II 118th CONGRESS 2d Session S. 4138 IN THE SENATE OF THE UNITED STATES April 17, 2024 Mr. Bennet (for himself and Mr. Rubio ) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To establish an alternative, outcomes-based process for authorizing innovative, high-quality higher education providers to participate in programs under title IV of the Higher Education Act of 1965.

1. Short title This Act may be cited as the Higher Education Innovation Act . 2. Alternative authorization system Part H of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1099a et seq. ) is amended by adding at the end the following: 4 Alternative authorization system 498C. Alternative authorization system (a) Definitions In this section: (1) Innovation authorizer The term innovation authorizer or authorizer means an entity that has been approved by the Secretary to carry out authorization of eligible entities. (2) Eligible entity The term eligible entity means an institution of higher education or another entity that— (A) promotes and supports student success outcomes and cost-effectiveness in postsecondary education; (B) provides an educational program— (i) that leads to a degree or certificate; (ii) of course bundles; or (iii) that leads to an industry-recognized credential that meets the requirements for licensing in the relevant field; (C) agrees to specified outcome-based oversight and reporting requirements described in this section; (D) demonstrates that the entity provides high-quality education by meeting or exceeding the minimum thresholds for each of the performance metrics that are required by the innovation authorizer in accordance with subsection (b) and which are developed in accordance with subsection (d); (E) meets the definition of an institution of higher education under section 101 or 102, except that the entity need not meet the requirements described in— (i) section 101(a)(5); (ii) section 102(b)(1)(A)(ii)(II); or (iii) section 102(b)(1)(D); and (F) meets the other requirements for participation in this title. (3) Teach-out plan The term teach-out plan means a written plan that provides for the equitable treatment of students if an eligible entity ceases to operate before all students have completed their program of study, and may include, if required by the Secretary, an agreement between eligible entities or between an eligible entity and another institution for such a teach-out plan. (4) Course bundle The term course bundle means a series of courses, or the equivalent, that lead to— (A) proficiency in a set of marketable skills or competencies; or (B) an industry-recognized credential that meets the requirements for licensing in the relevant field. (5) Completion The term completion means— (A) in the case of a course bundle— (i) completion of a series of courses— (I) that lead to proficiency in a set of marketable skills or competencies; or (II) that result in an industry-recognized credential that meets the requirements for licensing in the relevant field; or (ii) successful completion of a set of assessments— (I) that demonstrates proficiency in a set of marketable skills or competencies; or (II) that results in an industry-recognized credential that meets the requirements for licensing in the relevant field; and (B) in the case of a program leading to a certificate or degree, receipt of the certificate or degree. (b) Approval of innovation authorizers (1) In general The Secretary shall establish a process for approving innovation authorizers to carry out the authorization of eligible entities. (2) Request for applications Not later than 275 days after the date of enactment of this subpart, the Secretary shall publish a request for applications from entities that desire to become innovation authorizers. Any accrediting agency or association currently recognized by the Secretary or any entity not currently recognized by the Secretary may apply to be approved as innovation authorizers. (3) Application Requirements An entity that desires to be approved by the Secretary as an innovation authorizer under paragraph (1) shall submit an application to the Secretary that includes the following information: (A) Information on the entity's prior experience as an authorizer, accreditor, programmatic accreditor, or industry validator, or strong evidence and history that demonstrates the entity is equipped to be a high-quality authorizer. (B) An explanation of why the entity is qualified and capable of being an innovation authorizer, accompanied by supporting documentation. (C) Evidence that the entity is financially able to meet the requirements for authorizing eligible entities, including the requirements under paragraph (7). (D) A description of the process that the entity will use for awarding authorization, and suspending or revoking an eligible entity's authorization, including— (i) the performance metrics the authorizer will use in making determinations about authorization, which shall meet the requirements described under subsection (d); (ii) the minimum threshold for each performance metric described in clause (i), which shall require an eligible entity to meet or exceed the 60th-percentile student outcome for each such performance metric in order to be awarded authorization by the innovation authorizer; (iii) any other criteria or metrics that the entity will use as an innovation authorizer to award authorization status to an eligible entity, if applicable; and (iv) the process for— (I) monitoring authorized eligible entities, ensuring that each eligible entity continues to meet the criteria for authorization (including the threshold for each applicable performance metric as described in clause (ii)); and (II) ensuring the accuracy and validity of data. (E) A description of the entity's area of educational or subject matter focus, if applicable. (F) The composition or membership of the entity that seeks to become an innovation authorizer, and the entity's relationship or work with applicable industries and businesses. (G) A demonstration that the entity has— (i) clear and effective controls to protect against conflicts of interest, or the appearance of conflicts of interest, between the entity that wishes to be an innovation authorizer and eligible entities (including controls regarding potential conflicts of interest between board members, commissioners, evaluation team members, consultants, administrative staff, and other representatives of the entity that wishes to be an authorizer and eligible entities); and (ii) requirements to ensure that, as an authorizer, the entity and the staff, and representatives of the entity will be separate and independent (as defined in section 496(b)), both administratively and financially, from any eligible entities and will receive no benefit, financial or otherwise, from authorizing an eligible entity. (H) An agreement that the entity will make applicable authorization data, documents, and determinations publicly available. (4) Dissemination of information For the purpose of determining minimum thresholds for performance metrics under paragraph (3)(D)(ii) and subsection (d)(1)(B), the Secretary shall— (A) disseminate to innovation authorizers, on an annual basis, information about 60th-percentile student outcomes on the performance criteria described under subsection (d), in the aggregate for all students and disaggregated by student income quartile and field of study; and (B) provide the information described in subparagraph (A) to an innovation authorizer or an entity that wishes to apply to become an innovation authorizer upon request. (5) Limitation, Suspension, or termination of authorizer approval (A) Notice and opportunity for correction If the Secretary determines that an innovation authorizer has failed to apply and effectively enforce the performance criteria, including the minimum thresholds for such criteria, specified in the innovation authorizer's application under paragraph (3) in awarding, monitoring, and revoking authorization status for eligible entities, the Secretary shall provide notice to the innovation authorizer and give the innovation authorizer a 6-month period to apply and enforce the performance criteria and minimum thresholds described in the innovation authorizer's application under paragraph (3). (B) Limitation, suspension, or termination If, after the 6-month period described in subparagraph (A), the Secretary determines that an innovation authorizer has still failed to effectively enforce the performance criteria and minimum thresholds specified in that innovation authorizer's application under paragraph (3), the Secretary shall limit, suspend, or terminate the recognition of that innovation authorizer. (6) Loss of authorizer approval In the case of an eligible entity authorized by an innovation authorizer whose recognition has been limited, suspended, or terminated by the Secretary— (A) if the eligible entity successfully demonstrates to the Secretary that the eligible entity meets the performance criteria and minimum thresholds that such authorizer specified in its application under paragraph (3), the eligible entity shall have 6 months to apply for accreditation by another accrediting agency or association or authorization by another innovation authorizer; or (B) the eligible entity shall prepare a teach-out plan that meets the Secretary's regulations for teach-out plans and shall submit such plan to the Secretary. (7) Authorizer risk sharing Each innovation authorizer shall enter into an agreement with the Secretary whereby the innovation authorizer agrees to pay the Secretary an amount equal to not less than 25 percent of the amount of Federal student loans that are held by current and former students of any eligible entity authorized by the innovation authorizer under subsection (d) and that are in default each fiscal year. (c) Eligibility for federal pell grant funding Eligible entities that are authorized by an innovation authorizer shall be eligible to receive Federal Pell Grant funding in accordance with subsection (f). (d) Authorization by an innovation authorizer (1) Authorization process (A) In General An innovation authorizer may authorize an eligible entity, if— (i) that eligible entity meets the criteria under subsection (a)(2); and (ii) in the case of— (I) an eligible entity that has not carried out an educational program for more than 2 years, the eligible entity agrees to, and describes a high-quality, evidence-based plan to, meet within 2 years the specific performance metrics and minimum thresholds required by the innovation authorizer in accordance with subsection (b)(3)(D); and (II) an eligible entity that has carried out an educational program for more than 2 years, the eligible entity demonstrates that the eligible entity meets the specific performance metrics and minimum thresholds required by the innovation authorizer in accordance with subsection (b)(3)(D). (B) Performance metrics (i) In General In accordance with subparagraph (C), each innovation authorizer shall— (I) use, in order to determine whether to award authorization to an eligible entity, not less than— (aa) 1 performance metric relating to student learning, as described in clause (ii); (bb) the performance metric relating to completion, as described in clause (iii); and (cc) 2 performance metrics relating to the benefit to the student and affordability, as described in clause (iv); (II) establish the minimum thresholds for each performance metric that the eligible entity must meet or exceed in order to be authorized by the authorizer in accordance with subsection (b)(3)(D)(ii), ensuring that each minimum threshold meets or exceeds the 60th-percentile student outcome for the performance metric; and (III) in the determination about whether an eligible entity meets the required threshold for authorization for each performance metric, include data from all students who enroll in the eligible entity. (ii) Student learning The performance metrics relating to student learning are the following: (I) A nationally defined, demonstrated, objective, and verifiable measure of student learning, including a measure of the knowledge or skills gained by the student from the educational program or institution. (II) Demonstrated quality based on an evaluation conducted by an independent evaluator that uses evaluation criteria approved by the What Works Clearinghouse of the Institute of Education Sciences and shows statistically significant increases in student learning. (III) Pass rates and overall scores on qualifying or licensing examinations. (iii) Completion (I) In General The performance metric relating to completion is the percentage of all students who complete the educational program and each program of study in— (aa) 100 percent of the normal time for completion of each program of study; (bb) 150 percent of the normal time for completion of each program of study; and (cc) 200 percent of the normal time for completion of each program of study. (II) Transfer students In determining the percentage under subclause (I), an eligible entity may include the students in each program of study who transfer and successfully complete a program of study. (iv) Benefit to student and affordability The performance metrics relating to benefit to the student and affordability are the following: (I) Rates of employment or enrollment in and completion of graduate or professional school. (II) Increases in income for students. (III) The cost of tuition and fees, the net price disaggregated by income quintile and educational program, and the median total loan debt accrued by students who were enrolled in the eligible entity. (IV) Student loan repayment rates for Federal and private student loans, if applicable. (V) Median income of students who were enrolled in the eligible entity. (C) Data source When an innovation authorizer uses data about income or employment, as described in subparagraph (B)(iv), the following provisions shall apply: (i) The innovation authorizer shall use wage data gathered in accordance with clauses (iii) and (iv) and shall disaggregate such data (except that such disaggregation shall not be required in a case in which the results would reveal personally identifiable information about an individual student), by— (I) educational program based on the Classification of Instructional Programs Code developed by the National Center for Education Statistics; (II) credential received; (III) noncompleters; (IV) eligible entity; and (V) State and region of employment. (ii) The innovation authorizer shall include data for— (I) 1 year after educational program completion; (II) 3 years after educational program completion; and (III) 5 years after educational program completion. (iii) Notwithstanding any other provision of law, the Secretary, in cooperation with the Commissioner of Social Security, and each eligible entity whose wage data will be evaluated in accordance with subparagraph (B)(iv) shall establish a system through which relevant data may be retrieved from the Social Security Administration, including data on median annual earnings and employment metrics. (iv) The Secretary, innovation authorizers, and eligible entities shall not share personally identifiable information of a student in carrying out this subparagraph, except as necessary to enable individuals who are employed by the Department to meet the reporting requirements and data dissemination purposes and requirements under this Act. (D) Transparency Notwithstanding the specific performance metrics used by any specific authorizer, each authorized eligible entity shall make public and disaggregate information on all of the metrics described under subparagraph (B) for the eligible entity as a whole and for each educational program of the eligible entity, as applicable. (2) Renewing authorization An innovation authorizer shall require each eligible entity that has been authorized by the innovation authorizer to have the eligible entity's authorization renewed not later than 2 years after the eligible entity is first authorized, and not later than every 5 years thereafter. (3) Loss of authorization (A) In general An innovation authorizer shall remove an eligible entity from authorized status if, for 2 consecutive calendar years, that eligible entity falls below the minimum threshold for any performance metric required for authorization by the innovation authorizer in accordance with subsection (b)(3)(D). (B) Petition to regain authorization An eligible entity that is removed from authorized status may petition an innovation authorizer to regain authorization by demonstrating to the innovation authorizer that the eligible entity is ensuring quality and student success and has met, and will continue to meet, the minimum thresholds for each performance metric required for authorization by the innovation authorizer in accordance with subsection (b)(3)(D). (4) Accreditation deemed Authorization by an innovation authorizer approved by the Secretary under this section shall be deemed recognized accreditation for purposes of title IV. (e) Accreditation and authorization; changing accreditors or authorizers (1) Accreditation and authorization An eligible entity that otherwise meets the requirements for authorization by an innovation authorizer and the requirements for accreditation by a recognized accrediting agency or association may hold accreditation and authorization from both entities. (2) Changing accreditors or authorizers An eligible entity that otherwise meets the relevant requirements for accreditation or authorization may notify the Secretary and change accreditation or authorization status— (A) from an innovation authorizer to a recognized accrediting agency or association; or (B) from a recognized accrediting agency or association to an innovation authorizer. (f) Eligibility for Federal pell grant funding (1) Authorizer Federal Pell Grant funding requirements (A) Aggregate innovation authorizer Federal Pell Grant cap (i) Individual authorizer cap The Secretary shall determine, in accordance with subparagraph (B) for each award year and for each innovation authorizer, the total maximum amount of Federal Pell Grant funds that all eligible entities that are authorized by a given innovation authorizer may receive through tuition and fee payments from enrolled students who receive a Federal Pell Grant. (ii) Aggregate authorizer cap The Secretary shall determine each innovation authorizer Federal Pell Grant cap, as described in clause (i), in a manner that ensures that the aggregate amount of Federal Pell Grant funds that all eligible entities authorized by all innovation authorizers receive each year does not exceed 0.5 percent of total Federal Pell Grant funding for the previous award year. (B) Individual innovation authorizer Federal pell grant cap The Secretary shall determine each innovation authorizer's cap under subparagraph (A)(i) based on— (i) the authorizer's experience and track record of awarding authorization to eligible entities; and (ii) the performance criteria and minimum thresholds that the authorizer uses in determining whether to award authorization to eligible entities, as specified in subsection (b)(3)(D). (2) Eligible entity Federal Pell Grant funding requirements (A) In general An eligible entity that is authorized by an innovation authorizer in accordance with this section is eligible to receive Federal Pell Grant funds in accordance with subparagraphs (B), (C), and (D). (B) Eligible entity total cap on federal pell grant funding Each award year, an eligible entity described in subparagraph (A) will be eligible to receive (through tuition and fee payments from enrolled students) a maximum total amount of Federal Pell Grant funding that— (i) shall be determined by the innovation authorizer; (ii) shall be determined in a manner so as to ensure that the innovation authorizer does not exceed the innovation authorizer’s Federal Pell Grant cap; (iii) shall be based on the eligible entity’s history and track record of meeting or exceeding the relevant performance metrics minimum thresholds; and (iv) shall not exceed 15 percent of total Federal Pell Grant funding for eligible entities authorized by the innovation authorizer for the previous award year. (C) Federal Pell Grant allocations (i) Full Federal pell grant An eligible entity authorized by an innovation authorizer that provides validated documentation from an independent evaluator that the eligible entity has met or exceeded the minimum thresholds for each of the authorizer’s performance metrics for at least 5 consecutive years shall be eligible to receive up to the full amount of Federal Pell Grant funding that each enrolled student is eligible to receive, subject to the cap described in subparagraph (B). (ii) 50-percent reimbursement Federal pell grant An eligible entity authorized by an innovation authorizer that provides validated documentation from an independent evaluator that the eligible entity has met or exceeded the minimum thresholds for each of the authorizer’s performance metrics for at least 3 consecutive years but less than 5 consecutive years and has been determined by such authorizer to have a strong evidence basis for continuing to annually meet such minimum thresholds for each performance metric shall be eligible for a pay for performance contract with the following terms: (I) The eligible entity shall be eligible to receive up to 50 percent of the amount of Federal Pell Grant funding that each enrolled student is eligible to receive, subject to the cap described in subparagraph (B). (II) The eligible entity shall provide a bond or matching funds to pay for the remaining 50 percent of the amount of Federal Pell Grant funding that each enrolled student is otherwise eligible to receive. (III) The Secretary shall reimburse the eligible entity for an amount equal to the amount that the eligible entity provided under subclause (II) for each enrolled student, except that such amount may not exceed the remaining cost of tuition and fees for each student— (aa) for whom the eligible entity provided matching funds as described in subclause (II); and (bb) who successfully completes the educational program. (iii) 75-percent reimbursement Federal pell grant An eligible entity authorized by an innovation authorizer that provides validated documentation from an independent evaluator that the eligible entity has met or exceeded the minimum thresholds for each of the authorizer’s performance metrics for at least 1 year but less than 3 consecutive years and has been determined by such authorizer to have a strong evidence basis for continuing to annually meet such minimum thresholds for each performance metric shall be eligible for a pay for performance contract with the following terms: (I) The eligible entity shall be eligible to receive up to 25 percent of the amount of Federal Pell Grant funding that each enrolled student is eligible to receive, subject to the cap described in subparagraph (B). (II) The eligible entity shall provide— (aa) a bond for 25 percent of the amount of Federal Pell Grant funding that each enrolled student is otherwise eligible to receive; and (bb) a bond or matching funds for the remaining 75 percent of the amount of Federal Pell Grant funding that each enrolled student is otherwise eligible to receive. (III) If the eligible entity meets the minimum thresholds for each of the authorizer's performance metrics for 2 consecutive years after the date of the pay for performance contract, the Secretary shall reimburse the eligible entity for an amount equal to the amount that the eligible entity provided under subclause (II)(bb) for each enrolled student, except that such amount may not exceed the remaining cost of tuition and fees for each student— (aa) for whom the eligible entity provided matching funds as described in subclause (II)(bb); and (bb) who successfully completes the educational program. (IV) If the eligible entity fails to meet the minimum thresholds for each of the authorizer’s performance criteria for 2 consecutive years after the date of the contract, the eligible entity shall reimburse the Federal Government in an amount equal to the amount described in subclause (I). (iv) 100-percent reimbursement Federal pell grant An eligible entity that has no track record of meeting, exceeding, or failing to meet the minimum thresholds for each of the authorizer’s performance metrics, and that has been determined by an innovation authorizer to have a strong and rigorous evidence base demonstrating an ability to consistently and annually meet or exceed the minimum thresholds for each of the performance metrics of that innovation authorizer shall be eligible for a pay for performance contract with the following terms: (I) The eligible entity shall provide funds equal to 100 percent of the amount of Federal Pell Grant funding that each enrolled student is otherwise eligible to receive. (II) If the eligible entity meets the minimum thresholds for each of the authorizer’s performance metrics for 2 consecutive years after the date of the pay for performance contract, the Secretary shall reimburse the eligible entity for an amount equal to the amount that the eligible entity provided under subclause (I) for each enrolled student, except that such amount may not exceed the remaining cost of tuition and fees for each student— (aa) for whom the eligible entity provided funds as described in subclause (I); and (bb) who successfully completes the educational program. (D) Federal pell grant amount treated as payment Notwithstanding the actual amount of Federal Pell Grant funding that an eligible entity receives (which, in accordance with subparagraphs (B) and (C), may not be the full amount of Federal Pell Grant funding that each enrolled student who is eligible for a Federal Pell Grant is eligible to receive), an eligible entity— (i) shall treat each student as having paid the total amount of Federal Pell Grant funding for which the student is eligible; (ii) shall not charge students additional tuition or fees to compensate for any amount of Federal Pell Grant funding for which the eligible entity— (I) must provide a bond or matching funds or for which the eligible entity otherwise must wait for reimbursement under subparagraph (C); or (II) may fail to receive due to a cap described under subparagraph (B); and (iii) shall not charge a higher amount of tuition or fees to a student who is eligible for a Federal Pell Grant. (E) Rule of construction Nothing in subparagraph (D) shall be construed as prohibiting an eligible entity from reducing the amount of tuition and fees the eligible entity charges to a student who is eligible for a Federal Pell Grant based on student need. (F) Students exceeding cap An eligible entity may elect to enroll students whose collective eligibility for Federal Pell Grants would otherwise result in the eligible entity exceeding the cap under subparagraph (B) but such eligible entity shall comply with subparagraph (D). (3) Federal Pell Grant eligibility for students (A) In General A student may receive a Federal Pell Grant and use funding from such grant to attend an eligible entity or a program of an eligible entity that is authorized by an innovation authorizer under this subpart if the student meets the other requirements for receiving a Federal Pell Grant, as described in section 401. (B) Eligibility period For the purpose of calculating a student’s remaining period of eligibility for Federal Pell Grant funding under section 401, the Secretary shall consider only Federal Pell Grant funding actually paid to an eligible entity on behalf of the student, in accordance with subparagraphs (B) and (C) of paragraph (2). (g) Access to title IV funding (1) Continuation of title IV eligibility An institution of higher education that was eligible to participate in, and receive funding under, this title prior to seeking and gaining authorization under this section may petition the Secretary to continue to be eligible to receive loans made under this title if the institution is an eligible entity described under clause (i) or (ii) of subsection (f)(2)(C). (2) Recommendations Not later than 2 years after the date of enactment of this subpart, the Secretary, in consultation with innovation authorizers, eligible entities, and stakeholders, shall make recommendations to Congress regarding a process for providing all eligible entities with access to loans made under this title. (h) Reports (1) Reports from authorized eligible entities to innovation authorizers Each eligible entity that is authorized by an innovation authorizer shall prepare and submit an annual report to the innovation authorizer containing such information as that innovation authorizer may require. (2) Reports from innovation authorizers to the Secretary Each innovation authorizer shall prepare and submit an annual report to the Secretary containing such information as the Secretary may require. . 3. Termination of appropriations No funds shall be authorized to carry out this Act, including the amendments made by this Act, 5 years after the date of enactment of this Act. 4. Termination of authorization Subpart 4 of part H of title IV of the Higher Education Act of 1965, as added by section 2, shall expire on the date that is 5 years after the date of enactment of this Act.