II 

115TH CONGRESS 

1ST SESSION S. 1784 

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 SENATE OF THE UNITED STATES 

SEPTEMBER 11, 2017 

Mr. MURPHY (for himself, Mr. BLUMENTHAL, Mr. BROWN, Mr. DURBIN, Mr. 

FRANKEN, Ms. HARRIS, and Ms. WARREN) 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, to ensure personal liability 

of owners, officers, and executives of institutions of higher education, and for other purposes. 

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 ‘‘Students Before Prof5 its Act of 2017’’. 


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1 SEC. 2. IMPROVED DETERMINATION OF COHORT DEFAULT 

2 RATES. 

3 Section 435 (20 U.S.C. 1085) is amended— 

4 (1) in subsection (a)(2), by adding at the end 

5 the following: 

6 ‘‘(E)(i) In any case where the Secretary has de7 termined that the institution has engaged in default 

8 manipulation, the Secretary— 

9 ‘‘(I) shall recalculate the cohort default 

10 rate for the institution under this section using 

11 corrected data and information, for all fiscal 

12 years for which the default manipulation has 

13 occurred; and 

14 ‘‘(II) using the recalculated cohort default 

15 rate, shall redetermine whether the institution 

16 is ineligible to participate in a program under 

17 this title. 

18 ‘‘(ii) In this section, the term ‘default manipu19 lation’ means engaging in a device or practice, such 

20 as branching, consolidation of campuses, consolida21 tion or manipulation of the identification codes used 

22 by the Office of Postsecondary Education to des23 ignate campuses and institutions, change of owner24 ship or control, serial forbearance, or any similar de25 vice or practice (as determined by the Secretary) 

26 when, but for the device or practice, one or more 


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1 campuses of an institution of higher education would 

2 be at risk of cohort default rate sanctions under this 

3 section or student default risk sanctions under sec4 tion 489A.’’; and 

5 (2) in subsection (m)(3), by striking ‘‘through 

6 the use of’’ and all that follows through the period 

7 at the end and inserting ‘‘through default manipula8 tion.’’. 

9 SEC. 3. CIVIL PENALTIES. 

10 (a) IN GENERAL.—Part G of title IV of the Higher 

11 Education Act of 1965 (20 U.S.C. 1088 et seq.) is amend12 ed by inserting after section 489 the following: 

13 ‘‘SEC. 489A. CIVIL PENALTIES AND OTHER REMEDIES. 

14 ‘‘(a) DEFINITIONS.—In this section: 

15 ‘‘(1) OFFICER OF AN INSTITUTION OF HIGHER

16 EDUCATION.—The term ‘officer of an institution of 

17 higher education’ includes the president, chief execu18 tive officer, and chief financial officer of an institu19 tion of higher education or their equivalents. 

20 ‘‘(2) STUDENT DEFAULT RISK.—The term ‘stu21 dent default risk’ means a risk that is reflected as 

22 a percentage that is calculated by taking an institu23 tion’s 3-year cohort default rate, as defined in sec24 tion 435(m), for the most recent fiscal year avail25 able, and multiplying it by the percentage of stuVerDate Sep 11 2014 01:44 Sep 13, 2017 Jkt 069200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1784.IS S1784

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1 dents enrolled at such institution receiving a Federal 

2 student loan authorized under this title during the 

3 previous academic year. 

4 ‘‘(3) SUBSTANTIAL MISREPRESENTATION OR

5 OTHER SERIOUS VIOLATION.—The term ‘substantial 

6 misrepresentation or other serious violation’ means 

7 either of the following: 

8 ‘‘(A) A substantial misrepresentation re9 garding— 

10 ‘‘(i) the nature of the educational pro11 gram of an institution of higher education; 

12 ‘‘(ii) the financial charges of the insti13 tution; 

14 ‘‘(iii) the space availability in a pro15 gram of the institution for which a student 

16 is considering enrollment; 

17 ‘‘(iv) the admission requirements of 

18 the institution; 

19 ‘‘(v) the transferability of credits from 

20 the institution; 

21 ‘‘(vi) whether a program of the insti22 tution meets the necessary standards to 

23 qualify students to sit for licensing exami24 nations, or obtain certification required as 


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1 a precondition for employment, in the 

2 State in which the students reside; 

3 ‘‘(vii) the passage rates of students at 

4 the institution in obtaining certification re5 quirements; 

6 ‘‘(viii) the passage rates of students 

7 who sit for licensing examinations; or 

8 ‘‘(ix) the employability of the grad9 uates of the institution. 

10 ‘‘(B) A violation as follows that is deter11 mined to constitute an unfair, deceptive, or 

12 abusive act or practice: 

13 ‘‘(i) A violation of section 487(a)(20). 

14 ‘‘(ii) A violation of the default manip15 ulation regulations promulgated by the 

16 Secretary under section 435(m)(3). 

17 ‘‘(iii) Failure to comply with the pro18 gram review process described in section 

19 498A. 

20 ‘‘(iv) A violation of the program integ21 rity regulations promulgated by the Sec22 retary under this Act. 

23 ‘‘(v) A violation of this Act that the 

24 Secretary has determined, by regulation, to 


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1 be a serious violation for purposes of this 

2 section. 

3 ‘‘(b) SANCTIONS FOR SUBSTANTIAL MISREPRESEN4 TATIONS OR SERIOUS VIOLATIONS.— 

5 ‘‘(1) CIVIL PENALTIES.— 

6 ‘‘(A) IN GENERAL.—The Secretary may 

7 impose a civil penalty upon an eligible institu8 tion upon making a determination, after reason9 able notice and opportunity for a hearing, that 

10 an eligible institution has engaged in a substan11 tial misrepresentation or other serious violation. 

12 ‘‘(B) AMOUNT OF CIVIL PENALTIES.—A 

13 civil penalty imposed for a violation under sub14 paragraph (A) shall be not less than $100,000 

15 or— 

16 ‘‘(i) in the case of a first violation, an 

17 amount equal to the product of $1,000,000 

18 multiplied by the institution’s student de19 fault risk, whichever is larger; 

20 ‘‘(ii) in the case of a second violation, 

21 an amount equal to the product of 

22 $2,000,000 multiplied by the institution’s 

23 student default risk, whichever is larger; 

24 and 


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1 ‘‘(iii) in the case of a third or subse2 quent violation, an amount equal to the 

3 product of $3,000,000 multiplied by the in4 stitution’s student default risk, whichever 

5 is larger. 

6 ‘‘(C) TREATMENT OF MULTIPLE INSTITU7 TIONS.—For the purpose of determining the 

8 number of violations under subparagraph (B), 

9 any violation by a particular institution will ac10 crue against all identification codes used by the 

11 Office of Postsecondary Education to designate 

12 campuses and institutions affiliated with the in13 stitution, and within the period of participation 

14 for the institution, as defined in section 

15 668.13(b) of title 34, Code of Federal Regula16 tions, or any successor regulation. 

17 ‘‘(c) SANCTIONS FOR OTHER VIOLATIONS OF THIS

18 TITLE.—Upon determination, after reasonable notice and 

19 opportunity for a hearing, that an eligible institution has 

20 engaged in a violation of any other provision of this title, 

21 including the failure to carry out any provision of this 

22 title, that is not a significant misrepresentation or other 

23 serious violation, the Secretary may impose a civil penalty 

24 upon such institution of not more than $100,000 (subject 


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1 to such adjustments for inflation as may be prescribed in 

2 regulation) for each such violation. 

3 ‘‘(d) CIVIL PENALTIES AND SANCTIONS FOR OFFI4 CERS OF INSTITUTIONS.—Upon determination, after rea5 sonable notice and an opportunity for a hearing, that an 

6 officer of an institution of higher education that partici7 pates in a program under this title has knowingly and will8 fully, or with gross negligence, violated a provision of this 

9 title, the Secretary may sanction the officer. Such sanc10 tions may include the following: 

11 ‘‘(1) Prohibiting the institution of higher edu12 cation that has employed the officer of an institution 

13 of higher education and that participates in a pro14 gram under this title, or any other institution of 

15 higher education that participates in a program 

16 under this title, from employing the officer, except 

17 that any such prohibition under this subsection shall 

18 not be for a period of more than 5 years from the 

19 date of the determination of the violation. 

20 ‘‘(2) Assessing a civil penalty against an officer 

21 of an institution of higher education who has know22 ingly and willfully, or with gross negligence, violated 

23 a provision of this title, except that any such civil 

24 penalty under this subsection shall not be greater 

25 than the amount of the officer’s compensation for 


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1 each year for which the violations are determined to 

2 have occurred. For purposes of this paragraph, an 

3 officer’s compensation shall include proceeds of any 

4 sales of stock and any incentive-based compensation 

5 (including stock options awarded as compensation) 

6 based on information required to be reported to the 

7 Secretary or any other Federal agency during the 

8 period in which the violations are determined to have 

9 occurred. 

10 ‘‘(e) LIMITATION, SUSPENSION, OR TERMINATION OF

11 ELIGIBILITY STATUS.— 

12 ‘‘(1) IN GENERAL.—Upon determination, after 

13 reasonable notice and opportunity for a hearing, that 

14 an eligible institution has engaged in a violation of 

15 any provision of this title (including the failure to 

16 carry out any provision of this title or any regulation 

17 prescribed under such provision) or a violation of 

18 any applicable special arrangement, agreement, or 

19 limitation, the Secretary may limit, suspend, or ter20 minate the participation in any program under this 

21 title of an eligible institution, subject to the require22 ments of paragraph (2). 

23 ‘‘(2) SUSPENSION PROCEDURES.—No period of 

24 suspension under this section shall exceed 60 days 

25 unless the institution and the Secretary agree to an 


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1 extension or unless limitation or termination pro2 ceedings are initiated by the Secretary within that 

3 period of time. 

4 ‘‘(f) EMERGENCY ACTION.— 

5 ‘‘(1) IN GENERAL.—The Secretary may take an 

6 emergency action against an institution, under which 

7 the Secretary shall, effective on the date on which a 

8 notice and statement of the basis of the action is 

9 mailed to the institution (by registered mail, return 

10 receipt requested), withhold funds from the institu11 tion or its students and withdraw the institution’s 

12 authority to obligate funds under any program 

13 under this title, if the Secretary— 

14 ‘‘(A) receives information, determined by 

15 the Secretary to be reliable, that the institution 

16 is violating any provision of this title, any regu17 lation prescribed under this title, or any appli18 cable special arrangement, agreement, or limita19 tion; 

20 ‘‘(B) determines that immediate action is 

21 necessary to prevent misuse of Federal funds; 

22 and 

23 ‘‘(C) determines that the likelihood of loss 

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1 scribed in subsection (e) for limitation, suspen2 sion, or termination. 

3 ‘‘(2) TIME LIMITATION.—An emergency action 

4 described in paragraph (1) shall not exceed 30 days 

5 unless limitation, suspension, or termination pro6 ceedings are initiated by the Secretary against the 

7 institution within that period of time. 

8 ‘‘(3) OPPORTUNITY TO SHOW CAUSE.—The Sec9 retary shall provide an institution that is the subject 

10 of an emergency action under this subsection an op11 portunity to show cause, if the institution so re12 quests, that the emergency action is unwarranted 

13 and should be lifted. 

14 ‘‘(g) LIFTING OF SANCTIONS.—Notwithstanding any 

15 other provision of this title, an institution of higher edu16 cation that has been sanctioned by the Secretary under 

17 this section or any other provision of this title may not 

18 have such sanctions lifted until the Secretary has con19 ducted a subsequent program review under section 498A 

20 and has found the institution to be in compliance with this 

21 title. 

22 ‘‘(h) SINGLE COURSE OF CONDUCT; COMPROMISE

23 AUTHORITY.— 

24 ‘‘(1) SAME COURSE OF CONDUCT.—For pur25 poses of this section, acts and omissions relating to 


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1 a single course of conduct shall be treated as a sin2 gle violation. 

3 ‘‘(2) COMPROMISE AUTHORITY.—Any civil pen4 alty under this section may be compromised by the 

5 Secretary. In determining the amount of such pen6 alty, or the amount agreed upon in compromise, the 

7 Secretary shall consider— 

8 ‘‘(A) the appropriateness of the penalty to 

9 the size of the institution of higher education 

10 subject to the determination; and 

11 ‘‘(B) the gravity of the violation, failure, or 

12 misrepresentation. 

13 ‘‘(i) COLLECTION OF PENALTY.—The amount of any 

14 penalty under this section may be deducted from any sums 

15 owing by the United States to the institution charged. 

16 ‘‘(j) DISPOSITION OF AMOUNTS RECOVERED.— 

17 ‘‘(1) USE FOR STUDENT RELIEF FUND.—For 

18 each fiscal year, an amount equal to 100 percent of 

19 the amounts recovered or collected under this section 

20 shall be deposited into the Student Relief Fund es21 tablished under subsection (k). 

22 ‘‘(2) REPORT.—The Secretary shall regularly 

23 publish, on the website of the Department, a de24 tailed description that includes the amount of funds 


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1 that were used for the Student Relief Fund under 

2 paragraph (1). 

3 ‘‘(k) STUDENT RELIEF FUND.— 

4 ‘‘(1) ESTABLISHMENT.—The Secretary shall es5 tablish a Student Relief Fund (referred to in this 

6 subsection as the ‘Fund’) that shall be used, subject 

7 to the availability of funds, to provide financial relief 

8 to any student enrolled in an institution of higher 

9 education that— 

10 ‘‘(A) has failed to comply with an eligi11 bility requirement under section 101 or 102 or 

12 an obligation incurred under the terms of the 

13 program participation agreement under section 

14 487; or 

15 ‘‘(B) has been sanctioned under subsection 

16 (b) or (c). 

17 ‘‘(2) TREATMENT AND AVAILABILITY OF

18 FUNDS.— 

19 ‘‘(A) FUNDS THAT ARE NOT GOVERNMENT

20 FUNDS.—Funds obtained by or transferred to 

21 the Fund shall not be construed to be Govern22 ment funds or appropriated monies. 

23 ‘‘(B) AMOUNTS NOT SUBJECT TO APPOR24 TIONMENT.—Notwithstanding any other provi25 sion of law, amounts in the Fund shall not be 


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1 subject to apportionment for purposes of chap2 ter 15 of title 31, United States Code, or under 

3 any other authority. 

4 ‘‘(C) NO FISCAL YEAR LIMITATION.—Sums 

5 deposited in the Fund shall remain in the Fund 

6 and be available for expenditure under this sub7 section without fiscal year limitation. 

8 ‘‘(3) INVESTMENTS.— 

9 ‘‘(A) AMOUNTS IN FUND MAY BE IN10 VESTED.—The Secretary of Education may re11 quest the Secretary of the Treasury to invest 

12 the portion of the Fund that is not, in the dis13 cretion of the Secretary of Education, required 

14 to meet the current needs of the Fund. 

15 ‘‘(B) ELIGIBLE INVESTMENTS.—Invest16 ments shall be made by the Secretary of the 

17 Treasury in obligations of the United States or 

18 obligations that are guaranteed as to principal 

19 and interest by the United States, with matu20 rities suitable to the needs of the Fund as de21 termined by the Secretary on the record. 

22 ‘‘(C) INTEREST AND PROCEEDS CRED23 ITED.—The interest on, and the proceeds from 

24 the sale or redemption of, any obligations held 

25 in the Fund shall be credited to the Fund. 


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1 ‘‘(4) REGULATIONS.—The Secretary shall pre2 scribe regulations to implement the requirements of 

3 this section within 1 year after the date of enact4 ment of the Students Before Profits Act of 2017. 

5 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.—In 

6 addition to funds derived from financial penalties as7 sessed pursuant to subsection (j), there are author8 ized to be appropriated such sums as may be nec9 essary to carry out this subsection for fiscal year 

10 2018 and each of the 5 succeeding fiscal years. 

11 ‘‘(l) STATE ENFORCEMENT.— 

12 ‘‘(1) IN GENERAL.—Any violation of subsection 

13 (b), including the regulations promulgated under 

14 such subsection, shall be a cause of action enforce15 able by the State, through the attorney general (or 

16 the equivalent thereof) of the State, in any district 

17 court of the United States in that State or in a 

18 State court that is located in that State and that 

19 has jurisdiction over the defendant. The State may 

20 seek any relief provided under paragraph (4)(B) for 

21 such violation, or any remedies otherwise provided 

22 under law. 

23 ‘‘(2) NOTICE REQUIRED.— 

24 ‘‘(A) IN GENERAL.—Before initiating any 

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1 ulatory proceeding against any institution of 

2 higher education as authorized by paragraph 

3 (1) to enforce any provision of this subsection, 

4 including any regulation promulgated by the 

5 Secretary under this subsection, a State attor6 ney general shall timely provide a copy of the 

7 complete complaint to be filed and written no8 tice describing such action or proceeding to the 

9 Secretary, except as provided in subparagraph 

10 (B). 

11 ‘‘(B) EMERGENCY ACTION.—If prior notice 

12 is not practicable, the State attorney general 

13 shall provide a copy of the complete complaint 

14 and the notice to the Secretary immediately 

15 upon instituting the action or proceeding. 

16 ‘‘(C) CONTENTS OF NOTICE.—The notifi17 cation required under this paragraph shall, at a 

18 minimum, describe— 

19 ‘‘(i) the identity of the parties; 

20 ‘‘(ii) the alleged facts underlying the 

21 proceeding; and 

22 ‘‘(iii) whether there may be a need to 

23 coordinate the prosecution of the pro24 ceeding so as not to interfere with any ac25 tion, including any rulemaking, undertaken 


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1 by the Secretary or another Federal agen2 cy. 

3 ‘‘(3) REGULATIONS.—The Secretary shall pre4 scribe regulations to implement the requirements of 

5 this subsection and periodically provide guidance in 

6 order to further coordinate actions with the State at7 torneys general. 

8 ‘‘(4) PRESERVATION OF STATE AUTHORITY.— 

9 ‘‘(A) STATE CLAIMS.—Nothing in this sub10 section shall be construed as altering, limiting, 

11 or affecting the authority of a State attorney 

12 general or any other regulatory or enforcement 

13 agency or authority to bring an action or other 

14 regulatory proceeding arising solely under the 

15 law in effect in that State. 

16 ‘‘(B) RELIEF.— 

17 ‘‘(i) IN GENERAL.—Relief under this 

18 subsection may include, without limita19 tion— 

20 ‘‘(I) rescission or reformation of 

21 contracts; 

22 ‘‘(II) refund of moneys or return 

23 of real property; 

24 ‘‘(III) restitution; 


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1 ‘‘(IV) disgorgement or compensa2 tion for unjust enrichment; 

3 ‘‘(V) payment of damages or 

4 other monetary relief; 

5 ‘‘(VI) public notification regard6 ing the violation, including the costs 

7 of notification; and 

8 ‘‘(VII) limits on the activities or 

9 functions of the person. 

10 ‘‘(ii) EXCLUSION.—Relief under this 

11 subsection shall not include the ability to 

12 suspend or terminate the eligibility status 

13 of an institution of higher education for 

14 programs under this title.’’. 

15 (b) PROGRAM REVIEW AND DATA.—Section 

16 498A(b)(8) of the Higher Education Act of 1965 (20 

17 U.S.C. 1099c–1(b)(8)) is amended by inserting ‘‘and to 

18 the applicable State Attorney General if the institution is 

19 found to have not complied with the program review proc20 ess under this section’’ after ‘‘under review’’. 

21 SEC. 4. PERSONAL LIABILITY FOR OFFICERS OF INSTITU22 TIONS. 

23 Section 498(e) of the Higher Education Act of 1965 

24 (20 U.S.C. 1099c(e)) is amended— 


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1 (1) in paragraph (4), by striking ‘‘The Sec2 retary’’ and inserting ‘‘Except as provided in para3 graph (7), the Secretary’’; and 

4 (2) by adding at the end the following: 

5 ‘‘(7) Notwithstanding paragraph (4), if the Secretary 

6 has taken an enforcement action against a proprietary in7 stitution of higher education (as defined in section 

8 102(b)), (which may include heightened oversight activi9 ties such as heightened cash monitoring, provisional cer10 tification, or requirements to obtain approval for new edu11 cational programs and locations), the Secretary may hold 

12 an executive officer of the institution personally liable for 

13 financial losses related to such action to the Federal Gov14 ernment, student assistance recipients, and other program 

15 participants for funds under this title.’’. 

16 SEC. 5. GOVERNMENT CLAIMS FOR DISCHARGE. 

17 (a) FFEL AND DIRECT LOAN PROGRAMS.—Section 

18 437(c)(1) of the Higher Education Act of 1965 (20 U.S.C. 

19 1087(c)(1)) is amended in the first sentence by striking 

20 ‘‘against the institution and its affiliates and principals’’ 

21 and inserting ‘‘against the institution, its affiliates and 

22 principals, and any executive officer or board member of 

23 the institution’’. 

24 (b) FEDERAL PERKINS LOANS.—Section 464(g)(1) 

25 of the Higher Education Act of 1965 (20 U.S.C. 


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1 1087dd(g)(1)) is amended by striking ‘‘against the institu2 tion and the institution’s affiliates and principals’’ and in3 serting ‘‘against the institution, the institution’s affiliates 

4 and principals, and any executive officer or board member 

5 of the institution’’. 

6 SEC. 6. PROGRAM PARTICIPATION AGREEMENT. 

7 Section 487(a) of the Higher Education Act of 1965 

8 (20 U.S.C. 1094(a)) is amended by adding at the end the 

9 following: 

10 ‘‘(30) In the case of a proprietary institution of 

11 higher education (as defined in section 102(b)), such 

12 institution will prohibit any individual who has been 

13 found guilty of defrauding students from being a 

14 member of the board of directors, the chief executive 

15 officer, or other executive officer of the institution.’’. 

Æ 


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