I 

117TH CONGRESS 

2D SESSION H. R. 7031 

To amend the Higher Education Act of 1965 to modify the application 

and review process for changes of control, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 9, 2022 

Mr. KELLER (for himself, Mrs. MILLER-MEEKS, and Mr. OWENS) introduced 

the following bill; which was referred to the Committee on Education and 

Labor 

A BILL 

To amend the Higher Education Act of 1965 to modify 

the application and review process for changes of control, 

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 ‘‘Change of Ownership 

5 and Conversion Improvement Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) Institutions of higher education in the 

9 United States frequently merge with, consolidate, 


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1 and acquire other institutions that result in a 

2 change in ownership. 

3 (2) These transactions are generally good for 

4 students, as they promote innovation, drive competi5 tion, and prevent stagnation. 

6 (3) Changing demographics and evolving higher 

7 education enrollment patterns may lead to more 

8 mergers and acquisitions in the future. 

9 (4) Proprietary institutions that voluntarily 

10 convert to nonprofit status or are acquired by non11 profit and public entities can have a positive impact 

12 on students and society. 

13 (5) The Department of Education has an inter14 est in safeguarding Federal student aid funds and 

15 therefore should conduct thorough and comprehen16 sive reviews of all changes in ownership involving in17 stitutions of higher education. 

18 (6) These reviews are necessary to ensure that 

19 the acquiring entity has the financial and adminis20 trative capacity to manage the target institutions. 

21 (7) The Department of Education should con22 duct these reviews in a thorough and comprehensive 

23 manner but should do so as quickly as possible to 

24 promote the execution of these transactions. 


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1 (8) As of May 2021, the Department of Edu2 cation had ‘‘very few staff’’ assigned to evaluate 

3 pretransaction, change of control, and conversion ap4 plications on a full-time basis. 

5 (9) Consequently, these transactions are proc6 essed by the Department of Education at an ex7 traordinary slow rate of speed, with some institu8 tions waiting up to 5 years before receiving a final 

9 determination. 

10 (10) One of the primary challenges in proc11 essing these applications quickly is the lack of fund12 ing to hire enough qualified staff. 

13 (11) Currently, general taxpayers are bearing 

14 the cost of reviewing these transactions. 

15 (12) It is in the interest of institutions and the 

16 United States to charge a fee for applications involv17 ing changes in ownership at institutions of higher 

18 education that are submitted to the Department of 

19 Education. 

20 (13) In consideration for the fee, the Depart21 ment of Education will be required to guarantee an 

22 expedited review process for all applicants, absent 

23 compelling circumstances where good cause exists 

24 for delay. 


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1 (14) The Government Accountability Office has 

2 identified weaknesses in the Department of Edu3 cation’s post-transaction monitoring process, which 

4 will likewise require additional staff to be hired to 

5 conduct monitoring. 

6 (15) Institutions that have converted from pro7 prietary status to nonprofit status and have an on8 going financial relationship with the former owners 

9 of the institution are at highest risk of entering into 

10 financial arrangements that result in improper pri11 vate inurement. 

12 (16) These institutions should be closely mon13 itored for a period after these transactions occur and 

14 should be required to pay a fee to support the hiring 

15 of staff to conduct this monitoring. 

16 (17) The Government Accountability Office has 

17 likewise found weaknesses in the Internal Revenue 

18 Service review process for conversion requests and 

19 the post-transaction monitoring process. 

20 (18) In order to support a more thorough re21 view of these applications and to conduct moni22 toring, the Department of Education will remit part 

23 of the fee paid by institutions to the Internal Rev24 enue Service for these purposes. 


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1 SEC. 3. MODIFYING THE APPROVAL PROCESS FOR 

2 CHANGES OF CONTROL. 

3 (a) AMENDMENTS.—Section 498(i) of the Higher 

4 Education Act of 1965 (20 U.S.C. 1099c(i)) is amended— 

5 (1) in the subsection heading, by inserting 

6 ‘‘AND PROPOSED CHANGES OF OWNERSHIP’’ after 

7 ‘‘OWNERSHIP’’; 

8 (2) in paragraph (1)— 

9 (A) by striking ‘‘(1) An eligible institu10 tion’’, and inserting the following: ‘‘(1)(A) An 

11 eligible institution’’; 

12 (B) by striking ‘‘the requirements of sec13 tion 102 (other than the requirements in sub14 sections (b)(5) and (c)(3))’’ and inserting ‘‘the 

15 applicable requirements of section 102 or 

16 103(13)’’ 

17 (C) by adding at the end the following: 

18 ‘‘(B)(i) Prior to a change in ownership re19 sulting in a change of control, an institution 

20 may seek a pretransaction determination about 

21 whether the institution will meet the applicable 

22 requirements of section 102 or 103(13) and 

23 this section after such proposed change in own24 ership by submitting to the Secretary a materi25 ally complete pretransaction review application. 


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1 ‘‘(ii) In reviewing applications submitted 

2 under clause (i), the Secretary shall only pro3 vide a comprehensive review of each such appli4 cation, and may not provide an abbreviated or 

5 partial review. 

6 ‘‘(iii) If an institution submits a materially 

7 complete pretransaction review application at 

8 least 90 days prior to the transaction and the 

9 Secretary approves the application, the subse10 quent change in ownership application shall also 

11 be approved and the institution shall be cer12 tified as meeting the requirements for such 

13 transaction, provided that the institution— 

14 ‘‘(I) complies with the applicable 

15 terms of this section; and 

16 ‘‘(II) the transaction resulting in a 

17 change of control does not differ materially 

18 in its terms from the transaction proposed 

19 in the pretransaction review application.’’; 

20 (3) in paragraph (2)— 

21 (A) in subparagraph (E), by striking ‘‘or’’ 

22 at the end; 

23 (B) in subparagraph (F), by striking the 

24 period at the end and inserting ‘‘; or’’; and 

25 (C) by adding the following at the end: 


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1 ‘‘(G) in the case of a proprietary institution of 

2 higher education, a conversion to a public or other 

3 nonprofit institution of higher education.’’; 

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

5 ‘‘(5)(A) Subject to subparagraph (B), when any insti6 tution submits an application for a change in ownership 

7 resulting in a change in control under this section or sub8 mits a pretransaction review application under paragraph 

9 (1)(B) (other than in the case of a conversion trans10 action), the institution shall be required to pay to the Sec11 retary an administrative fee that shall— 

12 ‘‘(i) be in an amount equal to 0.15 percent of 

13 the total institutional revenue derived from this title 

14 by such institution for the most fiscal year for which 

15 data is available; and 

16 ‘‘(ii) be used exclusively for expenses related to 

17 the processing of such application, and be available 

18 to the Secretary without further appropriation, ex19 clusively for expenses related to the processing of 

20 such approval or application. 

21 ‘‘(B) In the case of a proprietary institution submit22 ting an application for conversion, or a pretransaction re23 view application for conversion, the institution shall be re24 quired to pay to the Secretary an administrative fee that 

25 shall— 


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1 ‘‘(i) be in an amount equal to 0.30 percent of 

2 the total institutional revenue derived from this title 

3 by such institution for the most fiscal year for which 

4 data is available; and 

5 ‘‘(ii) be used exclusively for expenses related to 

6 the processing of such application, and of which— 

7 ‘‘(I) 50 percent shall be available to the 

8 Secretary without further appropriation, exclu9 sively for expenses related to the processing of 

10 such application; and 

11 ‘‘(II) 50 percent shall be remitted by the 

12 Secretary to the Commissioner of the Internal 

13 Revenue, and shall be available, without further 

14 appropriation, to the Commissioner of Internal 

15 Revenue exclusively for purposes of determining 

16 whether the institution seeking such conversion 

17 or pretransaction review is an institution ex18 empt from tax and is otherwise in compliance 

19 with applicable requirements of the Internal 

20 Revenue Code of 1986. 

21 ‘‘(C) An institution that pays a fee under subpara22 graph (A) or (B) for a pretransaction application with re23 spect to a proposed transaction shall not be required to 

24 pay another fee under such subparagraph for a change 

25 in ownership application with respect to such transaction. 


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1 ‘‘(D) In no case may any fee remitted under subpara2 graph (A) or (B) exceed $120,000 for any transaction (or 

3 pretransaction) application, nor may the Secretary require 

4 an institution that has paid a fee under subparagraph (B) 

5 to pay an additional fee under subparagraph (A). 

6 ‘‘(6)(A) The Secretary shall approve or deny a mate7 rially complete application (including pretransaction re8 views and conversion applications) submitted under this 

9 section as soon as practicable and not later than the 90- 

10 day period beginning on the date of receipt of such an 

11 application, except that in a case in which the Secretary 

12 determines, on a nondelegable basis, that good cause exists 

13 to not make the determination during such 90-day period, 

14 the Secretary shall notify the institution in writing detail15 ing the reasons for a good cause extension. 

16 ‘‘(B) If the Secretary fails to approve or deny a mate17 rially complete application during the period described in 

18 subparagraph (A) and does not find good cause for exten19 sion, the materially complete application shall be deemed 

20 approved. 

21 ‘‘(C) In no case may the Secretary grant a good cause 

22 extension under this section to an institution for more 

23 than one month at a time, or for a total of more than 

24 more than 12 months. 


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1 ‘‘(D) To ensure timely submission of all relevant doc2 umentation, the Secretary may deny an application if an 

3 institution does not make a good faith effort to submit 

4 to the Secretary, in a timely manner— 

5 ‘‘(i) all relevant documentation; or 

6 ‘‘(ii) a materially complete application. 

7 ‘‘(E)(i) Upon approving or denying an application 

8 under this paragraph, the Secretary shall publish in the 

9 Federal Register the reasoning for such approval or de10 nial, including— 

11 ‘‘(I) a copy of the approval or denial letter sent 

12 to the institution; and 

13 ‘‘(II) any analysis regarding how the Secretary 

14 determined under paragraph 7(A)(iii) that a director 

15 of the institution was an interested or disinterested 

16 party to the transaction. 

17 ‘‘(ii) The Secretary shall not publish under clause (i) 

18 any information that is otherwise exempt from disclosure 

19 under section 552 of title 5, United States Code (relating 

20 to the Freedom of Information Act), including trade se21 crets and commercial or financial information that is privi22 leged or confidential. 

23 ‘‘(7)(A) In the case of a proprietary institution that 

24 subsequent to the transaction would be owned and oper25 ated by an entity (in this paragraph referred to as the 


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1 ‘buyer’) seeking to be recognized as a public or other non2 profit institution, the buyer shall meet the definition of 

3 a nonprofit institution under section 103(13) if— 

4 ‘‘(i) the buyer pays no more than fair market 

5 value for any assets of the proprietary institution; 

6 ‘‘(ii) the buyer pays no more than fair market 

7 value for any service or lease contracts, including 

8 such service and lease contracts provided by the en9 tity selling the proprietary institution; and 

10 ‘‘(iii) to prevent self-dealing in the case where 

11 one or more individuals with a substantial ownership 

12 or controlling interests in the proprietary institution 

13 will also have substantial or controlling interests in 

14 the institution seeking to be recognized as a public 

15 or other nonprofit institution (meaning that one or 

16 more individuals are on both sides of the trans17 action), the change of control transaction, and any 

18 substantial asset acquisition, service, or lease agree19 ments with the proprietary institution shall be ap20 proved by a disinterested committee of directors of 

21 the entity that seeks to be recognized as a public or 

22 other nonprofit institution. 

23 ‘‘(B) For the purposes of this paragraph, parties to 

24 the transaction are entitled to a rebuttable presumption 

25 that the assets, lease contracts, and service contracts that 


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1 are part of the transaction are purchased at fair market 

2 value if— 

3 ‘‘(i) the acquiring entity pays no more than fair 

4 market value for such assets, lease contracts, or 

5 service contracts; and 

6 ‘‘(ii) the value of the assets, lease contracts, or 

7 service contracts are evaluated by at least one inde8 pendent third-party entity hired by parties on both 

9 sides of the transaction. 

10 ‘‘(8)(A) An institution that has been approved for 

11 conversion by the Secretary shall be subject to a moni12 toring period for a 5-year period beginning on the day 

13 after the date of such approval. In conducting the moni14 toring of the institution under this paragraph, the Sec15 retary— 

16 ‘‘(i) shall only conduct monitoring to ensure 

17 that the institution is in compliance with the re18 quirements of section 103(13) and paragraph (7) of 

19 this subsection; and 

20 ‘‘(ii) may require the institution to submit reg21 ular reports or conduct audits of such institution re22 lating to such compliance. 

23 ‘‘(B) Each institution that is subject to the moni24 toring period under this paragraph shall remit an annual 

25 fee to the Secretary— 


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1 ‘‘(i) in an amount equal to 0.15 percent of the 

2 total revenue derived from this title by such institu3 tion for the most recent fiscal year for which data 

4 is available; and 

5 ‘‘(ii) that shall be exclusively for expenses re6 lated to monitoring of the institution for the period 

7 described in subparagraph (A)— 

8 ‘‘(I) of which 50 percent shall be used by 

9 the Secretary, without further appropriation, 

10 exclusively for expenses related to monitoring of 

11 the institution during such period; and 

12 ‘‘(II) of which 50 percent shall be remitted 

13 by the Secretary to the Commissioner of Inter14 nal Revenue, to be available to such Commis15 sioner, without further appropriation, exclu16 sively for monitoring compliance with the Inter17 nal Revenue Code of such institution during 

18 such period. 

19 ‘‘(C) An institution may not be subject to an annual 

20 fee under subparagraph (B) for monitoring related to a 

21 conversion that exceeds $60,000. 

22 ‘‘(D) If the Secretary determines that an institution 

23 should be subject to the monitoring under this paragraph 

24 beyond the 5-year period described in subparagraph (A), 

25 the Secretary shall provide the reasons justifying an extenVerDate Sep 11 2014 22:34 Mar 13, 2022 Jkt 029200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H7031.IH H7031

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1 sion in writing to the institution (and in the Federal Reg2 ister) at least 30 days before the expiration of such period. 

3 ‘‘(E) Any institution that is subject to monitoring 

4 under this paragraph may seek a waiver to be exempt from 

5 such monitoring (including the annual fee under subpara6 graph (B)) on an annual basis for any year during the 

7 monitoring period and the Secretary shall grant such waiv8 er if there is no ongoing contractual or financial relation9 ship between the institution and the former entity or indi10 viduals that previously owned the institution. The Sec11 retary may grant a waiver for more than 1 year in the 

12 case where the entity that formerly owned the proprietary 

13 institution has closed or no longer exists and the Secretary 

14 determines the institution is not at risk of violating the 

15 requirements of section 103(13) or paragraph (7) of this 

16 subsection. 

17 ‘‘(9) Any institution that submits an application for 

18 conversion shall not promote or market itself, in any man19 ner, as a public or other nonprofit institution of higher 

20 education unless— 

21 ‘‘(A) the Secretary has provided final approval 

22 of the conversion of the institution to a public or 

23 other nonprofit institution of higher education under 

24 this section; 


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1 ‘‘(B) an accrediting agency or association recog2 nized by the Secretary pursuant to section 496 has 

3 approved such public or nonprofit status of the insti4 tution; 

5 ‘‘(C) the State has given final approval to the 

6 institution as a public or nonprofit institution of 

7 higher education, as applicable; and 

8 ‘‘(D) in the case of an institution seeking non9 profit status, the Commissioner of Internal Revenue 

10 has approved the institution as tax exempt pursuant 

11 to the Internal Revenue Code of 1986. 

12 ‘‘(10) Not later than 270 days after the date of enact13 ment of the Change of Ownership and Conversion Im14 provement Act, and periodically thereafter, the Secretary 

15 shall publish (and update as necessary) in the Federal 

16 Register— 

17 ‘‘(A) descriptions of the documents and mate18 rials the Secretary expects or requires institutions of 

19 higher education to submit (including any standard20 ized forms) as part of any pretransaction application 

21 or change in ownership application under this sec22 tion, including a description of what the Secretary 

23 considers to be a materially complete application; 

24 and 


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1 ‘‘(B) after at least a 30-day notice and com2 ment period, responses to any public comments re3 ceived with respect to such descriptions or updates 

4 to such descriptions. 

5 ‘‘(11) In a case in which the Secretary requests a doc6 ument under this section as part of a pretransaction or 

7 change in ownership application that is not described in 

8 the Federal Register under paragraph (10), the Secretary 

9 shall— 

10 ‘‘(A) substantiate, in writing to the institution, 

11 the reasons why the Secretary is requesting such 

12 documents; and 

13 ‘‘(B) publish such reasons in the Federal Reg14 ister, including whether the Secretary may request 

15 other institutions that submit applications under this 

16 section to produce similar documentation. 

17 ‘‘(12)(A) Not later than 18 months after the date of 

18 enactment of the Change of Ownership and Conversion 

19 Improvement Act, and annually thereafter, the Secretary 

20 shall submit a report to authorizing committees, and post 

21 such report on a publicly available website regarding im22 plementation of the amendments made to this section by 

23 such Act, including the following information: 


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1 ‘‘(i) The mean and median length of time taken 

2 by the Secretary to review applications under this 

3 section during the preceding 12-month period. 

4 ‘‘(ii) The number of applications approved or 

5 denied during the preceding 12-month period. 

6 ‘‘(iii) For any application not processed during 

7 the 90-day period beginning on the date of receipt 

8 of the application for which the Secretary found 

9 good cause under paragraph (6)(A) to extend the 

10 deadline in which the application shall be processed, 

11 a copy of the letter sent to the institution explaining 

12 why the Secretary believed good cause existed for 

13 such extension. 

14 ‘‘(iv) For any application not processed during 

15 such 90-day period, which was deemed to be auto16 matically approved by the requirements of this sec17 tion under paragraph (6)(B), the name of each insti18 tution involved and an explanation for why the appli19 cation was not processed in a timely manner. 

20 ‘‘(v) Any legislative suggestions the Secretary 

21 may have to improve the application or monitoring 

22 process under this section. 

23 ‘‘(B) If the Secretary fails to submit a report under 

24 this paragraph by not later than 90 days after the dead25 line for such submission under subparagraph (A), the SecVerDate Sep 11 2014 22:34 Mar 13, 2022 Jkt 029200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H7031.IH H7031

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1 retary may not, for the 12-month period following such 

2 failure, spend the fees remitted by institutions under this 

3 section or remit such fees to the Commissioner unless 

4 Congress provides for such use by further appropriation. 

5 ‘‘(13) For the purposes of this subsection, the term 

6 ‘conversion’ means any transaction under which— 

7 ‘‘(A) a proprietary institution is reorganized 

8 and seeks recognition as a public or other nonprofit 

9 institution; or 

10 ‘‘(B) the control of a proprietary institution is 

11 transferred as a result of a sale, donation, or other 

12 method to an entity that seeks certification under 

13 this section as a public or other nonprofit institu14 tion.’’. 

15 (b) APPLICATION.—The amendments made by this 

16 section shall be apply with respect to applications sub17 mitted for change of control or conversion submitted on 

18 or after January 1, 2023. 

19 SEC. 4. GOVERNMENT ACCOUNTABILITY OFFICE. 

20 Not later than 5 years after the date of enactment 

21 of this Act, the Comptroller General shall submit to the 

22 Committee on Education and Labor of the House of Rep23 resentatives and the Committee on Health, Education, 

24 Labor, and Pensions of the Senate, a report on the impleVerDate Sep 11 2014 22:34 Mar 13, 2022 Jkt 029200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H7031.IH H7031

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1 mentation of the amendments made by this Act, including 

2 recommendations to improve— 

3 (1) the application process under section 498(i) 

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

5 1099c(i)), as amended by section 3, for institutions 

6 of higher education seeking a change in ownership 

7 resulting in a change in control; or 

8 (2) the monitoring process under such section 

9 for institutions of higher education that have re10 cently converted from being recognized as a propri11 etary institution to a public or other nonprofit insti12 tution. 

Æ 


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