131 
servicer that contracts with such institution, or a third 
party contractor, under which the Secretary shall, effective 
on the date on which a notice and statement of the basis 
of the action is mailed to the institution, third party 
servicer that contracts with such institution, or third party 
contractor (by registered mail, return receipt requested), 
withhold funds from the institution or its students, or 
from the third party servicer that contracts with such in-
stitution or third party contractor, and withdraw the insti-
tution’s authority to obligate funds under this title, or the 
authority of the third party servicer that contracts with 
such institution or third party contractor to act on behalf 
of an institution under any program under this title, if 
the Secretary— 
‘‘(1) receives information, determined by the 
Secretary to be reliable, that the institution, or third 
party servicer that contracts with such institution, 
or third party contractor is violating any provision 
of this title, any regulation prescribed under this 
title, or any applicable special arrangement, agree-
ment, or limitation; 
‘‘(2) determines that immediate action is nec-
essary to prevent misuse of Federal funds; and 
‘‘(3) determines that the likelihood of loss out-
weighs the importance of the procedures prescribed 
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132 
in subsection (b) for limitation, suspension, or termi-
nation, 
except that an emergency action shall not exceed 30 days 
unless the limitation, suspension, or termination pro-
ceedings are initiated by the Secretary against the indi-
vidual or organization within that period of time, and ex-
cept that the Secretary shall provide the individual or or-
ganization an opportunity to show cause, if it so requests, 
that the emergency action is unwarranted. 
‘‘(e) INDIVIDUAL OR ORGANIZATION WITH SUBSTAN-
TIAL CONTROL.—If an individual who, or entity that, ex-
ercises substantial control, as determined by the Secretary 
in accordance with the definition of substantial control in 
subpart 3 of part H, over one or more institutions partici-
pating in any program under this title, or, for purposes 
of this section over one or more organizations that con-
tract with an institution to administer any aspect of the 
institution’s student assistance program under this title, 
is determined to have committed one or more violations 
of the requirements of any program under this title, or 
has been suspended or debarred in accordance with the 
regulations of the Secretary, the Secretary may use such 
determination, suspension, or debarment as the basis for 
imposing an emergency action on, or limiting, suspending, 
or terminating, in a single proceeding, the participation 
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133 
of any or all institutions under the substantial control of 
that individual or entity. 
‘‘(f) DISPOSITION OF AMOUNTS RECOVERED.— 
‘‘(1) USE FOR STUDENT RELIEF FUND.—For 
each fiscal year, an amount equal to 100 percent of 
the amounts recovered or collected under this section 
shall be deposited into the Student Relief Fund es-
tablished under subsection (g). 
‘‘(2) REPORT.—The Secretary shall regularly 
publish, on the website of the Department, a de-
tailed accounting of the funds in the Student Relief 
Fund, including the amount of funds that were col-
lected and deposited into the Student Relief Fund 
under paragraph (1), and how those funds were 
used, pursuant to subsection (g)(1). 
‘‘(g) STUDENT RELIEF FUND.— 
‘‘(1) ESTABLISHMENT.—The Secretary shall es-
tablish a Student Relief Fund (referred to in this 
subsection as the ‘Fund’) that shall be used, subject 
to the availability of funds, to provide financial relief 
to any student that is enrolled in an institution of 
higher education that— 
‘‘(A) has failed to comply with an eligi-
bility requirement under section 101 or 102 or 
an obligation incurred under the terms of the 
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134 
program participation agreement under section 
487; or 
‘‘(B) has been sanctioned under subsection 
(b) or (c). 
‘‘(2) 
TREATMENT
AND
AVAILABILITY
OF 
FUNDS.— 
‘‘(A) FUNDS THAT ARE NOT GOVERNMENT 
FUNDS.—Funds obtained by or transferred to 
the Fund shall not be construed to be Govern-
ment funds, appropriated monies, or Federal 
education assistance funds, as defined in sec-
tion 102(b)(2)(B) (as added by section 101 of 
the Preventing Risky Operations from Threat-
ening the Education and Career Trajectories of 
Students Act of 2019). 
‘‘(B) AMOUNTS NOT SUBJECT TO APPOR-
TIONMENT.—Notwithstanding any other provi-
sion of law, amounts in the Fund shall not be 
subject to apportionment for purposes of chap-
ter 15 of title 31, United States Code, or under 
any other authority. 
‘‘(C) NO FISCAL YEAR LIMITATION.—Sums 
deposited in the Fund shall remain in the Fund 
and be available for expenditure under this sub-
section without fiscal year limitation. 
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135 
‘‘(h) STATE ENFORCEMENT.— 
‘‘(1) IN GENERAL.— 
‘‘(A) STATE CAUSE OF ACTION.—A viola-
tion described in subparagraph (B) shall be a 
cause of action enforceable by a State, through 
the attorney general (or the equivalent thereof) 
of such State, in any district court of the 
United States in that State or in a State court 
that is located in that State and that has juris-
diction over the defendant. The State may seek 
any relief provided under paragraph (3) for 
such violation, including a civil penalty under 
subsection (c), or any remedies otherwise avail-
able under law. 
‘‘(B) VIOLATIONS.—A violation described 
in this subparagraph is: 
‘‘(i) A substantial misrepresentation. 
‘‘(ii) A violation of section 487(a)(20). 
‘‘(iii) A violation of the default manip-
ulation regulations promulgated by the 
Secretary under section 435(m)(3). 
‘‘(iv) A violation of the program integ-
rity regulations promulgated by the Sec-
retary under this Act, including regulations 
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promulgated in section 102, section 455, 
and part H. 
‘‘(v) 
In 
accordance 
with 
section 
455(h), any act or omission of the institu-
tion, third party servicer that contracts 
with such institution, or third party con-
tractor, related to the making of the loan 
for enrollment at the institution or the pro-
vision of educational services for which the 
loan was provided that would give rise to 
a cause of action against the institution 
under applicable State law. 
‘‘(2) NOTICE REQUIRED.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), before initiating any action 
in a court or other administrative or regulatory 
proceeding against any institution of higher 
education, third party servicer that contracts 
with such institution, or third party contractor, 
as authorized by paragraph (1), a State attor-
ney general or the equivalent thereof shall time-
ly provide to the Secretary a copy of the com-
plete complaint to be filed and written notice 
describing such action or proceeding. 
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137 
‘‘(B) WAIVER OF PRIOR NOTICE.—If prior 
notice is not practicable under subparagraph 
(A), the State attorney general or equivalent 
thereof shall provide to the Secretary a copy of 
the complete complaint and the notice described 
in subparagraph (A) immediately upon insti-
tuting the action or proceeding. 
‘‘(C) CONTENTS OF NOTICE.—The notifi-
cation required under this paragraph shall, at a 
minimum, describe— 
‘‘(i) the identity of the parties; 
‘‘(ii) the alleged facts underlying the 
proceeding; and 
‘‘(iii) whether there may be a need to 
coordinate the prosecution of the pro-
ceeding so as not to interfere with any ac-
tion, including any rulemaking, undertaken 
by the Secretary or another Federal agen-
cy. 
‘‘(3) PRESERVATION OF STATE AUTHORITY.— 
‘‘(A) STATE CLAIMS.—Nothing in this sub-
section shall be construed as altering, limiting, 
or affecting the authority of a State attorney 
general or any other regulatory or enforcement 
agency or authority to bring an action or other 
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138 
regulatory proceeding arising solely under the 
law in effect in that State. 
‘‘(B) RELIEF.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), relief under this sub-
section may include, without limitation— 
‘‘(I) rescission or reformation of 
contracts; 
‘‘(II) refund of moneys or return 
of real property; 
‘‘(III) restitution; 
‘‘(IV) disgorgement or compensa-
tion for unjust enrichment; 
‘‘(V) payment of damages or 
other monetary relief; 
‘‘(VI) public notification regard-
ing the violation, including the costs 
of notification; or 
‘‘(VII) limits on the activities or 
functions of involved persons, institu-
tions, third party servicers that con-
tract with institutions, or third party 
contractors. 
‘‘(ii) EXCLUSION.—Relief under this 
subsection shall not include the ability to 
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suspend or terminate the eligibility status 
of an institution of higher education for 
programs under this title or withdrawal of 
the authority of the third party servicer or 
third party contractor to act on behalf of 
an institution or contract with an institu-
tion. 
‘‘(i) PRIVATE RIGHT OF ACTION.— 
‘‘(1) IN GENERAL.— 
‘‘(A) PRIVATE RIGHT OF ACTION.—A viola-
tion described in subparagraph (B) shall be 
subject to a private right of action enforceable 
by a student or former student of an institution 
of higher education, on behalf of such individual 
or such individual and a class, in an appro-
priate district court of the United States or any 
other court of competent jurisdiction that also 
has jurisdiction over the defendant. The student 
or former student may seek any relief provided 
under subsection (h)(3)(B) for such violation, 
or any remedies otherwise available to the indi-
vidual under law and equity. 
‘‘(B) VIOLATIONS.—A violation described 
in this subparagraph is: 
‘‘(i) A substantial misrepresentation. 
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‘‘(ii) A violation of section 487(a)(20). 
‘‘(iii) A violation of the default manip-
ulation regulations promulgated by the 
Secretary under section 435(m)(3). 
‘‘(iv) A violation of the program integ-
rity regulations promulgated by the Sec-
retary under this Act, including regulations 
promulgated in section 102, section 455, 
and part H. 
‘‘(2) AMOUNT OF DAMAGES.— 
‘‘(A) IN
GENERAL.—Any institution of 
higher education, third party servicer that con-
tracts with such institution, or third party con-
tractor, that commits a substantial misrepre-
sentation may be held liable to a student or 
former student of that institution in an amount 
equal to the sum of— 
‘‘(i) any actual damage sustained by 
such individual as a result of each substan-
tial misrepresentation; 
‘‘(ii) any additional damages as the 
court may allow; and 
‘‘(iii) in the case of any successful ac-
tion to enforce the foregoing liability, the 
costs of the action, together with a reason-
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141 
able attorney’s fee as determined by the 
court. 
‘‘(B) ABILITY TO ASSESS PUNITIVE DAM-
AGES.— 
‘‘(i) IN GENERAL.—On a finding by 
the court that the institution of higher 
education, third party servicer that con-
tracts with such institution, or third party 
contractor, has committed a violation de-
scribed in paragraph (1)(B) with actual or 
constructive knowledge or reckless dis-
regard for such violation, the court may 
assess punitive damages not to exceed 
threefold the sum of actual damages sus-
tained by the plaintiff or class, including 
court costs and a reasonable attorney’s fee. 
‘‘(ii) 
FACTORS
CONSIDERED
BY 
COURT.—In determining the amount of li-
ability in any action under clause (i), the 
court shall consider, among other relevant 
factors— 
‘‘(I) in any individual action 
under this subsection, the frequency 
and persistence of noncompliance by 
the institution of higher education, 
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third party servicer that contracts 
with such institution, or third party 
contractor and the nature of such 
noncompliance; or 
‘‘(II) in any class action under 
this subsection, in addition to the fac-
tors listed in clause (i), the financial 
resources of the institution of higher 
education, third party servicer that 
contracts with such institution, or 
third party contractor and the number 
of persons adversely affected. 
‘‘(3) JURISDICTION.—An action to enforce any 
liability created by this subsection may be brought 
in any appropriate United States district court with-
out regard to the amount in controversy, or in any 
other court of competent jurisdiction.’’. 
(b) CONFORMING AMENDMENTS.—Section 487(c), as 
amended by section 102(b), is further amended— 
(1) in paragraph (1), by striking subparagraphs 
(G) through (J); 
(2) by striking paragraphs (2) and (3); and 
(3) by redesignating paragraphs (4) through 
(7), as paragraphs (2) through (5), respectively. 
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143 
SEC. 306. SUBSTANTIAL MISREPRESENTATION PROHIB-
ITED. 
Section 487(a) (20 U.S.C. 1094(a)), as amended by 
section 202(b), is further amended by adding at the end 
the following: 
‘‘(30) The institution will not make a substan-
tial misrepresentation, as defined in section 489A.’’. 
Æ 
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