Sponsors
The bill seeks to protect students and taxpayers by reducing proprietary colleges' dependence on federal aid and increasing transparency and enforcement, but it risks cutting off aid to students, prompting institutional closures or program cuts, and imposing new compliance costs and transition uncertainty on schools.
Students and taxpayers: the bill reduces incentives for proprietary colleges to rely on federal Title IV funds and creates a clear enforcement consequence (loss of Title IV eligibility) for institutions that fail the test, which aims to protect students from predatory or low‑quality providers.
Students, taxpayers, and the public: the Secretary must report annually (based on audited financials) on how much revenue schools receive from federal student aid, increasing transparency about institutions' reliance on federal funds.
Students and institutions: the bill sets a predictable effective date (the second July 1 after enactment) and gives the Secretary a defined window to issue guidance and regulations, allowing time to plan and prepare for the change.
Students at affected proprietary institutions: students at schools that fail the non‑Federal revenue test could lose access to federal Pell and loan aid for at least two years, disrupting their education and financial plans.
Employees, local communities, and students: proprietary colleges that cannot replace lost federal revenue may cut programs or staff, or close entirely, risking job losses and reduced local educational access.
Institutions and students: the detailed cash‑basis compliance, auditing, and reporting requirements (and planning costs to meet the effective date) will increase administrative costs for schools, which may be passed on to students via higher tuition or fees.
Based on analysis of 3 sections of legislative text.
Requires for‑profit colleges to derive at least 15% of revenue from non‑Federal sources (cash‑basis), bars Title IV eligibility for two years if they fail, and mandates annual reporting.
Introduced June 17, 2025 by Stephen Cohen · Last progress June 17, 2025
Requires proprietary (for‑profit) colleges that participate in federal student aid (Title IV) to get at least 15% of their revenue from non‑Federal sources using a cash‑basis test (an “85/15” rule). Institutions that fail the test become ineligible for Title IV for two institutional fiscal years and must meet statutory conditions to regain eligibility; the Department must report each proprietary institution’s Federal and non‑Federal revenue shares annually using audited financial statements. Also reorganizes and repeals an existing subsection of current Title IV rules and updates cross‑references in related statutes. The substantive changes take effect at the start of the second full federal student‑aid award year after enactment, with annual reporting beginning the following award year.