H.R. 2271: Change of Ownership and Conversion Improvement Act

This bill, known as the Change of Ownership and Conversion Improvement Act, aims to amend the Higher Education Act of 1965 to streamline the process for institutions of higher education that undergo changes in ownership or convert from proprietary status to nonprofit status. Here’s a breakdown of its key components:

Findings

The bill begins with several findings indicating that:

• Higher education institutions often merge or acquire others, leading to changes in ownership.
• These changes can benefit students by fostering innovation and competition.
• Future demographic trends may lead to more mergers and acquisitions.
• Conversions of proprietary institutions to nonprofit status can positively affect students and society.
• The Department of Education (ED) needs to review ownership changes to protect federal student aid funds, ensuring that acquiring entities can effectively manage the institutions.

Review Process Modification

The bill proposes to enhance the review process for changes of control in educational institutions by:

• Allowing institutions to seek a pre-transaction determination on whether they meet eligibility requirements before a change in ownership.
• Setting a mandated review time frame of 90 days for the Department of Education to approve or deny applications, or automatic approval if not acted upon in time.
• Imposing fees on applications for ownership changes to cover processing costs and expedite reviews. The fees would be based on a percentage of the institution’s revenue.

Funding for Reviews

The bill suggests that the fees collected from institutions would specifically fund the processing of applications and additional staffing at the Department of Education to improve the speed and thoroughness of reviews.

Monitoring and Compliance

Institutions converting from proprietary to nonprofit status would be subject to a five-year monitoring period to ensure compliance with federal standards:

• Annual fees would be charged for this monitoring, also based on institutional revenue.
• Detailed reports may be required from monitored institutions, ensuring adherence to laws and standards.

Provisions for Ownership Changes

The bill outlines specific provisions for institutions undergoing ownership changes, including:

• Defining "conversion" as a process where proprietary institutions transition to becoming recognized as public or nonprofit institutions.
• Requirements ensuring that the transactions are transparent and fair, particularly in avoiding conflicts of interest.
• Instituting penalties for institutions that misrepresent themselves as nonprofit before official designation is granted.

Reporting and Assessment

Within 270 days of enactment, the Secretary of Education is required to publish guidelines on the submission of application materials. Additionally, the Secretary must provide annual reports detailing the efficiency of the review process and any recommendations for improvements. The Government Accountability Office will also review and report on the implementation of these amendments five years after the bill's enactment.

Implementation Timeline

The amendments will officially apply to applications for change of control or conversion submitted starting January 1, 2026.

Relevant Companies

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