H.R. 2899 — PROTECT Students Act of 2025

This section revises the definitions of (1) institution of higher education, (2) proprietary institution of higher education, (3) postsecondary vocational institution, and (4) eligible program under the Higher Education Act of 1965 to require that programs of training to prepare students for gainful employment in a recognized occupation (or profession, in one instance) also meet debt-to-earnings and earnings premium standards in new section 498C; and adds those standards to subpart 3 of part H of title IV. (As background, these definitions determine eligibility to participate in federal student aid programs authorized under title IV, which vocational and for-profit programs rely on heavily.) Section 498C requires the Secretary of Education to annually calculate and publish for each eligible gainful employment program (or graduate/professional program at certain institutions)—using matched earnings data from federal agencies—a discretionary debt-to-earnings rate (annual loan payment divided by discretionary earnings, i.e., median earnings minus 150% of the poverty level), an annual debt-to-earnings rate (annual loan payment divided by median annual earnings), and an earnings premium (program median earnings minus median for high school graduates, statewide or national); notifies institutions of results within 45 days; and determines failure if a program has both a discretionary rate of 20% or greater and an annual rate of 8% or greater, or an earnings premium of zero or negative, with ineligibility after two failures in three consecutive years. (Thus, noncompliant programs lose eligibility for federal student aid.)

This section revises the borrower defense to repayment provisions for Direct Loans (20 U.S.C. 1087e(h)). It requires the Secretary of Education to discharge a covered loan (i.e., a Direct Loan with an outstanding balance tied to an institution of higher education's cost of attendance) that is in repayment (i.e., after in-school deferment or grace period and before full payment or consolidation) upon concluding by a preponderance of the evidence that a qualifying institutional act, omission, or event caused detriment warranting discharge. Qualifying acts or omissions include (1) substantial misrepresentations in connection with attendance or borrowing decisions; (2) breach of contract obligations tied to attendance, borrowing, or loan funds; (3) aggressive and deceptive recruitment tactics (e.g., pressuring students, exploiting lack of knowledge, or repeated unsolicited contact); (4) a favorable judgment or agency action against the institution; (5) a Secretary sanction for related misconduct; or (6) any state-law cause of action related to the loan or educational services. To effectuate discharge, the Secretary must (A) forgive loan principal, interest, and fees (potentially prorated for partial consolidation loans); (B) reimburse prior payments; (C) clear any default status; (D) delete adverse credit reports; and (E) exclude the discharged loan and related grants from the borrower's record for future aid eligibility calculations. (Thus, these rules expand grounds for discharge beyond prior statutory language and apply prospectively to loans in repayment.)

This section revises the closed school loan discharge provision to (1) expand eligibility for discharge of Federal Family Education Loan Program (FFEL) loans received on or after January 1, 1986, and Federal Direct Loans, to include cases where the institution ceased educational instruction entirely or for programs in which more than 50% of students were enrolled, or the borrower (or student on whose behalf the loan was taken) was enrolled within 180 days before closure; (2) authorize the Secretary of Education to extend the 180-day period for exceptional circumstances (e.g., institutional probation, heightened cash monitoring, legal violations, or teach-out plan failures); (3) provide automatic discharge without borrower application one year after closure if the program was not completed; and (4) require the Secretary to pursue available claims against the institution and affiliates after discharge. (As background, closed school discharges repay federal student loans for borrowers unable to complete programs due to institutional closure, false certification of eligibility, or failure to refund loan proceeds.)

This section exempts enrollment agreements between students and institutions of higher education (IHEs, as defined in 20 U.S.C. 1002) from the Federal Arbitration Act (Chapter 1 of title 9, U.S. Code). It amends sec. 487(a) of the Higher Education Act of 1965 (20 U.S.C. 1094(a)) to (1) prohibit IHEs from requiring or enforcing any limitation or restriction (including on applicable law, jury trial, or venue) on a student's ability to pursue an individual or class action claim in court and to require written notification to students that such provisions are unenforceable; and (2) prohibit IHEs from withholding official transcripts due to a student's unpaid balance and to require provision of transcripts upon student request. This section further establishes a private right of action for students or former students of an IHE (individually or on behalf of a class) against the IHE, its third-party servicers, or contractors for (1) substantial misrepresentations (including omissions); (2) violations of HEA sec. 487(a)(20) (20 U.S.C. 1094(a)(20)); (3) violations of default rate regulations under HEA sec. 435(m)(3) (20 U.S.C. 1085(m)(3)); or (4) violations of program integrity regulations under the HEA (20 U.S.C. 1001 et seq.), including those for secs. 102, 455, and part H. Remedies include actual damages, additional damages, costs, reasonable attorney's fees, and punitive damages up to threefold actual damages (including costs and fees) if the court finds actual or constructive knowledge or reckless disregard; actions may proceed in U.S. district court or other competent courts without regard to the amount in controversy.

This section revokes Example 2–B of Question 2 in the Department of Education's Dear Colleague Letter GEN–11–05 (March 17, 2011), which provided guidance interpreting the statutory prohibition on incentive compensation payments (i.e., any commission, bonus, or other incentive payment to persons or entities engaged in student recruitment, admissions, or financial aid awarding activities based in whole or in part on success in securing enrollments or the awarding of financial aid); prohibits the Department from issuing any regulation or subregulatory guidance establishing an exception to that prohibition under section 487(a)(20) of the Higher Education Act of 1965 (20 U.S.C. 1094(a)(20)); and establishes new compliance requirements for institutions of higher education participating in federal student aid programs. Those requirements, added to section 487(a)(20), direct each institution to (1) attest to the Secretary of Education, not later than one year after enactment of the Preventing Risky Operations from Threatening the Education and Career Trajectories of Students Act of 2025, that it complies with the prohibition notwithstanding the revoked guidance (with the Secretary required to revoke the institution's program participation agreement if not compliant as of enactment); and (2) annually submit verification from an independent auditor confirming ongoing compliance.

This section expands the scope of activities performed by third-party servicers (i.e., entities contracted by institutions of higher education to administer federal student aid programs under Title IV of the Higher Education Act) that are subject to federal oversight and regulation. Specifically, it includes services related to delivery of Title IV funds, student recruitment or retention, compliance with cohort default rate requirements, development and delivery of instructional content, and other activities specified by the Secretary of Education.

This section directs the Secretary of Education to establish a single, uniform definition of "job placement rate" for purposes of the Higher Education Act of 1965 (added as new subsection (h) to section 481, 20 U.S.C. 1088(h)). It further (1) requires institutions advertising or disclosing job placement rates—or required to report them to accrediting agencies, state authorizers, or regulators—to use this definition and provide prospective students with related employment and graduation data, calculation methodology, and state licensing requirements prior to application (revises section 487(a)(8), 20 U.S.C. 1094(a)(8)); (2) incorporates the definition into accrediting agency standards for recognition (amends section 496(a)(5)(A), 20 U.S.C. 1099b(a)(5)(A)); and (3) exempts these amendments from negotiated rulemaking procedures under section 492 (20 U.S.C. 1098a). (As background, job placement rates of at least 70% are required for certain short-term programs of 300 to less than 600 clock hours to qualify as eligible for federal student aid under Title IV.)

This section establishes new financial responsibility standards under section 498(c) for institutions of higher education to participate in title IV programs (i.e., federal student aid programs such as Pell Grants and Direct Loans). It requires each institution to spend at least 30% of tuition and fee revenue (net of allowances and discounts) on instruction during academic years 2026–2027 through 2031–2032; directs the Secretary of Education to issue annual reports during academic years 2027–2028 through 2030–2031 using data under section 132(l) that identify each institution's spending on instruction and student services (excluding advertising, recruiting, marketing, executive compensation, lobbying, and pre-enrollment expenses), tuition revenue, median increases in combined instruction and student services spending relative to tuition revenue, and other relevant data; requires the Secretary in academic year 2031–2032 to establish via regulation a minimum threshold percentage (not less than 30%) for combined spending on instruction and student services, consistent with the averaged median increases identified in prior reports; and requires institutions to meet that threshold for combined spending beginning academic year 2031–2032 onward. The section further directs the Secretary to establish via regulation warning thresholds for at-risk institutions and require such institutions to warn prospective and enrolled students of low instructional spending, and to issue any other necessary regulations for compliance.

This section adds past performance requirements (subparagraphs (C) and (D)) to institutions' program participation agreements under Title IV of the Higher Education Act by prohibiting them from (1) knowingly employing an individual who was an owner, director, officer, or employee exercising substantial control over an institution that owes a liability; and (2) knowingly employing an individual who was an owner, director, officer, or employee of an institution found to have engaged in fraud, misuse of funds, or material violations of law, or whose participation in Title IV programs was terminated, certification revoked, or application denied—or who was a 10%-or-higher equity owner, director, officer, principal, executive, or affiliated contractor of an institution that incurred federal student aid losses exceeding 5% of its annual Title IV funds, as determined by the Secretary—or from contracting with any such institution, third-party servicer, individual, agency, or organization or its owners, officers, or employees. (Thus, these restrictions apply to affiliations with entities having poor Title IV compliance histories and limit their continued access to federal student aid funds, which include Pell Grants, Direct Loans, and campus-based aid programs serving over 10 million postsecondary students annually.)

This section amends the Higher Education Act of 1965 to strengthen institutional accountability under title IV student aid programs (i.e., federal grants, loans, and work-study for postsecondary students) as follows: (1) revises the enforcement provisions in section 487(c)(1)(F) to explicitly authorize the Secretary of Education to recoup liabilities established under new section 493E, in addition to limitation, suspension, or termination of program participation and civil penalties; (2) adds new section 493E to Part G, requiring the Secretary to assess liabilities against and recoup title IV funds from institutions due to student loan discharges, program review or audit findings, or other misconduct or noncompliance, while authorizing the Secretary to waive such liabilities based on individual circumstances; and (3) adds section 498(b)(6), requiring both an institution's authorized representative and, if applicable, a representative of any controlling owner entity to sign the program participation agreement, thereby agreeing to repay any liabilities assessed by the Secretary.

This section establishes an enforcement unit within the Performance-Based Organization (PBO) of the Office of Federal Student Aid to investigate allegations of misconduct and enforce compliance with federal student financial assistance programs under Title IV of the Higher Education Act by institutions of higher education, third-party servicers, and loan servicers. (As background, the PBO manages the administrative operations of Title IV programs, including Pell Grants and Direct Loans, to improve service, reduce costs, and ensure program integrity.) The unit, led by a Chief Enforcement Officer appointed as a senior manager reporting directly to the PBO Chief Operating Officer (with performance-based bonuses permitted), must (1) receive, process, and analyze complaints of legal violations or unfair practices (including via secret shopping); (2) develop an annual policy enforcing the incentive compensation ban; (3) pursue emergency actions, limitation/suspension/termination of participation, or civil penalties; and (4) coordinate with federal/state agencies while hiring staff, including up to 10 excepted service positions. The unit includes separate divisions for investigations, borrower defense to repayment claims under section 455(h), Clery Act and crime/drug-alcohol reporting oversight, enforcement actions and fines, compliance monitoring of all Title IV participants, and others as needed; the Chief Enforcement Officer may recommend termination/suspension/limitation of participation, civil penalties, servicer contract actions, or borrower defense decisions.

This section establishes the For-Profit Education Oversight Coordination Committee in the executive branch, composed of the heads (or designees) of the Departments of Education, Justice, Defense, Veterans Affairs, and Labor; the Bureau of Consumer Financial Protection; the Securities and Exchange Commission; the Federal Trade Commission; the Internal Revenue Service; the enforcement unit of the Performance-Based Organization under HEA sec. 141(g); and any other relevant federal agencies at the chairperson's discretion. The committee, chaired by the Secretary of Education (or designee), must coordinate federal oversight of for-profit institutions of higher education to improve enforcement of federal laws, increase accountability to students and taxpayers, protect students from unfair or deceptive practices, facilitate information sharing via binding memoranda of understanding, coordinate with state agencies (including State approving agencies under 38 U.S.C. 3671 that approve programs for VA education benefits), and develop best practices for consumer information dissemination. The committee must meet quarterly among members and at least annually with state authorizing agencies, attorneys general, State approving agencies, veterans service organizations, and consumer advocates; the chairperson must appoint a full-time executive director and additional staff as needed.

This section establishes a complaint tracking system under a new section 161 of the Higher Education Act (HEA) for centralized collection, monitoring, and response to complaints or reports of suspicious activity concerning (1) federal student financial aid and postsecondary education loan servicing; (2) educational practices and services of institutions of higher education (IHEs) or third-party servicers; and (3) recruiting and marketing practices of IHEs or third-party servicers. The system, operated by the Secretary of Education in coordination with the Student Loan Ombudsman, includes a toll-free telephone number and website; permits anonymous submissions (including options to withhold from servicers or IHEs); forwards complaints to relevant parties for a response within 60 days; requires the Secretary to respond to complainants within 90 days (describing actions taken, responses received, and planned steps); enables further investigation if needed; and supports retrieval, search, and categorization of data to identify trends and systemic issues. (As background, third-party servicers are entities that administer aspects of federal student aid on behalf of IHEs (per HEA §481(c)). Thus, the system enhances oversight of student aid administration, loan servicing, and IHE practices by mandating timely responses and information sharing, subject to exceptions for confidential data.)

This section reforms institutional eligibility and certification procedures under the Higher Education Act by (1) requiring the Secretary of Education to grant full, non-provisional certification only upon demonstration of compliance with all Title IV requirements, denying continued participation absent such compliance, and deeming institutions ineligible if non-compliant with program participation agreement terms under section 487(a)(16); and (2) prohibiting automatic certification or recertification due to delays in application reviews. This section further expands provisional certification authority for high-risk institutions to cover any Title IV violation, program participation agreement breach, or determination of significant risk to students and taxpayers; authorizes additional conditions on such institutions; and permits termination of provisionally certified institutions for failure to meet agreement responsibilities, Title IV violations (including substantial misrepresentations), or final findings of state or federal consumer protection law violations. This section additionally (1) subjects institutions to False Claims Act liability (31 USC 3729-3733) for misrepresentations or false claims on Title IV funding applications or knowing non-compliance with program participation agreements, with damages equal to Direct Loan funds disbursed from the violation date through final decision; and (2) revises program participation agreement certification language to affirm institutional compliance with all Title IV terms and laws as a condition of payment, with violations constituting material non-compliance.

This section adds to the definition of "institution of higher education" (IHE)—which determines eligibility to participate in federal student aid programs under Title IV of the Higher Education Act of 1965—a new requirement in subsection (a)(3) that an IHE providing distance education or correspondence courses in a state where it is not located must either meet that state's requirements for offering postsecondary education or, if authorized pursuant to an interstate reciprocity agreement, (i) enroll fewer than 200 students annually in that state, (ii) operate under an agreement allowing the state to enforce all non-registration and non-fee laws on out-of-state institutions, and (iii) have eligibility decisions made exclusively by representatives of member state regulatory agencies or attorneys general offices. (Thus, larger out-of-state distance education providers generally must comply directly with each state's authorization rules rather than relying on reciprocity.) The section makes conforming changes to update cross-references in subsections (a)(6), (b)(1), and related provisions of 20 U.S.C. 1002.

This section adds to the criteria for Secretary recognition of accrediting agencies a new requirement in 20 U.S.C. 1099b(c)(10) that such agencies (A) assess risks to students from institutions, programs, and third-party servicers using factors provided by the Secretary; (B) determine whether additional oversight or action is warranted for each; and (C) monitor their quality and risk. (Accrediting agencies recognized under the Higher Education Act establish eligibility for federal student aid programs; thus, this enhances their role in identifying and addressing student protections.)

This section revises the funding for administrative costs of the William D. Ford Federal Direct Loan Program by replacing the prior authorization of appropriations for FY2007 through FY2014 with mandatory funding available each fiscal year from funds not otherwise appropriated, capped at 5% of the average outstanding Direct Loan portfolio from the preceding fiscal year (and removing the prior reference to Federal Family Education Loan Program costs). Funds remain available until expended, with authority for the Secretary of Education to carry over unused amounts to subsequent fiscal years, and no funds may be expended without a detailed budget justification in the Department's annual congressional budget request describing prior-year uses, planned current-year activities and costs, and projected next-year costs.

This section amends the Higher Education Act of 1965 to require additional reporting and disclosures from institutions of higher education (IHEs) receiving federal student aid under title IV. Specifically, it (1) requires IHEs to provide warnings to prospective and enrolled students regarding gainful employment or graduate/professional programs that fail Department of Education standards, with prospective students required to acknowledge receipt; (2) directs the Secretary of Education to define instructional expenditures separately from marketing, recruitment, advertising, lobbying, executive compensation, and other pre-enrollment costs, and requires IHEs to report to the Secretary total title IV funds received, proportions spent on recruitment/marketing versus instruction/student services, and tuition prices relative to instruction/student services spending for each program or division, with such data publicly disclosed on the College Navigator website (i.e., Department-operated site providing IHE cost, net price, and other transparency data); (3) mandates annual IHE reporting to the Secretary on third-party servicers (including contracted programs/services, enrollment numbers, student loans offered, and marketing/recruiting expenditures), prominent disclosures of servicer relationships in advertisements/marketing/websites using Secretary-specified language, and servicer employee disclosures of non-IHE employment status, plus annual reporting on online/on-campus/hybrid program enrollment-securing expenditures, student aid recipient modalities (for calculating enrollment/retention/completion/loan/debt/earnings data), and net prices; and (4) requires proprietary IHEs to promptly file with the Secretary all public Securities and Exchange Commission filings.

This section directs the Secretary of Education to publicly disclose and regularly update specified information on higher education oversight activities, including (1) under Direct Loans (20 U.S.C. 1087e(h)), the number of borrower defense claims filed and discharges granted, disaggregated by institution of attendance, state of residence as of the claim date, student loan servicer, and discharge/reimbursement amounts in increments of not less than $10,000; (2) under the 90/10 rule for proprietary institutions (20 U.S.C. 1094(d)(3)), institution-submitted data on the College Navigator website in a prompt, comprehensive, and user-friendly manner, with notices and explanations for any temporary omissions; (3) under change-of-ownership and conversion rules (20 U.S.C. 1099c(j)), applications for changes of ownership or conversions from proprietary to nonprofit status, plus all decisions and external communications explaining those decisions; (4) for all Title IV institutions' financial standing (20 U.S.C. 1099c(c)), annual audited financial statements (including lists of late submitters), terms and updates on required letters of credit or sureties, and decisions imposing or removing heightened cash monitoring or other financial protections (with related external communications); (5) full program participation agreements under Title IV (20 U.S.C. 1099c(m)) and each institution's provisional, temporary provisional, or expired certification status; and (6) for accrediting agencies (20 U.S.C. 1099b), all Department draft and final recognition/monitoring reports and accreditor-submitted materials, plus accreditor communications to institutions on actions such as imposing or removing probation, show-cause orders, or limits on accreditation.