Protecting Financial Aid for Students and Taxpayers Act

To amend the Higher Education Opportunity Act to restrict institutions of higher education from using revenues derived from Federal educational assistance funds for advertising, marketing, or recruiting purposes. 1. Short title This Act may be cited as the Protecting Financial Aid for Students and Taxpayers Act 2. Findings Congress finds the following: (1) From 1998 to 2008, enrollment in for-profit institutions of higher education increased by 225 percent, from 553,000 students to 1,800,000 students. (2) On average, 86 percent of revenues at 15 large, publicly traded companies that operate for-profit institutions of higher education came from the Federal Government through student aid programs. (3) In 2009, students who enrolled at for-profit institutions of higher education received $30,000,000,000 in Federal Pell Grants and student loans. (4) Eight out of the 10 top recipients of Post-9/11 Educational Assistance funds are for-profit institutions of higher education. For-profit colleges received 37 percent ($4,400,000,000) of all Post-9/11 Educational Assistance funds during the 2-year period of August 1, 2009 through July 30, 2011. (5) Six of the top 10 military tuition assistance recipients are for-profit institutions of higher education. For-profit colleges received half of all tuition assistance dollars—$280,000,000 out of $563,000,000 spent last year. (6) The 15 companies that received 86 percent of their revenues from Federal student aid programs spent $3,700,000,000 (23 percent of expenditures) on advertising, marketing, and recruitment in fiscal year 2009. (7) According to documents obtained by the Committee on Health, Education, Labor and Pensions of the Senate (referred to in this Act as the HELP Committee (8) An analysis of 8 publicly traded companies that operate institutions of higher education shows that, on average, they spend 31 percent of expenditures on advertising, marketing, and recruiting. (9) Documents obtained by the HELP Committee reveal that for-profit institutions of higher education have created sophisticated marketing plans and employed many third parties as well as large sales forces specifically tasked with enrolling as many students as possible, including veterans, servicemembers, and their families. (10) In 2010, an undercover investigation by the Government Accountability Office documented misleading and deceptive recruitment practices at each of 15 for-profit institutions of higher education campuses visited. Misleading statements included information regarding the cost of attendance, transferability of credits, loan repayment by future employers, job placement, and likelihood of graduation. (11) Documents produced to the HELP Committee demonstrate that revenue from Federal funds is used to pay recruiters, who, at some for-profit institutions of higher education, are trained to exploit emotional vulnerabilities of prospective students to meet enrollment thresholds. (12) Documents produced to the HELP Committee demonstrate that revenues from Federal funds are used to pay very large sales staff titled enrollment advisors (13) The number of enrollment advisors at several for-profit institutions of higher education examined by the HELP Committee are very disproportionate with the number of staff engaged in all student support services, including job placement, which were 3,737, 2,582 and 2,472 at the same 3 for-profit companies. 3. Restrictions on sources of funds for recruiting and marketing activities Section 119 of the Higher Education Opportunity Act ( 20 U.S.C. 1011m (1) in the section heading, by inserting and Restrictions on Sources of Funds for Recruiting and Marketing Activities Funds (2) in subsection (d), by striking subsections (a) through (c) subsections (a), (b), (c), and (e) (3) by redesignating subsection (e) as subsection (f); and (4) by inserting after subsection (d) the following: (e) Restrictions on sources of funds for recruiting and marketing activities (1) In general An institution of higher education, or other postsecondary educational institution, may not use revenues derived from Federal educational assistance funds for recruiting or marketing activities described in paragraph (2). (2) Covered activities Except as provided in paragraph (3), the recruiting and marketing activities subject to paragraph (1) shall include the following: (A) Advertising and promotion activities, including paid announcements in newspapers, magazines, radio, television, billboards, electronic media, naming rights, or any other public medium of communication, including paying for displays or promotions at job fairs, military installations, or college recruiting events. (B) Efforts to identify and attract prospective students, either directly or through a contractor or other third party, including contact concerning a prospective student’s potential enrollment or application for grant, loan, or work assistance under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.) or participation in preadmission or advising activities, including— (i) paying employees responsible for overseeing enrollment and for contacting potential students in-person, by phone, by email, or by other internet communications regarding enrollment; and (ii) soliciting an individual to provide contact information to an institution of higher education, including websites established for such purpose and funds paid to third parties for such purpose. (C) Such other activities as the Secretary of Education may prescribe, including paying for promotion or sponsorship of education or military-related associations. (3) Exceptions Any activity that is required as a condition of receipt of funds by an institution under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. (4) Federal educational assistance funds In this subsection, the term Federal educational assistance funds (A) Title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. (B) Chapter 30, 31, 32, 33, 34, or 35 of title 38, United States Code. (C) Chapter 101, 105, 106A, 1606, 1607, or 1608 of title 10, United States Code. (D) Section 1784a, 2005, or 2007 of title 10, United States Code. (E) Title I of the Workforce Investment Act of 1998 ( 29 U.S.C. 2801 et seq. (F) The Adult Education and Family Literacy Act ( 20 U.S.C. 9201 et seq. (5) Rule of construction Nothing in this section shall be construed as a limitation on the use by an institution of revenues derived from sources other than Federal educational assistance funds. (6) Reporting Each institution of higher education, or other postsecondary educational institution, that receives revenues derived from Federal educational assistance funds shall report annually to the Secretary and to Congress the institution's expenditures on advertising, marketing, and recruiting. .

Summary: Protecting Financial Aid for Students and Taxpayers Act - Amends the Higher Education Opportunity Act to prohibit postsecondary educational institutions from using revenues derived from federal educational assistance funds for: (1) advertising and promotion; (2) identifying and attracting prospective students; or (3) other activities the Secretary of Education may proscribe, such as paying for the promotion or sponsorship of education or military-related associations. Excepts from that prohibition activities that are required as a condition of receiving funds under title IV (Student Assistance) of the Higher Education Act of 1965, specifically authorized under title IV, or otherwise specified by the Secretary.