S. 994 — PROTECT Students Act of 2025

This section revises the definitions of (1) institution of higher education under 20 U.S.C. 1001(b)(1), (2) proprietary institution of higher education under 20 U.S.C. 1002(b)(1)(A)(i), (3) postsecondary vocational institution under 20 U.S.C. 1002(c)(1)(A), and (4) eligible program under 20 U.S.C. 1088(b)(1)(A)(i) to condition inclusion of programs of training to prepare students for gainful employment in a recognized occupation on meeting debt-to-earnings and earnings premium standards in new section 498C. (These definitions determine eligibility to participate in federal student aid programs under Title IV of the Higher Education Act of 1965.) The section adds section 498C to establish those standards, under which a gainful employment program fails if, in 2 out of 3 consecutive years, it has both a discretionary debt-to-earnings rate of 20% or greater (annual loan payment divided by discretionary earnings, i.e., median annual earnings minus 150% of the poverty level) and an annual debt-to-earnings rate of 8% or greater (annual loan payment divided by median annual earnings), or an earnings premium of zero or negative (median annual earnings of program completers, measured 2-4 years post-completion, minus median earnings of high school graduates in the state or nationally). Section 498C further requires the Secretary of Education to annually calculate and publish the rates and premium using matched data from the IRS, Social Security Administration, and other agencies and, for gainful employment programs and certain graduate or professional programs, to issue notices of determination within 45 days of data matching (appealable only for calculation errors). (Thus, failing programs lose Title IV eligibility.)

This section revises the borrower defense to repayment provision for Direct Loans under section 455(h) of the Higher Education Act (HEA) (20 U.S.C. 1087e(h)) by requiring the Secretary of Education to discharge a covered loan (i.e., a Direct Loan with an outstanding balance from costs of attendance at an institution of higher education) in repayment upon a preponderance-of-evidence determination that a qualifying act, omission, or event by the institution caused detriment to the borrower 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, discouraging advisors, abusive language, or repeated unsolicited contact); (4) a favorable judgment against the institution relating to the loan or services; (5) a Secretary sanction based on related acts; or (6) any state-law cause of action relating to the loan or services. (As background, HEA borrower defense rules allow students defrauded by their schools to seek loan discharge, previously limited primarily to misrepresentations.) To effectuate discharge, the Secretary must (1) forgive loan principal, interest, and fees (prorating for partial consolidation loans); (2) reimburse prior payments; (3) clear any default status; (4) delete adverse credit reports; and (5) exclude the loan and related grants from the borrower's record for future aid eligibility calculations.

This section revises closed school loan discharge provisions (i.e., forgiveness of Federal Family Education Loan Program loans if a borrower's institution closes, falsely certifies eligibility, or fails to refund loan proceeds) to also cover Federal Direct Loans and expand eligibility as follows: (1) discharge if the institution ceased educational instruction entirely or for programs in which more than 50% of students were enrolled, or if the borrower was enrolled within 180 days before closure; (2) authorization for the Secretary of Education to extend the 180-day period for exceptional circumstances (e.g., accreditor probation, heightened cash monitoring, legal violations, extended teach-out plans, or partial closures); (3) automatic discharge without borrower application one year after closure for students who did not complete the program; and (4) requirement that the Secretary pursue available claims against the institution and affiliates after discharge. (Thus, more borrowers, including those enrolled shortly before closure or affected by institutional issues short of full closure, qualify for loan forgiveness without needing to apply.)

This section excludes enrollment agreements between students and institutions of higher education (IHEs) from enforcement under the Federal Arbitration Act (Chapter 1 of title 9, U.S. Code). It further amends the program participation agreement requirements under section 487(a) of the Higher Education Act of 1965 (HEA) by (1) prohibiting IHEs from requiring or enforcing any limitation or restriction—including on applicable law, jury trial, or venue—on a student's ability to pursue claims in court and requiring written notification to students that such provisions are unenforceable (new subparagraph (30)); and (2) prohibiting IHEs from withholding official transcripts due to a balance owed by the student and requiring provision of transcripts upon request (new subparagraph (31)). (As background, section 487(a) specifies conditions IHEs must meet to participate in federal student aid programs under HEA title IV.) This section also establishes a private right of action for students or former students of an IHE—individually or on behalf of a class—in federal or state court against the IHE, its third-party servicers, or contractors for (1) substantial misrepresentations (including omissions); (2) HEA section 487(a)(20) violations (incentive compensation); (3) default rate regulation violations; or (4) program integrity regulation violations (including under HEA sections 102, 455, and part H); with remedies including actual damages, additional damages, costs, reasonable attorney's fees, and punitive damages up to threefold actual damages (plus costs and fees) upon a finding of actual or constructive knowledge or reckless disregard.

This section (1) revokes Department of Education Example 2–B of Question 2 from Dear Colleague Letter GEN–11–05 (March 17, 2011), which interpreted the Higher Education Act's (HEA) incentive compensation ban; (2) prohibits the Department from issuing regulations or subregulatory guidance establishing exceptions to the HEA ban on incentive payments to employees based on student enrollment or financial aid secured (20 U.S.C. 1094(a)(20)); and (3) requires institutions participating in federal student aid programs to attest to the Secretary of Education, not later than one year after enactment, that they comply with the ban notwithstanding the revoked guidance—with the Secretary revoking the institution's program participation agreement if noncompliant as of enactment—and to provide annual verification from an independent auditor thereafter. (As background, the HEA incentive compensation ban applies to institutions eligible for federal student aid programs to prevent recruitment abuses; the revoked example permitted certain compensation structures now expressly overridden.)

This section expands the activities that qualify an entity as a third-party servicer—i.e., an entity under contract with a postsecondary institution to administer aspects of federal student aid programs under title IV of the Higher Education Act of 1965—to include delivery of funds under title IV, recruitment or retention of students, compliance with cohort default rate requirements, development and delivery of instructional content, and other activities specified by the Secretary.

This section directs the Secretary of Education to establish a single, uniform definition of "job placement rate" under the Higher Education Act (HEA) to ensure consistent determinations across institutions and accrediting agencies. It requires institutions advertising or disclosing job placement rates—or required to report them to accreditors, state authorizers, or regulators—to use that definition and provide prospective students, at or before application, with the most recent employment and graduation statistics, calculation methodology, and relevant state licensing requirements. It mandates accrediting agencies to incorporate that definition in their standards for institutional recognition. The amendments are not subject to HEA negotiated rulemaking requirements.

This section establishes new financial responsibility standards under the Higher Education Act for institutions of higher education participating in Title IV programs (i.e., federal student aid programs such as Pell Grants and Direct Loans). Specifically, it requires each institution to spend not less than 30% of tuition and fee revenue (net of allowances and discounts) on instruction beginning in academic year 2026–2027 through 2031–2032; directs the Secretary of Education to issue annual reports from academic year 2027–2028 through 2030–2031 using data from institution reports under section 132(l) (i.e., Integrated Postsecondary Education Data System) on instructional spending, student services spending (excluding advertising, recruiting, marketing, executive compensation, lobbying, and pre-enrollment expenses), net tuition revenue, median increases in combined instructional and student services spending relative to tuition revenue, and other relevant metrics; requires the Secretary in academic year 2031–2032 to establish by regulation a minimum threshold percentage (not less than 30%, and consistent with the three-year average median increase identified in the reports) for combined spending on instruction and student services, which institutions must meet beginning academic year 2031–2032 and thereafter; directs the Secretary to establish warning thresholds for at-risk institutions and require them to notify prospective and enrolled students of low instructional spending; and authorizes the Secretary to issue implementing regulations. (Thus, noncompliance may result in ineligibility for Title IV participation.)

This section requires institutions participating in Title IV higher education programs (i.e., federal student grants and loans) to agree, as a condition of eligibility, not to knowingly employ or contract with certain individuals or entities with adverse past performance. Specifically, under new subparagraph (C), institutions must not employ individuals who previously served as owners, directors, officers, or substantial-control employees of an institution that owes a liability. Under new subparagraph (D), institutions must not (1) employ individuals who were owners, directors, officers, or employees of institutions found to have engaged in fraud, misuse of funds, or material violations of law; had Title IV participation terminated, certification revoked, or certification applications denied; or were 10% or higher equity owners, directors, officers, principals, executives, or affiliated contractors of institutions that incurred Title IV fund losses exceeding 5% of their annual Title IV funds, as determined by the Secretary; or (2) contract with institutions, third-party servicers, individuals, agencies, or organizations (or their owners, officers, or employees) with similar adverse histories.

This section revises the program participation agreement (PPA) requirements under the Higher Education Act for institutions to participate in federal student aid programs by (1) clarifying the Secretary of Education's authority under section 487(c)(1)(F) to limit, suspend, or terminate an institution's participation, recoup liabilities established under new section 493E, or impose civil penalties for violations (with suspensions limited to 60 days absent agreement or proceedings); (2) adding section 493E to Part G of title IV, which requires the Secretary to assess liabilities against institutions and seek recoupment of funds provided under title IV due to student loan discharges (e.g., borrower defense claims), program review or audit findings, or other misconduct or noncompliance (with waiver authority based on individual circumstances); and (3) requiring proprietary institutions' authorized representatives and, if applicable, owners with substantial control to sign the PPA, 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 (i.e., the discrete management unit responsible for administering federal student financial assistance programs under Title IV of the Higher Education Act, such as Pell Grants and Direct Loans). The unit, led by a Chief Enforcement Officer who reports directly to the PBO's Chief Operating Officer and is eligible for performance-based bonuses, must (1) receive, process, and investigate allegations of misconduct by institutions of higher education (IHEs), third-party servicers, and loan servicers, including through secret shopping and incentive compensation audits; (2) enforce Title IV compliance via emergency actions, limitation/suspension/termination (LST) proceedings, or civil penalties; (3) coordinate with federal/state agencies; and (4) hire 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, fines/LST actions, compliance monitoring of all Title IV IHEs and servicers, and others as needed; the Chief Enforcement Officer may recommend termination/suspension/limitation/provisional certification of IHEs/servicers, civil penalties, servicer contract actions, or borrower defense decisions.

This section establishes the For-Profit Education Oversight Coordination Committee in the executive branch to coordinate federal oversight of for-profit institutions of higher education, including improving enforcement of federal laws, protecting students from unfair or predatory practices, sharing information via binding memoranda of understanding, coordinating with state agencies (including State approving agencies designated under 38 U.S.C. 3671, which approve educational programs for VA benefits such as the GI Bill), and developing best practices for consumer information dissemination. The committee comprises the heads (or designees) of 10 federal entities—the Departments of Education, Justice, Defense, Veterans Affairs, and Labor; Bureau of Consumer Financial Protection; Securities and Exchange Commission; Federal Trade Commission; Internal Revenue Service; and Department of Education Performance-Based Organization enforcement unit—plus others at the chairperson's discretion; is chaired by the Secretary of Education (or designee); meets quarterly among members and annually with state agencies, State approving agencies, veterans service organizations, and consumer advocates; and requires the chairperson to appoint a full-time executive director and additional staff.

This section establishes a complaint tracking system under a new section 161 of the Higher Education Act (HEA) to be operated by the Secretary of Education, in coordination with the Student Loan Ombudsman, via a toll-free telephone number and website 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. (As background, third-party servicers assist IHEs in administering federal student aid; the system permits anonymous complaints—including systemic issues not tied to specific students or IHEs—from students, borrowers, staff, or the public; forwards complaints to relevant parties; requires those parties to respond to complainants and the Secretary within 60 days; mandates Secretary responses to complainants within 90 days; enables trend analysis; and requires information provision by parties subject to exceptions for confidential data.)

This section revises institutional eligibility and certification procedures under the Higher Education Act of 1965 for participation in federal student aid programs (Title IV). Specifically, it requires the Secretary of Education, when determining eligibility, to (1) mandate demonstration of full compliance with all Title IV provisions for non-provisional certification; (2) deny continued participation absent such compliance; and (3) deem ineligible any institution out of compliance with program participation agreement requirements under section 487(a)(16) (20 U.S.C. 1094(a)(16)); prohibits automatic certification or recertification due to administrative delays; and expands authority for site visits. This section further modifies provisional certification of high-risk institutions by adding as triggers (1) violation of any Title IV requirement or program participation agreement terms and (2) a Secretary determination of significant risk to students or taxpayers (in addition to prior triggers of recent change of ownership/control, prior provisional certification within five years, or high cohort default rates); authorizes additional conditions on provisionally certified institutions; and directs termination of such institutions' participation for program participation agreement violations, substantial misrepresentations, or final findings of state or federal consumer protection law violations. This section applies the False Claims Act (31 U.S.C. 3729-3733) to institutions submitting misrepresentations or false claims on Title IV fund applications or knowingly failing to comply with program participation agreements, with damages measured as total Direct Loan (part D) funds distributed from the violation date through final decision. It also revises program participation agreement certification language to affirm institutional compliance with all agreement terms and applicable federal laws/regulations (violation of which constitutes material noncompliance with payment conditions) and to require evidence of state operating authority.

This section revises the definition of "institution of higher education" (i.e., entities eligible for federal student aid programs under Title IV of the Higher Education Act) to add a new requirement in subsection (a)(3) that, if providing distance education or correspondence courses in a state where the institution is not located, the institution must either meet that state's requirements for offering postsecondary education or, if authorized pursuant to an interstate reciprocity agreement, satisfy three conditions: (1) enroll fewer than 200 students annually in that state; (2) operate under an agreement allowing states to enforce all non-registration and non-fee laws against out-of-state institutions; and (3) have eligibility decisions made exclusively by representatives of member state regulatory agencies or attorneys general offices. It makes conforming changes to cross-references in subsections (a)(4)-(6), (b)(1), and related provisions in 20 U.S.C. 1002 (defining proprietary institutions of higher education).

This section adds a new criterion (paragraph (10)) to the requirements accrediting agencies must meet for recognition by the Secretary of Education as reliable authorities on the quality of higher education or training for federal purposes, including Title IV student aid eligibility. The new criterion requires such agencies to (A) assess risks to students from institutions, programs, and third-party servicers (i.e., entities that manage student-facing services such as enrollment or financial aid processing) using Secretary-provided factors; (B) determine whether additional oversight or action is warranted for each; and (C) provide adequate monitoring of their quality and risk.

This section revises funding for administrative costs of the William D. Ford Federal Direct Loan Program by establishing permanent mandatory funding each fiscal year from funds not otherwise appropriated, capped at 5 percent of the average outstanding loan portfolio under the program from the preceding fiscal year (previously, discretionary authorization of such sums as necessary through FY2014). Funds remain available until expended and may be carried forward to subsequent fiscal years. No funds may be expended without a detailed budget justification in the Department's annual congressional budget request describing prior-year uses, planned activities and costs for the current year, and projected costs for the following year.

This section requires additional disclosures and reporting from institutions of higher education (IHEs) receiving Title IV federal student aid funds, as follows: (1) amends the gainful employment transparency requirements to direct IHEs to provide warnings, as specified by the Secretary of Education, to prospective and enrolled students regarding any gainful employment program or graduate or professional degree program that fails to meet debt-to-earnings standards under such section, and to require prospective students to acknowledge receipt of the warning; also requires IHEs to disclose to students the link to a specified website with program data; (2) directs the Secretary to define instructional expenditures separately for instruction, student services, marketing, recruitment, advertising, lobbying, and related pre-enrollment activities (excluding the latter from instruction and student services counts), and requires IHEs to report total Title IV funds received, the proportions spent on recruitment and marketing versus instruction and student services, and—for each program or division—the tuition price relative to revenues allocated to instruction and student services, with such data disclosed publicly by the Secretary on the College Navigator website (which provides IHE cost, aid, and outcome information to students and families); (3) requires annual IHE reporting to the Secretary on third-party servicers contracted for program support—including servicer names, programs and services supported, enrollment numbers, student loan products offered, and marketing/recruitment/advertising expenditures—and prominent disclosures of servicer relationships in advertisements, marketing, and websites (with servicer employees identifying themselves as such to students); further requires annual reporting of expenditures to secure enrollments in online, on-campus, and hybrid programs (relative to total expenditures), student aid recipient enrollment modalities (to enable calculation of enrollment, retention, completion, borrowing, repayment, and median earnings by program), and annual net prices by program; and (4) requires proprietary IHEs to promptly file with the Secretary all public filings submitted to the Securities and Exchange Commission.

This section requires the Secretary of Education to publicly disclose and regularly update specified oversight information, including— (1) borrower defense claims filed and discharges granted under section 455(h), 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) proprietary institutions' 90/10 data (i.e., revenue from non-title IV sources) on the Department website, including notices and explanations for any temporary omissions on the College Navigator website; (3) applications for, and decisions on, institutional changes of ownership or conversions from proprietary to nonprofit status; (4) for title IV-participating institutions, annual audited financial statements (including any failures to submit), terms and changes to required financial guarantees (e.g., letters of credit), related communications, and decisions imposing or removing heightened cash monitoring or other financial protections; (5) each institution's full program participation agreement and certification status (provisional, temporary provisional, or expired); and (6) Department recognition and monitoring reports for accrediting agencies, plus reports and exhibits submitted by accrediting agencies during recognition reviews, and requires accrediting agencies to publicly post and submit to the Department their communications to institutions on adverse actions (e.g., probation, show-cause orders, limits on enrollment or programs).