H.R. 8009 — Student Protection and Success Act

This section establishes institutional ineligibility to participate in the Federal Direct Loan program (i.e., Direct Stafford, Unsubsidized Stafford, PLUS, and Consolidation Loans) for any fiscal year beginning with FY2028—and the two succeeding fiscal years—if the institution's cohort repayment rate is 15% or less. It defines cohort repayment rate as the percentage of borrowers (or, for cohorts under 30 borrowers entering repayment, those plus the prior three fiscal years' cohorts) entering repayment on such loans who, by the end of the second fiscal year thereafter, are not in default and have reduced principal by at least $1 (excluding borrowers in specified deferments or forbearances, such as for half-time enrollment, military service, or Peace Corps); requires the Secretary of Education to publish these rates and notify at-risk institutions annually through FY2027; and permits appeals within 30 days, with continued participation possible pending recalculation and repayment of loans disbursed during unsuccessful appeals. The section further applies this ineligibility to Federal Pell Grants beginning FY2028 by (1) limiting existing default rate-based ineligibility to through FY2027, (2) expanding the Pell appeal process to cover repayment rate determinations, and (3) prohibiting eligibility for institutions ineligible under the new Direct Loan provision.

This section establishes the College Opportunity Bonus Program, under which the Secretary of Education awards grants beginning in FY2028 to eligible institutions of higher education (i.e., those with a cohort repayment rate greater than 25%, as defined in section 455(r)(3) of the Higher Education Act of 1965). Grants are awarded to institutions with a strong record of improving affordability and access for low- and moderate-income students and must be used to supplement (not supplant) state and institutional funds for (1) additional need-based aid to Federal Pell Grant-eligible students, (2) enhanced academic and student support services, and (3) accelerated learning opportunities, considering best practices under section 5 of the Student Protection and Success Act. Grant amounts are determined by a formula equally weighting (A) the number and percentage of Pell Grant-eligible students, (B) their cohort repayment rate, and (C) the institution's student service expenditures as a percentage of its student service resources, capped at 2.5% of the institution's total annual revenues and investment returns minus auxiliary enterprise revenues and hospital revenues (per the IPEDS Finance Survey). The program is funded solely by risk-sharing payments received by the Secretary under section 454(d) (i.e., payments from institutions based on student loan borrower outcomes).

This section requires institutions of higher education participating in the Direct Student Loan Program to accept institutional risk-sharing requirements in their participation agreements and establishes annual risk-sharing payments to the Secretary of Education beginning in FY2028 (and notification of projected payments from the first year data are available after enactment through FY2027). The payment equals 2% of an institution's cohort nonrepayment loan balance—defined as the outstanding principal on Direct Loans to borrowers attending the institution who entered repayment, deferment, or forbearance in the third preceding fiscal year and who did not reduce their principal by at least $1 over the next three consecutive fiscal years (excluding borrowers in specified deferments or forbearances, such as for graduate fellowships, half-time enrollment, qualifying service for loan discharge or cancellation, active duty military service during war or emergency, mandatory forbearance, or Peace Corps or Domestic Volunteer Service Act volunteer service)—minus an amount equal to the cohort loan balance (total principal entering repayment etc. in the third preceding fiscal year) multiplied by the average national unemployment rate over the prior three fiscal years; such payment is capped at 2.5% of the institution's total annual revenues and investment returns less auxiliary enterprise revenues and hospital revenues (per the IPEDS Finance Survey for the most recent audited fiscal year). (Thus, institutions with higher nonrepayment rates after unemployment adjustment must pay more to the federal government to share financial risk for poor student loan outcomes.)

This section directs the Secretary of Education, not later than six months after enactment, to submit to Congress a report on (1) best practices for institutions of higher education to improve repayment rates and (2) recommendations for such institutions to improve repayment rates, with particular emphasis on those serving a high proportion of low-income students.

This section revises the general duties of the National Center for Education Statistics to require collection, analysis, and dissemination of data on education financing and management beyond revenues and expenditures, specifically including (1) student service expenditures (i.e., instruction, information technology, and other activities contributing to students’ emotional, physical, intellectual, cultural, and social development inside or outside formal instruction, excluding marketing, recruitment, or intercollegiate athletics); (2) student service resources (i.e., an institution’s resources reasonably allocable to student services, including net tuition revenues, state and local appropriations, endowment income, and revenues from student housing and food services less related expenditures and plant operations and maintenance); and (3) recruitment and marketing expenditures. (As background, the center collects and reports comprehensive statistics on U.S. education at all levels to inform federal, state, and local policymaking.)