I 
113TH CONGRESS 
2D SESSION 
H. R. 5674 
To provide for higher education reform. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 19, 2014 
Mr. HIMES introduced the following bill; which was referred to the Committee 
on Education and the Workforce 
A BILL 
To provide for higher education reform. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘College Affordability 
and Innovation Act of 2014’’. 
SEC. 2. DEFINITIONS. 
In this Act: 
(1) AUTHORIZING
COMMITTEES.—The term 
‘‘authorizing committees’’ means the Committee on 
Health, Education, Labor, and Pensions of the Sen-
ate and the Committee on Education and the Work-
force of the House of Representatives. 
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(2) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Education. 
SEC. 3. PILOT PROGRAM TO PROMOTE INNOVATION IN 
HIGHER EDUCATION. 
(a) PURPOSE; DEFINITION.— 
(1) PURPOSE.—The purpose of this section is 
to authorize an evidence-based grant program to 
promote greater experimentation among institutions 
of higher education to increase the level of student 
attainment of postsecondary and graduate certifi-
cates and degrees through innovative programs de-
signed to decrease the cost and time required to 
complete postsecondary and graduate programs 
while improving the quality and effectiveness of post-
secondary education programs, providing accelerated 
degree or certificate programs, and increasing on- 
time graduation rates. 
(2) INSTITUTION OF HIGHER EDUCATION.—In 
this section, the term ‘‘institution of higher edu-
cation’’ has the meaning given the term in section 
102 of the Higher Education Act of 1965 (20 
U.S.C. 1002). 
(b) INCENTIVE GRANTS FOR INNOVATIVE PROGRAMS 
THAT IMPROVE QUALITY AND AFFORDABILITY.— 
(1) IN GENERAL.— 
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(A) GRANTS.—The Secretary shall, for a 
5-year award term, award grants to not more 
than 15 institutions of higher education, 
through a competitive process described in this 
section, to enable the institutions to carry out 
programs designed to graduate students with 
certificates or degrees at significantly lower 
costs for students and within shorter time peri-
ods than traditional programs while improving 
the quality and effectiveness of the programs. 
(B) GOOD
STANDING
REQUIREMENT.— 
Only those institutions of higher education that 
are in good standing with the administration of 
their student assistance programs under title IV 
of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) shall be eligible to receive 
grants under subparagraph (A). 
(2) DISTRIBUTION OF GRANT FUNDS.—Grant 
payments shall be awarded with an initial distribu-
tion of 20 percent of the total grant amount, fol-
lowed by a distribution of 10 percent of the total 
grant amount prior to the second, third, and fourth 
years of the program, and the remaining 50 percent 
of the total grant amount after the program receives 
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its final satisfactory annual evaluation by the Sec-
retary in accordance with subsection (f)(1). 
(3) DESCRIPTION OF INNOVATIVE PROGRAMS.— 
The programs described under paragraph (1) shall 
include those that— 
(A) utilize online instruction, including dis-
tance education (as defined in section 103 of 
the Higher Education Act of 1965 (20 U.S.C. 
1003)), or online interaction components, or on-
line instruction integrated with classroom or in- 
person instruction; 
(B) utilize direct assessment programs, as 
described in section 481(b)(4) of the Higher 
Education Act of 1965 (20 U.S.C. 1088(b)(4)), 
either within a comprehensive direct assessment 
program or integrated within another type of 
academic program; 
(C) utilize integration of experiential learn-
ing and design of customized programs of 
study, to promote completion or alignment with 
medium- and long-term employment needs; 
(D) allow students to be dually or concur-
rently enrolled in the postsecondary program 
and a secondary school, or a postsecondary pro-
gram and a graduate program; or 
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(E) utilize any other innovative, evidence- 
based method of postsecondary education that 
provides cost-effective, high-quality methods for 
instruction, student learning, and use of avail-
able technology-based resources, including hy-
brid models incorporating elements of the pro-
gram types set forth in subparagraphs (A), (B), 
(C), and (D), and adaptive learning tech-
nologies. 
(c) APPLICATIONS.— 
(1) IN GENERAL.—An institution of higher edu-
cation that desires to receive a grant under this sec-
tion shall submit an application to the Secretary at 
such time and in such manner as the Secretary may 
require. 
(2) 
CONTENTS.—An 
application 
submitted 
under paragraph (1) shall include— 
(A) a description of the institution’s qual-
ity assurances for the programs to be offered; 
(B) a description of the statutory and reg-
ulatory requirements for which a waiver is 
sought under subsection (e) and the reasons for 
which the waiver is sought; 
(C) a description of the programs to be of-
fered; 
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(D) a description of the students eligible 
for the programs offered, including any eligi-
bility limitations; 
(E) an assurance that the institution will 
fully cooperate with the ongoing evaluations of 
the programs provided for in this section; 
(F) a description of how the proposed pro-
gram will improve the quality of its postsec-
ondary certificates or degrees, reduce tuition 
and other costs to students, and reduce enroll-
ment time; 
(G) a description of the data (or any other 
evidence) that indicate that the programs to be 
offered will likely lead to the outcomes de-
scribed in subparagraph (F); 
(H) a complete listing of the institution’s 
performance goals and measures regarding as-
sessments of the quality of its postsecondary 
certificates or degrees, amount of tuition and 
costs charged to students, and the amount of 
enrollment time needed by students to complete 
the postsecondary certificates or degrees; and 
(I) any other information as the Secretary 
may require. 
(d) AWARDING OF GRANTS.— 
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(1) IN GENERAL.—The Secretary shall award 
grants under this section to institutions of higher 
education for new or existing programs. 
(2) PRIORITY.—In awarding grants under this 
section, the Secretary shall give priority to an insti-
tution of higher education that the Secretary deter-
mines— 
(A) is financially responsible, as described 
in section 498(c)(1) of the Higher Education 
Act of 1965 (20 U.S.C. 1099c(c)(1)); 
(B) has a proven record of graduating stu-
dents from the other programs of the institu-
tion; 
(C) has a proven record of graduates from 
the other programs of the institution securing 
full-time employment; 
(D) simultaneously addresses income-re-
lated inequalities in remedial education, college 
access, persistence rates, and graduation rates; 
(E) has support services in place, such as 
counseling, coaching, mentoring, and outreach, 
that are designed to assist all students in ob-
taining information and making decisions re-
garding financial aid, and degree or certificate 
likelihood of persistence and completion; 
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(F) will serve low-income students, adult 
students aged 25 years and older, and part-time 
students; 
(G) will support programs that are 
replicable at a range of institutions of higher 
education if they are demonstrated to be suc-
cessful; and 
(H) has presented the strongest evidence 
in support of their likely outcomes, as required 
under subsection (c)(2)(G). 
(3) 
DIVERSE
POPULATIONS.—In 
awarding 
grants under this section, the Secretary shall ensure 
the participation of diverse student populations, in-
cluding rural and urban populations, and of a di-
verse range of institutions. 
(4) PUBLICATION
OF
GRANTEES.—The Sec-
retary shall make available to the public and to the 
authorizing committees a list of the institutions of 
higher education awarded a grant under this section, 
including a listing of the specific statutory and regu-
latory requirements being waived for each institution 
and a description of the programs and courses to be 
offered. 
(e) WAIVERS.— 
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(1) IN GENERAL.—Except as provided under 
paragraph (2), with respect to institutions of higher 
education awarded grants under this section, the 
Secretary may waive— 
(A) subsection (a) or (b) of section 481 of 
the Higher Education Act of 1965 (20 U.S.C. 
1088(a) and (b)), as such subsections relate to 
requirements for a minimum number of weeks 
of instruction; 
(B) subparagraph (A) or (B) of section 
102(a)(3) 
of 
such 
Act 
(20 
U.S.C. 
1002(a)(3)(A) and (B)); 
(C) one or more of the regulations promul-
gated to carry out part F or G of title IV of 
such Act (20 U.S.C. 1087kk et seq. and 1088 
et seq.), which inhibit the operation of innova-
tive education programs; and 
(D) any other requirement under title IV 
of such Act (20 U.S.C. 1070 et seq.) that will 
bias the results of the program, including a re-
quirement related to the award process and dis-
bursement of student financial aid (such as in-
novative delivery systems for modular or com-
pressed courses or other innovative systems), or 
other management procedures or processes as 
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determined in the negotiated rulemaking proc-
ess under section 492 of such Act (20 U.S.C. 
1098a), or regulations prescribed under such 
title. 
(2) PROHIBITION OF WAIVER.—The Secretary 
shall not waive, pursuant to paragraph (1), any pro-
vision under the Higher Education Act of 1965 (20 
U.S.C. 1001 et seq.) or a regulation promulgated to 
carry out such Act with respect to award rules 
(other than an award rule related to an experiment 
in modular or compressed schedules), grant and loan 
maximum award amounts, and need analysis re-
quirements, unless the waiver of such provision is 
authorized by another provision under such Act. 
(f) EVALUATION AND REPORTS.— 
(1) EVALUATION AND ACCOUNTABILITY PROC-
ESS.—The Secretary shall establish an evaluation 
and accountability process for the programs author-
ized under this section and shall administer such 
process on an annual basis. Such evaluations shall 
include— 
(A) the extent to which the institution of 
higher education has met the goals set forth in 
its application to the Secretary, including the 
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quality of education provided by participating 
programs; 
(B) the number and types of students par-
ticipating in the programs offered, including the 
progress of participating students toward recog-
nized certificates or degrees; 
(C) issues related to student financial as-
sistance; 
(D) the extent to which any statutory or 
regulatory requirements present difficulties for 
students or institutions in the participating pro-
grams; and 
(E) an analysis of the program’s progress 
with each of its objectives, including the num-
ber and rate of completion of participating stu-
dents toward recognized certificates or degrees, 
prices charged to students, time required to 
complete the participating programs, on-time 
completion rates of participating students, and 
indicators of program quality. 
(2) REVIEW.—The Secretary shall review poli-
cies and identify those policies that present impedi-
ments to the development and use of innovative pro-
grams and other nontraditional methods of expand-
ing success and access to education. 
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(3) MEASURES.—The Secretary shall establish 
measures to assess the quality of the education pro-
vided by participating programs under this section, 
including a minimum standard of quality that par-
ticipating programs shall meet. 
(4) REPORTS.—The Secretary shall provide re-
ports to the authorizing committees on an annual 
basis regarding— 
(A) the programs authorized under this 
section; and 
(B) the number and types of students re-
ceiving assistance under this section for instruc-
tion leading to a recognized degree or certifi-
cate, including the progress of such students to-
ward recognized certificates and the degree to 
which participation in such programs leading to 
such certificates increased. 
(5) DUTIES
OF
THE
SECRETARY.—In con-
ducting the program authorized under this section, 
the Secretary shall, on a continuing basis— 
(A) ensure compliance of institutions of 
higher education with the requirements of this 
section (other than the sections and regulations 
that are waived under subsection (e)); 
(B) provide technical assistance; 
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(C) monitor fluctuations in the student 
population enrolled in the participating pro-
gram; and 
(D) assess whether each participating pro-
gram is improving the quality of postsecondary 
credentials and meeting the quality control 
measures set by the Secretary. 
(g) CONSUMER PROTECTION FOR STUDENTS.— 
(1) PROGRAM
TERMINATION.—If a program 
funded under this section terminates on its accord at 
any point during which the program is receiving 
funds under this section, or if the Secretary deter-
mines that the program does not meet the minimum 
standard of quality as required under subsection 
(f)(3)— 
(A) the institution of higher education ad-
ministering the program shall provide imme-
diate notice to students enrolled in the program 
and shall prepare a teach-out plan, as described 
in section 487(f) of the Higher Education Act 
of 1965 (20 U.S.C. 1094(f)); and 
(B) the Secretary shall— 
(i) ensure that— 
(I) no additional program funds 
are distributed to the program; and 
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(II) the institution of higher edu-
cation administering the program is in 
compliance with the notice and teach- 
out requirements under subparagraph 
(A); and 
(ii) assess a fine to an institution of 
higher education administering the pro-
gram that is not in compliance with the 
notice and teach-out requirements under 
subparagraph (A). 
(2) NOTICE
AND
DISCLOSURE
FOR
STU-
DENTS.—An institution of higher education admin-
istering a participating program under this section 
shall provide notice to all students before they enroll 
in the participating program that such program is 
receiving grant funds under this section and may be 
terminated, as described in paragraph (1). 
(h) FINAL
EVALUATION
BY
THIRD-PARTY
RE-
VIEWER.— 
(1) IN GENERAL.—The Secretary shall direct 
an independent third-party evaluator to review all 
participating programs and conduct a final evalua-
tion in order to determine the evidence of the effec-
tiveness of each program in achieving its objectives 
with regard to the quality of the education provided, 
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reducing the cost of the degree or certificate pro-
gram, and shortening the amount of time needed to 
complete the degree or certificate program. 
(2) EVALUATION
METHODOLOGY.—The inde-
pendent third-party evaluator shall establish evalua-
tion methodology in carrying out the final evaluation 
under paragraph (1). 
(3) SUBMISSION
TO
AUTHORIZING
COMMIT-
TEES.—The independent third-party evaluator shall 
publicize the final evaluation and submit such eval-
uation to the authorizing committees. 
(4) FUNDING.—Not more than 1 percent of the 
total amount appropriated to carry out this section 
may be used to carry out this subsection. 
(i) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to carry out this section— 
(1) $260,000,000 for fiscal year 2015; and 
(2) such sums as may be necessary for each 
succeeding fiscal year. 
SEC. 4. HIGHER EDUCATION ACCOUNTABILITY. 
(a) PURPOSE; DEFINITION.— 
(1) IN GENERAL.—The purpose of this section 
is to establish minimum institutional accountability 
standards that will be required of all institutions of 
higher education that receive funds or whose stu-
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dents receive funds pursuant to title IV of the High-
er Education Act of 1965 (20 U.S.C. 1070 et seq.) 
programs. The standards shall focus on afford-
ability, accessibility for low- and middle-income stu-
dents, and value. 
(2) INSTITUTION OF HIGHER EDUCATION.—In 
this section: 
(A) IN GENERAL.—The term ‘‘institution 
of higher education’’ means an institution of 
higher education described in section 102 of the 
Higher Education Act of 1965 (20 U.S.C. 
1002), except as provided in subparagraphs (B) 
and (C). 
(B) EXCEPTION.—The term ‘‘institution of 
higher education’’ does not include institutions 
that solely offer graduate or professional degree 
programs of study. 
(C) INSTITUTIONS.—To the extent an in-
stitution offers undergraduate programs of 
study and graduate or professional degree pro-
grams of study, for purposes of this section, the 
term ‘‘institution of higher education’’ with re-
spect to such institutions shall only include the 
undergraduate programs of study. 
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(b) COMMISSION ON HIGHER EDUCATION ACCOUNT-
ABILITY STANDARDS.— 
(1) IN GENERAL.—Not later than 90 days after 
the date of enactment of this Act, there shall be es-
tablished a Commission on Higher Education Ac-
countability Standards (referred to in this section as 
the ‘‘Commission’’) to make recommendations on a 
set of minimum accountability standards and the 
measures for assessing compliance with such stand-
ards for institutions of higher education that shall 
focus on affordability, access for low- and middle-in-
come students, and value. 
(2) COMPOSITION OF THE COMMISSION.— 
(A) IN GENERAL.—Members of the Com-
mission shall be appointed as follows: 
(i) 5 members shall be appointed by 
the Majority Leader of the Senate, with 
the concurrence of the Minority Leader of 
the Senate on 2 of such members. 
(ii) 5 members shall be appointed by 
the Majority Leader of the House of Rep-
resentatives, with the concurrence of the 
Minority Leader of the House of Rep-
resentatives on 2 of such members. 
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(iii) 5 members shall be appointed by 
the Secretary, including at least 1 member 
from the National Center for Education 
Statistics and 1 member from the Federal 
Student Aid Office of the Department of 
Education. 
(iv) In the event that any member of 
the Commission has not been appointed 
during the 90-day period after the date of 
enactment of this Act, the Secretary shall 
appoint the remaining member in order to 
establish the Commission. 
(B) GENERAL QUALIFICATIONS.—Members 
of the Commission shall be appointed on the 
basis of the individuals’— 
(i) experience, integrity, impartiality, 
and good judgment; and 
(ii) except with respect to the under-
graduate students, technical qualifications 
and professional standing. 
(C) MEMBERS
OF
THE
COMMISSION.— 
Members appointed under subparagraph (A) 
shall be comprised of the following relevant 
stakeholders: 
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(i) 2 undergraduate student leaders 
from different types of institutions of high-
er education. 
(ii) 2 members of national or regional 
student advocacy organizations with a 
track record of engagement and expertise 
on issues related to college costs and stu-
dent debt. 
(iii) 1 consumer advocate or consumer 
protection expert with demonstrated knowl-
edge of consumer protection issues related 
to undergraduate students. 
(iv) 
representatives 
of 
faculty 
groups or associations with expertise re-
lated to higher education finance or gov-
ernance. 
(v) 1 State government official with 
demonstrated knowledge of State budg-
eting and higher education funding. 
(vi) 3 administrative officers from 
various types of institutions of higher edu-
cation, including at least 1 from a minor-
ity-serving institution. 
(vii) 1 higher education researcher. 
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(viii) 1 State postsecondary education 
data system director. 
(ix) 1 member from the National Cen-
ter for Education Statistics. 
(x) 1 member from the Federal Stu-
dent Aid Office of the Department of Edu-
cation. 
(3) RECOMMENDATIONS.— 
(A) IN GENERAL.—The Commission shall 
make recommendations on a set of minimum 
accountability standards that institutions of 
higher education must meet with respect to af-
fordability, accessibility, and value in order to 
receive funds or that the students of such insti-
tutions may receive funds pursuant to title IV 
of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) programs. The Commis-
sion shall also recommend measures and accept-
able levels of performance on those measures to 
assess compliance with the minimum account-
ability standards. If the Commission cannot 
issue its recommendations by consensus, it shall 
issue its recommendations based on the views of 
a majority of the Commission. 
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ures, including the appropriateness of the 
following: 
(I) The cost of tuition relative to 
the cost to the institution of educating 
a student and the institution’s admin-
istrative costs. 
(II) The percentage of institu-
tional aid that is awarded on the basis 
of need, as opposed to merit. 
(III) Annual increases in tuition 
after taking into account all public 
subsidies. 
(ii) ACCESSIBILITY.—The Commission 
shall make recommendations on higher 
education accessibility measures, including 
the appropriateness of the following: 
(I) Enrollment of low- and mid-
dle-income, underrepresented minori-
ties, and adult students aged 25 and 
older. 
(II) Whether institutional policies 
on credit transfers meet industry 
standards by type of receiving institu-
tion. 
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(iii) VALUE.—The Commission shall 
make recommendations on measures of 
higher education value, including the ap-
propriateness of the following: 
(I) Student progress toward com-
pletion of a postsecondary degree or 
certificate. 
(II) Student completion of a 
postsecondary degree or certificate, in-
cluding for transfer and part-time stu-
dents, or where applicable, transfer 
rates to 4-year degree programs. 
(III) Student retention rates. 
(IV) Full-time employment and 
graduate degree enrollment rates after 
graduation. 
(4) CONSIDERATIONS.—The Commission shall 
take into account the differences in missions of insti-
tutions of higher education and ensure that institu-
tions are held to standards that are appropriate for 
their mission. 
(5) HEARINGS AND REPORT.— 
(A) HEARINGS.—Not later than 6 months 
after the date of the appointment of the final 
member of the Commission, the Commission 
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shall hold public field hearings in all regions of 
the United States. The Commission shall hold 
not fewer than 8 hearings. 
(B) REPORT.—Not later than 1 year after 
the date of the appointment of the final mem-
ber of the Commission, the Commission shall 
prepare a report on the recommendations under 
paragraph (3) and submit the report to the 
Secretary and the authorizing committees. The 
report shall include the following: 
(i) Recommendations for minimum ac-
countability standards and the measures 
for assessing compliance with those stand-
ards for every institution of higher edu-
cation that receives funds or whose stu-
dents receive funds pursuant to title IV of 
the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) programs. The stand-
ards shall focus on affordability, access for 
low- and middle-income students, and 
value. The Commission shall recommend 
standards that are in accordance with the 
types of information that institutions of 
higher education are authorized to collect 
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and report under the Higher Education 
Act of 1965 (20 U.S.C. 1001 et seq.). 
(ii) Recommendations for applying the 
standards to institutions of higher edu-
cation with different academic missions. 
(iii) Recommendations for periodic re-
evaluation of the standards and their effi-
cacy by the Secretary. 
(iv) Recommendations for sharing in-
stitutions’ performance with respect to the 
standards with prospective students and 
conducting complementary consumer edu-
cation for students. 
(v) Recommendations for the criteria 
the Secretary should use to reward institu-
tions of higher education that meet and ex-
ceed the minimum accountability stand-
ards. 
(vi) Recommendations to Congress on 
reforms to statutory or regulatory limita-
tions on the collection and availability of 
data that would improve the Secretary’s 
ability to assess institutions’ compliance 
with minimum standards of affordability, 
accessibility, and value. 
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(6) SECURING
INFORMATION.—The Commis-
sion may secure directly from any Federal depart-
ment or agency such information as the Commission 
considers necessary to carry out its duties under this 
section. The Commission may request the head of 
any State or local department or agency to furnish 
such information to the Commission. 
(7) FINAL STANDARDS.— 
(A) IN GENERAL.—Not later than 1 year 
after receiving the report under paragraph (5), 
the Secretary shall publish a final rule on insti-
tutional accountability standards. The stand-
ards shall be determined by the Secretary after 
giving due consideration to the recommended 
standards provided by the Commission. The 
Secretary shall set forth in writing the reasons 
for any deviation from the Commission’s rec-
ommendations for any standard or measure and 
shall submit the written statement to the au-
thorizing committees. 
(B) REQUIRED
MEASURES
TO
BE
IN-
CLUDED.—In carrying out subparagraph (A), 
the Secretary shall include the measures de-
scribed in subsection (b)(3)(B) that the Com-
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mission is required to include as part of its 
minimum accountability standards. 
(8) ASSESSMENT.—The Secretary shall annu-
ally assess compliance with the institutional account-
ability standards. On September 30 of the year fol-
lowing the publication of the final rule as required 
under paragraph (7) and every year thereafter, the 
Secretary shall publish a list of each institution of 
higher education that participates in title IV of the 
Higher Education Act of 1965 (20 U.S.C. 1070 et 
seq.) and the institution’s level of compliance with 
the accountability standards. The list shall be made 
easily accessible to the public. 
(9) IMPLEMENTATION.—The Secretary shall es-
tablish procedures to implement this subsection, in-
cluding procedures for effectively applying this sub-
section. 
(10) TERMINATION.—The Commission shall 
terminate 60 days after the date on which the Com-
mission submits the report under paragraph (5). 
(c) INCENTIVIZE IMPROVEMENT FOR BELOW-STAND-
ARD INSTITUTIONS.— 
(1) IN GENERAL.—An institution of higher edu-
cation that participates in title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1070 et seq.) 
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programs and that does not meet the institutional 
accountability standards adopted under subsection 
(b)— 
(A) shall be deemed to be in probationary 
status; and 
(B) shall work with the Secretary to de-
velop a plan for how the institution will achieve 
compliance not later than 5 years after the date 
of the determination of noncompliance. 
(2) CONTINUOUS
IMPROVEMENT.—For each 
year following a determination that an institution of 
higher education does not meet the institutional ac-
countability standards adopted under subsection (b), 
the institution shall demonstrate to the Secretary 
continuous improvement in following its plan to 
achieve compliance. 
(3) FAILURE TO MAKE CONTINUOUS IMPROVE-
MENT.— 
(A) IN GENERAL.— 
(i) 2 YEARS OUT.—If an institution of 
higher education does not show continuous 
improvement 2 years after a determination 
that it does not meet the institutional ac-
countability standards adopted under sub-
section (b), the institution shall pay to the 
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Secretary an amount equal to 10 percent 
of the total amount of funds made avail-
able under title IV of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1070 et 
seq.) to students in attendance with an un-
dergraduate enrollment status at the insti-
tution during the prior academic year, to 
be deposited into the fund described in 
subparagraph (C). 
(ii) 3 YEARS OUT.—If an institution 
of higher education does not show contin-
uous improvement 3 years after a deter-
mination that it does not meet the institu-
tional accountability standards adopted 
under subsection (b), the institution shall 
pay to the Secretary an amount equal to 
20 percent of the total amount of funds 
made available under title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1070 et 
seq.) to students in attendance with an un-
dergraduate enrollment status at the insti-
tution during the prior academic year, to 
be deposited into the fund described in 
subparagraph (C). 
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(iii) 4 YEARS OUT.—If an institution 
of higher education does not show contin-
uous improvement 4 years after a deter-
mination that it does not meet the institu-
tional accountability standards adopted 
under subsection (b), the institution shall 
pay to the Secretary an amount equal to 
30 percent of the total amount of funds 
made available under title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1070 et 
seq.) to students in attendance with an un-
dergraduate enrollment status at the insti-
tution during the prior academic year, to 
be deposited into the fund described in 
subparagraph (C). 
(B) WAIVER AND PAYMENT PLAN.— 
(i) 
WAIVER.—The 
Secretary 
may 
waive a requirement of an institution of 
higher education paying the amount owed 
pursuant to subparagraph (A) if the Sec-
retary determines such a waiver is nec-
essary to avoid extreme hardship for the 
students enrolled at such institution. 
(ii) PAYMENT PLAN.—The Secretary 
may allow an institution of higher edu-
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cation that owes an amount under sub-
paragraph (A) to enter into a payment 
plan to pay such amount. 
(C) FUND.—There shall be established a 
special fund in which amounts refunded by an 
institution of higher education under this para-
graph shall be placed to be used pursuant to 
subsection (d). 
(4) NONCOMPLIANCE FIVE YEARS OUT.—If an 
institution of higher education fails to achieve com-
pliance by not later than the date that is 5 years 
after the date of the determination that the institu-
tion does not meet the institutional accountability 
standards, the institution— 
(A) shall not be eligible to receive funds 
under title IV of the Higher Education Act of 
1965 (20 U.S.C. 1070 et seq.) for the academic 
year following the date that is 5 years after the 
date of the determination; 
(B) shall be required to submit a teach-out 
plan, as described in section 487(f) of the High-
er Education Act of 1965 (20 U.S.C. 1094(f)); 
and 
(C) shall be eligible to receive funds under 
such title IV when the institution is able to 
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demonstrate compliance with the institutional 
accountability standards. 
(d) AUTHORIZATION
OF
REWARD
GRANT
PRO-
GRAM.— 
(1) IN GENERAL.—From amounts available in 
the 
fund 
established 
pursuant 
to 
subsection 
(c)(3)(C), the Secretary shall award grants, on a 
competitive basis, to institutions of higher education 
that meet or exceed the institutional accountability 
standards adopted under subsection (b). In deter-
mining the criteria for awarding grants, the Sec-
retary shall give due consideration to the rec-
ommendations of the Commission. 
(2) USE FOR FINANCIAL AID.—An institution of 
higher education awarded a grant under paragraph 
(1) shall use the grant funds for need-based aid to 
students who are eligible for Federal Pell Grants 
under subpart 1 of part A of title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1070a et seq.). 
Æ 
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