Title: Students Not Profits Act of 2019
Policy area: Education

Summary:
Students Not Profits Act of 2019
This bill makes certain institutions of higher education (IHEs) ineligible to receive federal financial student assistance.
Specifically, the bill makes for-profit institutions of higher education ineligible to receive such assistance. The bill also makes ineligible any institution that has (1) filed for bankruptcy; (2) been convicted of, or pled nolo contendere or guilty to, a crime involving federal student aid; (3) committed fraud, substantial misrepresentation, or false certification involving federal student aid; or (4) executive officers who were previously employed at an institution receiving federal student aid that closed.
Additionally, the bill establishes certain criteria that an IHE must meet to be eligible for conversion from a for-profit IHE to a nonprofit IHE. Before approving such conversion, the Department of Education must publish the application in the Federal Register for notice and comment.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2640 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  1st Session
                                S. 2640

     To amend the Higher Education Act of 1965 to make for-profit 
  institutions ineligible for Federal student aid and to protect the 
        integrity of nonprofit institutions of higher education.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 17, 2019

 Mr. Brown (for himself 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 make for-profit 
  institutions ineligible for Federal student aid and to protect the 
        integrity of nonprofit institutions of higher education.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Students Not Profits Act of 2019''.

SEC. 2. DEFINITION OF INSTITUTION OF HIGHER EDUCATION.

    The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is 
amended--
            (1) in section 101--
                    (A) in subsection (a), in the matter preceding 
                paragraph (1), by striking ``other than title IV,'';
                    (B) in subsection (b)--
                            (i) in the matter preceding paragraph (1), 
                        by striking ``other than title IV,'';
                            (ii) in paragraph (1), by striking ``and'' 
                        after the semicolon;
                            (iii) in paragraph (2)(B), by striking the 
                        period at the end and inserting a semicolon; 
                        and
                            (iv) by adding at the end the following:
            ``(3) a public, nonprofit postsecondary vocational 
        institution; and
            ``(4) only for the purposes of part D of title IV, an 
        institution outside the United States that is comparable to an 
        institution of higher education, as defined in subsection (a), 
        and that has been approved by the Secretary for the purpose of 
        part D of title IV, consistent with the requirements of section 
        452(d).'';
                    (C) in subsection (c), by striking ``and section 
                102''; and
                    (D) by adding at the end the following:
    ``(d) Requirements of Courses of Study and Enrollment.--An 
institution shall be considered to meet the definition of an 
institution of higher education in subsection (a) or (b) only if such 
institution--
            ``(1) limits enrollment of students in distance education 
        courses offered by the institution to not more than 50 percent 
        of all students enrolled in the institution, unless the 
        institution is a public or nonprofit technical institution or 
        career and technical education school, as described in section 
        3(3)(C) of the Carl D. Perkins Career and Technical Education 
        Act of 2006;
            ``(2) limits enrollment of students who are incarcerated to 
        not more than 25 percent of all students enrolled in the 
        institution;
            ``(3) limits enrollment of students who do not have a 
        secondary school diploma or its recognized equivalent to not 
        more than 50 percent of all students enrolled in the 
        institution; and
            ``(4) if the institution offers an education or training 
        program that leads to a certificate, or other nondegree 
        recognized credential and funds available under title IV for 
        students are used for enrollment in such education or program, 
        ensures that such education or program prepares students for 
        gainful employment in a recognized occupation.
    ``(e) Limitations Based on Management.--An institution shall not be 
considered to meet the definition of an institution of higher education 
in subsection (a) or (b) if such institution--
            ``(1) the institution, or an affiliate of the institution 
        that has the power, by contract or ownership interest, to 
        direct or cause the direction of the management or policies of 
        the institution, has filed for bankruptcy; or
            ``(2) the institution, the institution's owner, the 
        institution's chief executive officer, or any other executive 
        officer of the institution--
                    ``(A) has been convicted of, or has pled nolo 
                contendere or guilty to, a crime involving the 
                acquisition, use, or expenditure of funds under title 
                IV;
                    ``(B) has been determined to have committed fraud, 
                substantial misrepresentation, or false certification 
                involving funds under title IV; or
                    ``(C) has been previously employed at an 
                institution receiving funds under title IV that closed.
    ``(f) Certification.--The Secretary shall certify an institution's 
qualification as an institution of higher education in accordance with 
the requirements of subpart 3 of part H of title IV.
    ``(g) Loss of Eligibility.--An institution of higher education 
shall not be considered to meet the definition of an institution of 
higher education in subsection (a) or (b) if such institution is 
removed from eligibility for funds under title IV as a result of an 
action pursuant to part H of title IV.
    ``(h) Postsecondary Vocational Institution.--
            ``(1) Principal criteria.--For the purpose of this section, 
        the term `postsecondary vocational institution' means a school 
        that--
                    ``(A) provides an eligible program of training to 
                prepare students for gainful employment in a recognized 
                occupation;
                    ``(B) meets the requirements of paragraphs (1), 
                (2), (4), and (5) of subsection (a); and
                    ``(C) has been in existence for at least 2 years.
            ``(2) Additional institutions.--The term `postsecondary 
        vocational institution' also includes an educational 
        institution in any State that, in lieu of the requirement in 
        subsection (a)(1), admits as regular students individuals--
                    ``(A) who are beyond the age of compulsory school 
                attendance in the State in which the institution is 
                located; or
                    ``(B) who will be dually or concurrently enrolled 
                in the institution and a secondary school.
    ``(i) Institution Outside the United States.--
            ``(1) In general.--For the purpose of qualifying as an 
        institution under subsection (b)(4), the Secretary shall 
        establish criteria by regulation for the approval of 
        institutions outside the United States and for the 
        determination that such institutions are comparable to an 
        institution of higher education, as defined in subsection 
        101(a) (except that a graduate medical school, nursing school, 
        or a veterinary school, located outside the United States shall 
        not be required to meet the requirements of subsection (a)(4)). 
        Such criteria shall include a requirement that a student 
        attending such school outside the United States is ineligible 
        for loans made under part D of title IV unless--
                    ``(A) in the case of a graduate medical school 
                located outside the United States--
                            ``(i) at least 60 percent of those enrolled 
                        in, and at least 60 percent of the graduates 
                        of, the graduate medical school outside the 
                        United States were not persons described in 
                        section 484(a)(5) in the year preceding the 
                        year for which a student is seeking a loan 
                        under part D of title IV; and
                            ``(ii) at least 75 percent of the 
                        individuals who were students or graduates of 
                        the graduate medical school outside the United 
                        States or Canada (both nationals of the United 
                        States and others) taking the examinations 
                        administered by the Educational Commission for 
                        Foreign Medical Graduates received a passing 
                        score in the year preceding the year for which 
                        a student is seeking a loan under part D of 
                        title IV;
                    ``(B) in the case of a veterinary school located 
                outside the United States that does not meet the 
                requirements of subsection (a)(4), the institution's 
                students complete their clinical training at an 
                approved veterinary school located in the United 
                States; or
                    ``(C) in the case of a nursing school located 
                outside of the United States--
                            ``(i) the nursing school has an agreement 
                        with a hospital, or accredited school of 
                        nursing (as such terms are defined in section 
                        801 of the Public Health Service Act (42 U.S.C. 
                        296)), located in the United States that 
                        requires the students of the nursing school to 
                        complete the students' clinical training at 
                        such hospital or accredited school of nursing;
                            ``(ii) the nursing school has an agreement 
                        with an accredited school of nursing located in 
                        the United States providing that the students 
                        graduating from the nursing school located 
                        outside of the United States also receive a 
                        degree from the accredited school of nursing 
                        located in the United States;
                            ``(iii) the nursing school certifies only 
                        Federal Direct Stafford Loans under section 
                        455(a)(2)(A), Federal Direct Unsubsidized 
                        Stafford Loans under section 455(a)(2)(D), or 
                        Federal Direct PLUS Loans under section 
                        455(a)(2)(B) for students attending the 
                        institution;
                            ``(iv) the nursing school reimburses the 
                        Secretary for the cost of any loan defaults for 
                        current and former students included in the 
                        calculation of the institution's cohort default 
                        rate during the previous fiscal year; and
                            ``(v) not less than 75 percent of the 
                        individuals who were students or graduates of 
                        the nursing school, and who took the National 
                        Council Licensure Examination for Registered 
                        Nurses in the year preceding the year for which 
                        the institution is certifying a Federal Direct 
                        Stafford Loan under section 455(a)(2)(A), a 
                        Federal Direct Unsubsidized Stafford Loan under 
                        section 455(a)(2)(D), or a Federal Direct PLUS 
                        Loan under section 455(a)(2)(B), received a 
                        passing score on such examination.
            ``(2) Failure to release information.--The failure of an 
        institution outside the United States to provide, release, or 
        authorize release to the Secretary of such information as may 
        be required by paragraph (1) shall render such institution 
        ineligible for the purpose of part D of title IV.
            ``(3) Special rule.--If, pursuant to this subsection, an 
        institution loses eligibility to participate in the programs 
        under title IV, then a student enrolled in such institution 
        may, notwithstanding such loss of eligibility, continue to be 
        eligible to receive a loan under part D of title IV while 
        attending such institution for the academic year succeeding the 
        academic year in which such loss of eligibility occurred.'';
            (2) by striking section 102; and
            (3) by redesignating section 103 as section 102.

SEC. 3. REPEAL OF EXISTING REFERENCES TO PROPRIETARY INSTITUTIONS.

    Section 487 of the Higher Education Act of 1965 (20 U.S.C. 1094) is 
amended--
            (1) in subsection (a)--
                    (A) by striking paragraph (24);
                    (B) by redesignating paragraphs (25) through (29) 
                as paragraphs (24) through (28), respectively;
                    (C) in paragraph (24)(A)(ii) (as redesignated by 
                subparagraph (B)), by striking ``subsection (e)'' and 
                inserting ``subsection (d)''; and
                    (D) in paragraph (26) (as redesignated by 
                subparagraph (B)), by striking ``subsection (h)'' and 
                inserting ``subsection (g)'';
            (2) by striking subsection (d);
            (3) by redesignating subsections (e) through (j) as 
        subsections (d) through (i), respectively;
            (4) in subsection (f)(1) (as redesignated by paragraph 
        (3)), by striking ``subsection (e)(2)'' and inserting 
        ``subsection (d)(2)''; and
            (5) in subsection (g)(1) (as redesignated by paragraph 
        (3)), by striking ``subsection (a)(27)'' in the matter 
        preceding subparagraph (A) and inserting ``subsection 
        (a)(26)''.

SEC. 4. CONFORMING AMENDMENTS.

    The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is 
amended--
            (1) in section 102, as redesignated by subsection (a)(3), 
        in paragraph (5)(B), by striking ``(as such term is defined in 
        section 102)'';
            (2) in section 114--
                    (A) in subsection (a), by striking ``(as defined in 
                section 102)''; and
                    (B) in subsection (b)(2)(B), by striking ``(as 
                defined in section 102)'';
            (3) in section 133(b)--
                    (A) by striking paragraph (5); and
                    (B) by redesignating paragraphs (6) through (9) as 
                paragraphs (5) through (8), respectively;
            (4) in section 151(2), by striking ``, as such term in 
        defined in section 102,'';
            (5) in section 152--
                    (A) in subsection (a)(1)(A), by striking 
                ``subsections (a)(27) and (h) of section 487'' and 
                inserting ``subsections (a)(26) and (g) of section 
                487''; and
                    (B) in subsection (b)(1)(B)(i)(I), by striking 
                ``section 487(e)'' and inserting ``section 487(d)'';
            (6) in section 153(c)(3), by striking ``section 
        487(a)(25)'' each place the term appears and inserting 
        ``section 487(a)(24)'';
            (7) in section 420L(1), by striking ``, as defined in 
        section 102,'';
            (8) in section 435(a)(1), by striking ``, as defined in 
        section 102,'';
            (9) section 486(b)--
                    (A) in paragraph (2), by striking ``sections 
                102(a)(3)(A), 102(a)(3)(B)'';
                    (B) in paragraph (3)(B), by striking ``section 
                102(a)(1)(C)'' and inserting ``section 101(b)(4)''; and
                    (C) in paragraph (3)(C), by striking ``an 
                institution of higher education that meets the 
                requirements of subsection (a) of section 102, other 
                than the requirement of paragraph (3)(A) or (3)(B) of 
                such subsection,'' and inserting ``an institution of 
                higher education that meets the requirements of section 
                101, other than the requirement of section 
                101(e)(1)(A),'';
            (10) in section 487--
                    (A) in subsection (c)(1)(A)(iii), by striking 
                ``section 102(a)(1)(C)'' and inserting ``section 
                101(b)(4)''; and
                    (B) in subsection (i)--
                            (i) by striking paragraph (4); and
                            (ii) by redesignating paragraphs (5) and 
                        (6) as paragraphs (4) and (5), respectively;
            (11) in section 491(l)(2)(A), by striking ``section 
        102(a)(1)(C)'' and inserting ``section 101(b)(4)'';
            (12) in section 496--
                    (A) in subsection (c)(3)(A), by striking ``section 
                487(f)'' and inserting ``section 487(e)'';
                    (B) in subsection (j), by striking ``section 102'' 
                and inserting ``section 101''; and
                    (C) in subsection (k), by striking ``section 102'' 
                and inserting ``section 101'';
            (13) in section 498--
                    (A) in subsection (g)(3), by striking ``section 
                102(a)(1)(C)'' and inserting ``section 101(b)(4)'';
                    (B) in subsection (i), by striking ``section 102'' 
                and inserting ``section 101'';
                    (C) in subsection (j), by striking ``sections 
                102(b)(1)(E) and 102(c)(1)(C)'' and inserting ``section 
                101(i)(1)(C)''; and
                    (D) in subsection (k)--
                            (i) in paragraph (1), by striking ``section 
                        487(f)'' and inserting ``section 487(e)''; and
                            (ii) in paragraph (2)(A), by striking 
                        ``sections 102(b)(1)(E) and 102(c)(1)(C)'' and 
                        inserting ``section 101(i)(1)(C)'';
            (14) in section 498B(b), by striking ``section 
        102(a)(1)(C)'' and inserting ``section 101(b)(4)'';
            (15) in section 741(f)(2), by striking ``section 102'' and 
        inserting ``section 101''; and
            (16) in section 807(d)(1), by striking subparagraph (A) and 
        inserting the following:
                    ``(A) intend to pursue a career in instruction at 
                an institution of higher education in the United 
                States; and''.

SEC. 5. INTEGRITY OF NONPROFIT INSTITUTIONS OF HIGHER EDUCATION.

    Part B of title I of the Higher Education Act of 1965 (20 U.S.C. 
1011 et seq.) is amended by adding at the end the following:

``SEC. 124. INTEGRITY OF NONPROFIT INSTITUTIONS OF HIGHER EDUCATION.

    ``(a) Determination.--On determining that an institution of higher 
education meets the requirements under subsection (b), the Secretary 
shall approve the conversion of an institution of higher education to a 
nonprofit institution of higher education.
    ``(b) Application.--To be eligible to convert under this section 
and participate as a nonprofit institution of higher education under 
this Act, an institution of higher education shall submit an 
application to the Secretary that demonstrates each of the following:
            ``(1) That such institution of higher education is a 
        nonprofit institution of higher education.
            ``(2) That the assets or services acquired from former 
        owners of such institution of higher education were not 
        acquired for more than the value of such assets or services.
            ``(3) That no member of the governing board of such 
        institution of higher education (other than ex officio members 
        serving at the pleasure of the remainder of the governing board 
        and receiving a fixed salary), or any person with the power to 
        appoint or remove members of such governing board or any 
        immediate family member of such a member of the board or such a 
        person with power of appointment, receives any substantial 
        direct or indirect economic benefit (including a lease, 
        promissory note, or other contract) from such institution of 
        higher education.
            ``(4) That such institution of higher education is an 
        organization described in section 501(c)(3) of the Internal 
        Revenue Code of 1986 and is exempt from taxation under section 
        501(a) of such Code.
            ``(5) Subject to subsection (c), that none of the core 
        functions of the institution of higher education are under the 
        control of, or subject to significant direction from, an entity 
        that is not a public institution of higher education or other 
        nonprofit entity.
    ``(c) Presumption of Significant Direction.--For purposes of 
subsection (b)(5), in the case of an institution, there shall be a 
conclusive presumption that an entity (other than such institution) 
exercises significant direction over such institution if one or more of 
the employees or owners of the entity serves as an officer, member of 
the board, or person holding similar authority for such institution.
    ``(d) Transition Period.--In the case of an institution of higher 
education approved for conversion under subsection (a), such 
institution shall be subject to any rules and regulations that apply to 
proprietary institutions of higher education, as defined in section 
102(b), for a minimum of 5 years.
    ``(e) Value.--The term `value', with respect to an acquisition 
under subsection (b)(2)--
            ``(1) includes the value of any ongoing relationship 
        (including any contract, agreement, lease or other 
        arrangement);
            ``(2) subject to paragraph (3), may be demonstrated 
        through--
                    ``(A) a third-party appraisal based on comparable 
                assets acquired by, or goods or services procured by, 
                nonprofit corporations in similar market conditions;
                    ``(B) an independent financing of the acquisition 
                based upon the assets acquired; or
                    ``(C) a full and open competition in the 
                acquisition of services or assets, as such term is 
                defined in section 2.101(b) of title 48, Code of 
                Federal Regulations, as in effect on the date of the 
                enactment of this section; and
            ``(3) shall be subject to such other demonstration process 
        determined appropriate by the Secretary in a case in which the 
        Secretary does not accept a demonstration process described in 
        paragraph (2).
    ``(f) Publication.--
            ``(1) Application.--Before the Secretary may approve the 
        conversion of an institution of higher education under 
        subsection (a), the application of such institution submitted 
        to the Secretary under subsection (b) shall be published in the 
        Federal Register with an appropriate notice and comment period.
            ``(2) Determination.--The Secretary shall publish each 
        determination under this section, and the reasons for such 
        determination, under the Federal Register.
    ``(g) Public Representation and Marketing of Nonprofit Status.--An 
institution of higher education shall not promote or market itself, in 
any manner, as a nonprofit institution of higher education unless--
            ``(1) in the case of an institution of higher education 
        that seeks to convert to a nonprofit institution of higher 
        education under this section--
                    ``(A) the Secretary has given final approval of the 
                conversion of the institution to a nonprofit 
                institution of higher education under this section;
                    ``(B) an accrediting agency or association 
                recognized by the Secretary pursuant to section 496 has 
                approved the nonprofit status of the institution; and
                    ``(C) the State has given final approval to the 
                institution as a nonprofit institution of higher 
                education, as applicable; and
            ``(2) the Commissioner of Internal Revenue has approved the 
        institution as tax exempt for purposes of the Internal Revenue 
        Code of 1986.
    ``(h) Office To Monitor Nonprofit Integrity.--Not later than 1 year 
after the date of enactment of the Students Not Profits Act of 2019, 
the Secretary shall establish an office within the Department with the 
expertise necessary to carry out this section.

``SEC. 125. REVIEW OF GOVERNANCE.

    ``The Secretary shall review the governance of an institution of 
higher education when such institution has engaged in transactions or 
arrangements determined by the Secretary as potential indicators of 
private inurement, in order to promote the highest standards of 
nonprofit integrity.''.
                                 <all>