretary shall provide a grant 
        to each eligible entity receiving a contract under this section 
        in an amount equal to 10 percent of the total cost of the pay-
        for-success project.
    ``(e) Pay-for-Success Payments.--
            ``(1) Additional funds available.--If, upon completion of a 
        pay-for-success project, the Secretary determines, based on the 
        results of the evaluation described in subsection (c)(2)(C), 
        that the pay-for-success project has demonstrated effectiveness 
        in a cost-effective manner and has met the target outcomes 
        described in subsection (c)(2)(B), the Secretary may use funds 
        available under this part to provide additional funds to 
        reimburse the eligible entity carrying out the pay-for-success 
        project for not more than 75 percent of the total cost of the 
        pay-for-success project identified in the application under 
        subsection (c)(2)(D).
            ``(2) Considerations.--In making the determination under 
        paragraph (1), the Secretary shall take into account the 
        strength and ambition of the target outcomes described in 
        subsection (c)(2)(B).
    ``(f) Dissemination of Evidence-Based Strategies.--The Director of 
the Institute of Education Sciences shall broadly disseminate--
            ``(1) the evaluations conducted under the contracts under 
        subsection (b), including the data collected through the 
        evaluations;
            ``(2) successful and evidence-based strategies of eligible 
        entities carrying out pay-for-success projects; and
            ``(3) information, including project design and evaluation, 
        from such eligible entities regarding practices that were found 
        to be ineffective and, to the extent practicable, an 
        explanation of why.''.
Pay for Student Success Act This bill amends the Higher Education Act of 1965 to require the Department of Education (ED) to contract with eligible entities for pay-for-success projects that develop, implement, evaluate, and promote innovative strategies for increasing the postsecondary education retention and completion rates of students who receive Pell Grants and first-generation postsecondary students. Each entity that receives a contract must provide 90% of the project costs up front. ED may reimburse an entity for no more than 75% of the total project costs if ED determines, based on an independent evaluation, that the project is successful.
Pay for Student Success Act