I

104TH CONGRESS

1ST SESSION H. R. 2834

To amend the Higher Education Act of 1965 to improve accountability

and reform certain programs.

IN THE HOUSE OF REPRESENTATIVES

DECEMBER 22, 1995

Mr. KLINK introduced the following bill; which was referred to the Committee

on Economic and Educational Opportunities

A BILL

To amend the Higher Education Act of 1965 to improve

accountability and reform certain programs.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Federal Accountability

5 and Institutional Reform in Education Act of 1995’’.

6 SEC. 2. FINDINGS.

7 The Congress finds that—

8 (1) the Federal Government is reducing spend9 ing in all areas, including postsecondary education;
2

•HR 2834 IH

1 (2) reductions in postsecondary education

2 spending fall on students, schools, State loan guar3 anty agencies and lenders;

4 (3) the administration of postsecondary edu5 cation is the responsibility of the Department of

6 Education; and

7 (4) reforms should be made to postsecondary

8 education programs to provide greater accountability

9 from the Department, educational institutions, lend10 ers, and guarantee agencies and to enhance institu11 tional compliance with Department policies.

12 SEC. 3. STUDENT LOAN COHORT DEFAULT MANAGEMENT

13 REFORMS.

14 (a) ADMINISTRATIVE AND FISCAL PROCEDURES.—

15 Section 428(c)(2)(A) of the Higher Education Act of 1965

16 is amended by striking ‘‘proof that reasonable attempts

17 were made’’ and inserting ‘‘proof that the institution was

18 contacted and other reasonable attempts were made’’

19 (b) REIMBURSEMENT.—Section 428(c)(2)(G) of the

20 Higher Education Act of 1965 is amended by striking

21 ‘‘certifies to the Secretary that diligent attempts have been

22 made’’ and inserting ‘‘demonstrates to the Secretary that

23 diligent attempts, including direct contact with the institu24 tion have been made.’’.
3

•HR 2834 IH

1 (c) LIMITATION.—Section 428 of the Higher Edu2 cation Act of 1965 is amended by adding at the end the

3 following:

4 ‘‘(o) LIMITATION.—Notwithstanding any other provi5 sion of this section, the Secretary shall not reimburse or

6 permit any eligible lender, servicer, or guaranty agency (or

7 its affiliates) who previously filed a claim for reimburse8 ment on a loan to retain any proceeds from rehabilitation

9 of a defaulted loan to the extent that such funds, when

10 added to the amount of prior reimbursement under this

11 section, exceed 100 percent of the original principal of the

12 loan.’’.

13 (d) NOTICE TO SECRETARY AND PAYMENT OF

14 LOSS.—Section 430(a) of the Higher Education Act of

15 1965 is amended—

16 (1) by inserting ‘‘all’’ after ‘‘required to meet’’;

17 and

18 (2) by inserting ‘‘the institution was contacted

19 and other’’ after ‘‘submit proof that’’.

20 (e) ANNUAL REPORT.—Section 430 of the Higher

21 Education Act of 1965 is amended by adding at the end

22 the following:

23 ‘‘(f) ANNUAL REPORT.—The Secretary shall report

24 annually to Congress that lenders, servicers and guaranty

25 agencies have attested to their compliance with servicing
4

•HR 2834 IH

1 and due diligence requirements, under both statute and

2 regulation. The Secretary shall also provide information

3 on the successful practices of low-default lenders, servicers

4 and guaranty agencies to other financial, servicing and

5 guaranty institutions participating in this title to encour6 age duplication of successful servicing and collection pro7 grams.’’.

8 (f) CIRCUMSTANCES.—Section 435(a)(2) of the

9 Higher Education Act of 1965 is amended by adding at

10 the end the following:

11 ‘‘(D) The circumstances referred to in subpara12 graph (A)(ii) shall be uniformly applied to all eligible

13 institutions and shall require that such an institu14 tion meet the following criteria:

15 ‘‘(i) Not less than 50 percent of the stu16 dents enrolled in eligible programs qualify for

17 an award under subpart 1 of part A of title IV.

18 ‘‘(ii) The institution’s student completion

19 rate, as calculated under the Student Right to

20 Know provisions of this title, is 60 percent or

21 greater.

22 ‘‘(iii) The initial job placement rate of pro23 gram graduates is 60 percent or greater.’’.

24 (g) COHORT DEFAULT RATE.—Section

25 435(m)(1)(B) of the Higher Education Act of 1965 is
5

•HR 2834 IH

1 amended by striking ‘‘paid claims’’ and inserting ‘‘prop2 erly paid claims as required in section 430 of this Act’’.

3 SEC. 4. ELIGIBLE INSTITUTION REFORM.

4 Section 481 (b) of the Higher Education Act of 1965

5 is amended—

6 (1) by inserting before the period at the end of

7 the first sentence the following: ‘‘on the basis of a

8 review by the institution’s independent auditor using

9 generally accepted accounting principles’’; and

10 (2) by inserting before the second sentence the

11 following:

12 ‘‘For the purposes of paragraph (6), revenues from

13 sources that are not derived from funds under this title

14 include revenues from programs of education or training

15 that do not meet the definition of an eligible program in

16 subsection (e), but are provided on a contractual basis

17 under Federal, State or local training programs, to busi18 ness and industry, or to other eligible applicants. For the

19 purposes of determining whether an institution meets the

20 requirements of paragraph (6), the Secretary shall not

21 consider the financial information of any institution for

22 a fiscal year that began on or before April 30, 1994.’’.
6

•HR 2834 IH

1 SEC. 5. ACCOUNTING PROCEDURES FOR INSTITUTIONAL

2 PROGRAM PARTICIPATION.

3 Section 498(c) of the Higher Education Act of 1965

4 is amended by inserting ‘‘, based on an audited financial

5 statement using any generally accepted accounting prin6 ciples’’ after ‘‘is able’’.

Æ