H.R. 4026: Protecting Our Students and Taxpayers Act of 2025

The Protecting Our Students and Taxpayers Act of 2025 aims to amend the Higher Education Act of 1965, specifically focusing on proprietary institutions of higher education. The bill introduces measures to ensure that these institutions derive a significant portion of their revenue from sources other than federal education assistance funds, thus attempting to protect students and taxpayers from reliance on federal funding.

Key Provisions

• Revenue Requirement: The bill enforces a rule known as the 85/15 rule, which requires for-profit colleges to obtain at least 15 percent of their revenue from non-federal education assistance sources. This means they must show that a portion of their income comes from student tuition, fees, or other charges instead of just federal funds.
• Definitions:
  • Defines "alternative financing agreements" and "federal education assistance funds" to clarify what constitutes acceptable source of income for these institutions.
• Eligibility: If a proprietary institution fails to meet the revenue requirement for a fiscal year, it becomes ineligible for federal funding for at least two years. To regain eligibility, the institution must comply with all certification requirements for two consecutive fiscal years.
• Reporting Obligations: The Secretary of Education will be required to report to Congress annually, detailing each proprietary institution's revenue sources, emphasizing the balance between federal assistance and private funding.
• Definitions of Income: The bill specifies what counts as revenue, including tuition and fees from enrolled students, funds generated from educational activities, and certain scholarships. It excludes loans made by institutions and other closely controlled financing arrangements.
• Earnings from Income Share Agreements: The bill stipulates conditions under which income share agreements can contribute to a school’s revenue, emphasizing transparency with clear disclosures on costs and repayment terms for students.

Repeal of Existing Requirements

The legislation also proposes the repeal of several existing provisions related to the eligibility and certification of proprietary institutions, streamlining the requirements within the Higher Education Act of 1965.

Conforming Amendments

Conforming amendments throughout the Higher Education Act of 1965 will be made to ensure consistency with the new measures introduced by this bill.

Effective Date

The amendments proposed by this Act will take effect on the second full award year following its enactment.

Impact on Proprietary Institutions

Overall, the intention of the bill is to impose stricter financial accountability on proprietary educational institutions, necessitating a more diversified revenue model away from dependence on federal funds, thus aiming to improve the financial stability and educational quality for students.

Relevant Companies

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