On February 28, Senator Frank Lautenberg (D-NJ) introduced the “Students First Act” (S. 406), “A bill to amend the Higher Education Act of 1965 to provide for new program review requirements.” The bill, which was referred to the Committee on Health, Education, Labor and Pensions (HELP), was co-sponsored by that committee’s chairman, Senator Tom Harkin (D-IA), as well as Senators Richard “Dick” Durbin (D-IL) and John “Jay” Rockefeller (D-WV).
While the text is not currently available, a press release explains that the bill:
enhances the program review process, creating triggers that require the Department to conduct program reviews of institutions most at risk of violating federal law. It also strengthens existing sanctions against colleges that violate requirements of federal student aid programs knowingly and willfully, and holds executives of those institutions personally accountable.
A “fact sheet” further summarizes the key provisions of the bill. The key provisions include (1) automatic triggers to result in a program review (if an institution spends more than 20% of revenue on “recruitment and marketing” or receives more than 85% of its revenue from federal student aid sources); are (2) prioritization of program reviews for institutions based on “default rate, proportion of overall federal student aid revenue, increases in enrollment, student complaints, graduation rates, financial health, and profit margins”; (3) strengthens penalties for noncompliance (increases fines and may lower the bar for expulsion from the Title IV Program); (4) imposes personal liability on institution executives for noncompliance with Title IV; (5) and, most interestingly, “uses funds collected from penalties to provide relief to students who attended sanctioned institutions, including tuition reimbursement and loan forgiveness.”
Although all of these proposals have troubling elements (based on the summary), the last requirement is perhaps the most problematic. It is, of course, important for the Department of Education to be able to impose a penalty for noncompliance beyond mere repayment of amounts owed to the Department. This serves as an important deterrent. The problem, however, is that in directing penalties be used for “tuition reimbursement and loan forgiveness,” the bill alters the interests of the Department.
As the bill summary explains, penalties will be assessed for violations of the “program integrity regulations” — which include topics such as the payment of prohibited incentive compensation (serious, yet not very common) to improper application of satisfactory academic progress rules (not uncommon) or failing to return Title IV funds for withdrawn students in a timely manner (fairly common and often clerical mistakes) — as well as “other Title IV violations.” In sum, absent some text that significantly limits the ability of the Department to impose fines for any noncompliance, there doesn’t appear to be a violation that would not justify a penalty. Further, with the added incentive of collecting revenue to provide student loan forgiveness for students at the penalized school, it would be surprising if fines were not far more common than they are at present. Indeed, allowing the Department to provide loan forgiveness with funds obtaining through the imposition of penalties shifts the institutional interests of the Department away from merely guarding against waste of federal dollars by institutions of higher education.
Of course, the bill text may address these issues. When we get the bill text we will pass it along, as I imagine there will be a number of issues addressed there that the Fact Summary is unable to cover in compete detail. You can read the fact sheet after the jump.