,,ii #aaeth ,,congress #ast ,session ,s4 #aghd ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #aa1 #bjag,mr4 ,murphy 7for himself1 ,mr4 ,blumenthal1 ,mr4 ,brown1 ,mr4 ,durbin1 ,mr4 ,franken1 ,ms4 ,harris1 and ,ms4 ,warren7 introduced the following bill2 which was read twice and referred to the ,committee on ,health1 ,education1 ,labor1 and ,pensions ,a ,,bill ,to amend the ,higher ,education ,act of #aife to improve the determination of cohort default rates and provide for enhanced civil penalties1 to ensure personal liability of owners1 officers1 and executives of institutions of higher education1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,students ,before ,profits ,act of #bjag4 #b4 ,improved determination of cohort default rates ,section #dce 7#bj ,u4,s4,c4 #ajhe7 is amended-- 7#a7 in subsection 7a77#b71 by adding at the end the following3 7,e7 7i7 ,in any case where the ,secretary has determined that the institution has engaged in default manipulation1 the ,secretary-- 7,i7 shall recalculate the cohort default rate for the institution under this section using corrected data and information1 for all fiscal years for which the default manipulation has occurred2 and 7,,ii7 using the recalculated cohort default rate1 shall redetermine whether the institution is ineligible to participate in a program under this title4 7ii7 ,in this section1 the term default manipulation means engaging in a device or practice1 such as branching1 consolidation of campuses1 consolidation or manipulation of the identification codes used by the ,office of ,postsecondary ,education to designate campuses and institutions1 change of ownership or control1 serial forbearance1 or any similar device or practice 7as determined by the ,secretary7 when1 but for the device or practice1 one or more campuses of an institution of higher education would be at risk of cohort default rate sanctions under this section or student default risk sanctions under section #dhi;,a4 2 and 7#b7 in subsection 7m77#c71 by striking through the use of and all that follows through the period at the end and inserting through default manipulation44 #c4 ,civil penalties 7a7 ,in general ,part ,g of title ,,iv of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhh et seq47 is amended by inserting after section #dhi the following3 #dhi;,a4 ,civil penalties and other remedies 7a7 ,definitions ,in this section3 7#a7 ,officer of an institution of higher education ,the term officer of an institution of higher education includes the president1 chief executive officer1 and chief financial officer of an institution of higher education or their equivalents4 7#b7 ,student default risk ,the term student default risk means a risk that is reflected as a percentage that is calculated by taking an institution's #c-year cohort default rate1 as defined in section #dce7m71 for the most recent fiscal year available1 and multiplying it by the percentage of students enrolled at such institution receiving a ,federal student loan authorized under this title during the previous academic year4 7#c7 ,substantial misrepresentation or other serious violation ,the term substantial misrepresentation or other serious violation means either of the following3 7,a7 ,a substantial misrepresentation regarding-- 7i7 the nature of the educational program of an institution of higher education2 7ii7 the financial charges of the institution2 7iii7 the space availability in a program of the institution for which a student is considering enrollment2 7iv7 the admission requirements of the institution2 7v7 the transferability of credits from the institution2 7vi7 whether a program of the institution meets the necessary standards to qualify students to sit for licensing examinations1 or obtain certification required as a precondition for employment1 in the ,state in which the students reside2 7vii7 the passage rates of students at the institution in obtaining certification requirements2 7viii7 the passage rates of students who sit for licensing examinations2 or 7ix7 the employability of the graduates of the institution4 7,b7 ,a violation as follows that is determined to constitute an unfair1 deceptive1 or abusive act or practice3 7i7 ,a violation of section #dhg7;a77#bj74 7ii7 ,a violation of the default manipulation regulations promulgated by the ,secretary under section #dce7m77#c74 7iii7 ,failure to comply with the program review process described in section #dih;,a4 7iv7 ,a violation of the program integrity regulations promulgated by the ,secretary under this ,act4 7v7 ,a violation of this ,act that the ,secretary has determined1 by regulation1 to be a serious violation for purposes of this section4 7b7 ,sanctions for substantial misrepresentations or serious violations 7#a7 ,civil penalties 7,a7 ,in general ,the ,secretary may impose a civil penalty upon an eligible institution upon making a determination1 after reasonable notice and opportunity for a hearing1 that an eligible institution has engaged in a substantial misrepresentation or other serious violation4 7,b7 ,amount of civil penalties ,a civil penalty imposed for a violation under subparagraph 7,a7 shall be not less than #ajj1jjj or-- 7i7 in the case of a first violation1 an amount equal to the product of #a1jjj1jjj multiplied by the institution's student default risk1 whichever is larger2 7ii7 in the case of a second violation1 an amount equal to the product of #b1jjj1jjj multiplied by the institution's student default risk1 whichever is larger2 and 7iii7 in the case of a third or subsequent violation1 an amount equal to the product of #c1jjj1jjj multiplied by the institution's student default risk1 whichever is larger4 7,c7 ,treatment of multiple institutions ,for the purpose of determining the number of violations under subparagraph 7,b71 any violation by a particular institution will accrue against all identification codes used by the ,office of ,postsecondary ,education to designate campuses and institutions affiliated with the institution1 and within the period of participation for the institution1 as defined in section #ffh4ac7;b7 of title #cd1 ,code of ,federal ,regulations1 or any successor regulation4 7c7 ,sanctions for other violations of this title ,upon determination1 after reasonable notice and opportunity for a hearing1 that an eligible institution has engaged in a violation of any other provision of this title1 including the failure to carry out any provision of this title1 that is not a significant misrepresentation or other serious violation1 the ,secretary may impose a civil penalty upon such institution of not more than #ajj1jjj 7subject to such adjustments for inflation as may be prescribed in regulation7 for each such violation4 7d7 ,civil penalties and sanctions for officers of institutions ,upon determination1 after reasonable notice and an opportunity for a hearing1 that an officer of an institution of higher education that participates in a program under this title has knowingly and willfully1 or with gross negligence1 violated a provision of this title1 the ,secretary may sanction the officer4 ,such sanctions may include the following3 7#a7 ,prohibiting the institution of higher education that has employed the officer of an institution of higher education and that participates in a program under this title1 or any other institution of higher education that participates in a program under this title1 from employing the officer1 except that any such prohibition under this subsection shall not be for a period of more than #e years from the date of the determination of the violation4 7#b7 ,assessing a civil penalty against an officer of an institution of higher education who has knowingly and willfully1 or with gross negligence1 violated a provision of this title1 except that any such civil penalty under this subsection shall not be greater than the amount of the officer's compensation for each year for which the violations are determined to have occurred4 ,for purposes of this paragraph1 an officer's compensation shall include proceeds of any sales of stock and any incentive-based compensation 7including stock options awarded as compensation7 based on information required to be reported to the ,secretary or any other ,federal agency during the period in which the violations are determined to have occurred4 7e7 ,limitation1 suspension1 or termination of eligibility status 7#a7 ,in general ,upon determination1 after reasonable notice and opportunity for a hearing1 that an eligible institution has engaged in a violation of any provision of this title 7including the failure to carry out any provision of this title or any regulation prescribed under such provision7 or a violation of any applicable special arrangement1 agreement1 or limitation1 the ,secretary may limit1 suspend1 or terminate the participation in any program under this title of an eligible institution1 subject to the requirements of paragraph 7#b74 7#b7 ,suspension procedures ,no period of suspension under this section shall exceed #fj days unless the institution and the ,secretary agree to an extension or unless limitation or termination proceedings are initiated by the ,secretary within that period of time4 7f7 ,emergency action 7#a7 ,in general ,the ,secretary may take an emergency action against an institution1 under which the ,secretary shall1 effective on the date on which a notice and statement of the basis of the action is mailed to the institution 7by registered mail1 return receipt requested71 withhold funds from the institution or its students and withdraw the institution's authority to obligate funds under any program under this title1 if the ,secretary-- 7,a7 receives information1 determined by the ,secretary to be reliable1 that the institution is violating any provision of this title1 any regulation prescribed under this title1 or any applicable special arrangement1 agreement1 or limitation2 7,b7 determines that immediate action is necessary to prevent misuse of ,federal funds2 and 7,c7 determines that the likelihood of loss outweighs the importance of the procedures prescribed in subsection 7e7 for limitation1 suspension1 or termination4 7#b7 ,time limitation ,an emergency action described in paragraph 7#a7 shall not exceed #cj days unless limitation1 suspension1 or termination proceedings are initiated by the ,secretary against the institution within that period of time4 7#c7 ,opportunity to show cause ,the ,secretary shall provide an institution that is the subject of an emergency action under this subsection an opportunity to show cause1 if the institution so requests1 that the emergency action is unwarranted and should be lifted4 7g7 ,lifting of sanctions ,notwithstanding any other provision of this title1 an institution of higher education that has been sanctioned by the ,secretary under this section or any other provision of this title may not have such sanctions lifted until the ,secretary has conducted a subsequent program review under section #dih;,a and has found the institution to be in compliance with this title4 7h7 ,single course of conduct2 compromise authority 7#a7 ,same course of conduct ,for purposes of this section1 acts and omissions relating to a single course of conduct shall be treated as a single violation4 7#b7 ,compromise authority ,any civil penalty under this section may be compromised by the ,secretary4 ,in determining the amount of such penalty1 or the amount agreed upon in compromise1 the ,secretary shall consider-- 7,a7 the appropriateness of the penalty to the size of the institution of higher education subject to the determination2 and 7,b7 the gravity of the violation1 failure1 or misrepresentation4 7i7 ,collection of penalty ,the amount of any penalty under this section may be deducted from any sums owing by the ,united ,states to the institution charged4 7j7 ,disposition of amounts recovered 7#a7 ,use for student relief fund ,for each fiscal year1 an amount equal to #ajj percent of the amounts recovered or collected under this section shall be deposited into the ,student ,relief ,fund established under subsection 7k74 7#b7 ,report ,the ,secretary shall regularly publish1 on the website of the ,department1 a detailed description that includes the amount of funds that were used for the ,student ,relief ,fund under paragraph 7#a74 7k7 ,student relief fund 7#a7 ,establishment ,the ,secretary shall establish a ,student ,relief ,fund 7referred to in this subsection as the ,fund7 that shall be used1 subject to the availability of funds1 to provide financial relief to any student enrolled in an institution of higher education that-- 7,a7 has failed to comply with an eligibility requirement under section #aja or #ajb or an obligation incurred under the terms of the program participation agreement under section #dhg2 or 7,b7 has been sanctioned under subsection 7b7 or 7c74 7#b7 ,treatment and availability of funds 7,a7 ,funds that are not government funds ,funds obtained by or transferred to the ,fund shall not be construed to be ,government funds or appropriated monies4 7,b7 ,amounts not subject to apportionment ,notwithstanding any other provision of law1 amounts in the ,fund shall not be subject to apportionment for purposes of chapter #ae of title #ca1 ,united ,states ,code1 or under any other authority4 7,c7 ,no fiscal year limitation ,sums deposited in the ,fund shall remain in the ,fund and be available for expenditure under this subsection without fiscal year limitation4 7#c7 ,investments 7,a7 ,amounts in fund may be invested ,the ,secretary of ,education may request the ,secretary of the ,treasury to invest the portion of the ,fund that is not1 in the discretion of the ,secretary of ,education1 required to meet the current needs of the ,fund4 7,b7 ,eligible investments ,investments shall be made by the ,secretary of the ,treasury in obligations of the ,united ,states or obligations that are guaranteed as to principal and interest by the ,united ,states1 with maturities suitable to the needs of the ,fund as determined by the ,secretary on the record4 7,c7 ,interest and proceeds credited ,the interest on1 and the proceeds from the sale or redemption of1 any obligations held in the ,fund shall be credited to the ,fund4 7#d7 ,regulations ,the ,secretary shall prescribe regulations to implement the requirements of this section within #a year after the date of enactment of the ,students ,before ,profits ,act of #bjag4 7#e7 ,authorization of appropriations ,in addition to funds derived from financial penalties assessed pursuant to subsection 7j71 there are authorized to be appropriated such sums as may be necessary to carry out this subsection for fiscal year #bjah and each of the #e succeeding fiscal years4 7l7 ,state enforcement 7#a7 ,in general ,any violation of subsection 7b71 including the regulations promulgated under such subsection1 shall be a cause of action enforceable by the ,state1 through the attorney general 7or the equivalent thereof7 of the ,state1 in any district court of the ,united ,states in that ,state or in a ,state court that is located in that ,state and that has jurisdiction over the defendant4 ,the ,state may seek any relief provided under paragraph 7#d77;,b7 for such violation1 or any remedies otherwise provided under law4 7#b7 ,notice required 7,a7 ,in general ,before initiating any action in a court or other administrative or regulatory proceeding against any institution of higher education as authorized by paragraph 7#a7 to enforce any provision of this subsection1 including any regulation promulgated by the ,secretary under this subsection1 a ,state attorney general shall timely provide a copy of the complete complaint to be filed and written notice describing such action or proceeding to the ,secretary1 except as provided in subparagraph 7,b74 7,b7 ,emergency action ,if prior notice is not practicable1 the ,state attorney general shall provide a copy of the complete complaint and the notice to the ,secretary immediately upon instituting the action or proceeding4 7,c7 ,contents of notice ,the notification required under this paragraph shall1 at a minimum1 describe-- 7i7 the identity of the parties2 7ii7 the alleged facts underlying the proceeding2 and 7iii7 whether there may be a need to coordinate the prosecution of the proceeding so as not to interfere with any action1 including any rulemaking1 undertaken by the ,secretary or another ,federal agency4 7#c7 ,regulations ,the ,secretary shall prescribe regulations to implement the requirements of this subsection and periodically provide guidance in order to further coordinate actions with the ,state attorneys general4 7#d7 ,preservation of state authority 7,a7 ,state claims ,nothing in this subsection shall be construed as altering1 limiting1 or affecting the authority of a ,state attorney general or any other regulatory or enforcement agency or authority to bring an action or other regulatory proceeding arising solely under the law in effect in that ,state4 7,b7 ,relief 7i7 ,in general ,relief under this subsection may include1 without limitation-- 7,i7 rescission or reformation of contracts2 7,,ii7 refund of moneys or return of real property2 7,,iii7 restitution2 7,,iv7 disgorgement or compensation for unjust enrichment2 7,v7 payment of damages or other monetary relief2 7,,vi7 public notification regarding the violation1 including the costs of notification2 and 7,,vii7 limits on the activities or functions of the person4 7ii7 ,exclusion ,relief under this subsection shall not include the ability to suspend or terminate the eligibility status of an institution of higher education for programs under this title4 4 7b7 ,program review and data ,section #dih;,a7b77#h7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajii;c-#a7;b77#h77 is amended by inserting and to the applicable ,state ,attorney ,general if the institution is found to have not complied with the program review process under this section after under review4 #d4 ,personal liability for officers of institutions ,section #dih7;e7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajii;c7e77 is amended-- 7#a7 in paragraph 7#d71 by striking ,the ,secretary and inserting ,except as provided in paragraph 7#g71 the ,secretary2 and 7#b7 by adding at the end the following3 7#g7 ,notwithstanding paragraph 7#d71 if the ,secretary has taken an enforcement action against a proprietary institution of higher education 7as defined in section #ajb7;b771 7which may include heightened oversight activities such as heightened cash monitoring1 provisional certification1 or requirements to obtain approval for new educational programs and locations71 the ,secretary may hold an executive officer of the institution personally liable for financial losses related to such action to the ,federal ,government1 student assistance recipients1 and other program participants for funds under this title4 4 #e4 ,government claims for discharge 7a7 ,,ffel and ,direct loan programs ,section #dcg7;c77#a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhg7;c77#a77 is amended in the first sentence by striking against the institution and its affiliates and principals and inserting against the institution1 its affiliates and principals1 and any executive officer or board member of the institution4 7b7 ,federal ,perkins loans ,section #dfd7;g77#a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajhg;dd7g77#a77 is amended by striking against the institution and the institution's affiliates and principals and inserting against the institution1 the institution's affiliates and principals1 and any executive officer or board member of the institution4 #f4 ,program participation agreement ,section #dhg7;a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajid7;a77 is amended by adding at the end the following3 7#cj7 ,in the case of a proprietary institution of higher education 7as defined in section #ajb7;b771 such institution will prohibit any individual who has been found guilty of defrauding students from being a member of the board of directors1 the chief executive officer1 or other executive officer of the institution4 4