H.R. 8009: Student Protection and Success Act

This bill, known as the Student Protection and Success Act, aims to modify the Higher Education Act of 1965 with several key provisions related to the financial performance of higher education institutions and the management of federal student loans.

Institutional Ineligibility Based on Repayment Rates

Beginning in fiscal year 2028, if a higher education institution has a "cohort repayment rate" of 15 percent or lower, it will be ineligible to participate in federal financial aid programs for that fiscal year and the following two years. The cohort repayment rate is defined as the percentage of borrowers who make progress in repaying their loans. Institutions can appeal this loss of eligibility if they believe the calculated repayment rate is inaccurate, and they may continue participation during the appeal if they can demonstrate that their repayment rate would exceed 15 percent upon recalculation. If an appeal fails, the institution must repay any loan amounts disbursed during the appeal process.

Definition and Calculation of Cohort Repayment Rate

The cohort repayment rate is determined differently based on the number of borrowers at an institution:

• If there are 30 or more borrowers, the rate includes those who are not in default and who reduce their loan principal by at least one dollar within two years of repayment.
• If there are fewer than 30 borrowers, it includes all borrowers who entered repayment in the three previous years.

Certain borrowers, such as those in deferment due to military service or specific educational programs, are excluded from this calculation. Additionally, repayment rates will be published by the Secretary of Education.

Ineligibility in Other Programs

Institutions will also lose eligibility for Pell Grants and student loan insurance programs if they are found ineligible under the program pertaining to cohort repayment rates. This includes provisions that will ensure that any ineligibility based on repayment rates affects all federal financial aid areas.

College Opportunity Bonus Program

The bill establishes a College Opportunity Bonus Program starting in fiscal year 2028, where the Secretary of Education will award grants to higher education institutions that demonstrate strong support for improving access and success for low- to moderate-income students. Eligible institutions must have a cohort repayment rate greater than 25 percent. The Secretary will determine the amount and distribution of these grants based on criteria such as the number of Pell Grant recipients and service expenditures related to student support.

Risk-Sharing Payments

Institutions participating in the federal student loan program will be required to remit risk-sharing payments beginning in fiscal year 2028. These payments are based on a calculated "cohort nonrepayment loan balance," which includes loans from borrowers who have not made a principal reduction in three consecutive years. The payment amount will be set at 2 percent: however, it cannot exceed 2.5 percent of the institution's total annual revenues, excluding certain types of income.

Notification and Reporting Requirements

The Secretary of Education must provide notifications each fiscal year regarding repayment statistics to institutions at risk of losing eligibility and also must submit regular reports on best practices for improving repayment rates, focusing particularly on institutions serving low-income students.

Student Service Expenditures

The bill mandates that expenditures related to student services must focus on the well-being and educational development of students and excludes marketing or recruitment costs.

Relevant Companies

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