S. 4114 — Student Protection and Success Act

This section establishes ineligibility for the William D. Ford Federal Direct Loan (Direct Loan) program for institutions with a cohort repayment rate of 15% or less beginning in FY2028 for that fiscal year and the two succeeding fiscal years. (The cohort repayment rate measures the percentage of borrowers entering repayment on Direct Loans who, within two fiscal years, are not in default and reduce principal by at least $1—excluding those in specified deferments or forbearance, such as for military service or graduate study—with smaller cohorts averaging over three prior years; the Secretary publishes rates and notifies at-risk institutions beforehand, with a 30-day appeal allowing continued participation if a calculation error is shown, subject to repayment if unsuccessful.) This section also amends Federal Pell Grant program institutional eligibility rules by (1) limiting default rate-based ineligibility to fiscal years through FY2027 (from open-ended), (2) extending appeals to cohort repayment rate determinations, and (3) deeming ineligible any institution ineligible under the new Direct Loan provision. (Thus, low-repayment institutions lose access to both loan and grant aid for low-income students.)

This section establishes the College Opportunity Bonus Program under a new section 401B of the Higher Education Act of 1965. Beginning in FY2028, the Secretary of Education must award grants to eligible institutions of higher education—defined as those with a cohort repayment rate greater than 25% (i.e., the percentage of student loan borrowers repaying principal and interest, per section 455(r)(3))—based on a formula that equally weighs (1) the number and percentage of enrolled Federal Pell Grant-eligible students, (2) those students' cohort repayment rate, and (3) the institution's student service expenditures as a percentage of its student service resources; grants are capped at 2.5% of the institution's total annual revenues and investment returns minus auxiliary enterprise and hospital revenues (per the IPEDS Finance Survey). Grant recipients, which must demonstrate a strong record of affordability and access/success for low- and moderate-income students, may use funds to supplement (not supplant) other state and institutional funds for (1) additional need-based aid to Pell Grant-eligible students, (2) academic and student support services, and (3) accelerated learning opportunities, considering best practices under section 5 of the Student Protection and Success Act; the program is funded solely by risk-sharing payments received by the Secretary under section 454(e).

This section amends participation agreements for institutions in the Direct Student Loan Program (i.e., federal loans—including subsidized and unsubsidized Stafford loans and PLUS loans—made directly by the Department of Education to students and parents) to require acceptance of new institutional risk-sharing requirements and establishes such payments beginning in FY2028. The payment equals 2% of an institution's cohort nonrepayment loan balance—defined as the outstanding principal on Direct Loans for borrowers from the third preceding fiscal year who entered repayment, deferment, or forbearance and did not reduce principal by at least $1 over the next three fiscal years (excluding those in specified deferments or forbearances, such as graduate fellowships, half-time enrollment, military service, or Peace Corps service)—minus an adjustment for the average national unemployment rate over the prior three fiscal years multiplied by the total cohort loan balance; payments are capped at 2.5% of the institution's total annual revenues and investment returns less auxiliary enterprise and hospital revenues (per the IPEDS Finance Survey). Prior to FY2028, the Secretary must notify participating institutions annually of their projected payments if the provision were in effect.

This section directs the Secretary of Education to submit to Congress, not later than 6 months after the date of enactment of this Act, a report on (1) best practices for institutions of higher education to improve repayment rates and (2) recommendations for such institutions to improve repayment rates, with particular emphasis on those serving a high proportion of low-income students.

This section revises the data collection duties of the Statistics Center under the Education Sciences Reform Act of 2002 to require statistics on education financing and management that include, in addition to revenues and expenditures, (1) student service expenditures (i.e., instruction, information technology, and activities contributing to students’ emotional, physical, intellectual, cultural, and social development, excluding marketing, recruitment, and intercollegiate athletics); (2) student service resources (i.e., net tuition revenues, state and local appropriations, endowment income, and student housing/food service revenues less related expenditures and plant operations/maintenance); and (3) recruitment and marketing expenditures.