Students Not Profits Act of 2026
- Sponsor
- Rep. Jayapal, Pramila [D-WA-7]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Sep 24, 2026
Bottom line
The bill aims to redirect federal student aid exclusively to public and nonprofit institutions, enhance accountability for institutional failures, and protect students from predatory practices often associated with for-profit colleges.
What it actually does
This bill significantly amends the Higher Education Act of 1965 by largely excluding for-profit institutions from eligibility for federal student aid programs under Title IV. It redefines "institution of higher education" to remove proprietary institutions and introduces new eligibility requirements and limitations based on institutional practices and management history. The bill also establishes a rigorous process for for-profit institutions to convert to nonprofit status and imposes personal liability on executives for financial losses to the federal government due to institutional closures or successful borrower defense claims.
Proponents argue
Supporters argue that the bill protects students from predatory for-profit institutions that often leave students with high debt and poor job prospects, while disproportionately benefiting from federal funds. They contend that federal aid should only support institutions focused on educational outcomes, not shareholder profits, and that the bill enhances accountability and safeguards taxpayer money by holding executives personally responsible for institutional failures.
Opponents contend
Opponents might argue that the bill limits student choice, particularly for non-traditional students who may find for-profit institutions more flexible or specialized. They could also contend that it unfairly targets an entire sector, potentially leading to job losses and reducing competition in higher education, and that existing regulations are sufficient to address bad actors without a blanket ban that harms legitimate institutions.
The bill is moderately complex due to extensive amendments and cross-references, requiring careful reading to understand its full implications.
Section 2(1), amending HEA Section 101(a) and (b)
Exclusion of For-Profit Institutions from Federal Student Aid Eligibility
This provision removes the language that allowed for-profit institutions to be considered 'institutions of higher education' for most federal student aid programs under Title IV of the Higher Education Act. By striking 'other than title IV,' from the definitions, the bill effectively makes for-profit institutions ineligible for the vast majority of federal student financial assistance, including Pell Grants and federal student loans.
Supporters argue
Proponents argue that this change ensures federal taxpayer dollars are directed only to institutions primarily focused on educational outcomes rather than profit generation, thereby protecting students from predatory practices and reducing the risk of loan defaults associated with low-quality programs.
Critics contend
Opponents contend that this provision unfairly restricts student choice, particularly for non-traditional students who may rely on the flexibility and specialized programs offered by for-profit institutions. They argue it could lead to reduced access to education and job training for certain populations.
Tradeoffs
The provision balances the goal of protecting students and taxpayer funds from potentially exploitative practices against concerns about limiting educational options and market competition in the higher education sector.
Section 2(1)(D), adding HEA Section 101(d)
New Enrollment and Program Requirements for Eligibility
This section introduces new conditions for all institutions to be considered eligible for federal student aid. These include limiting distance education enrollment to 50% of all students (with an exception for public/nonprofit technical schools), limiting incarcerated student enrollment to 25%, and limiting enrollment of students without a secondary diploma to 50%. Additionally, non-degree programs using Title IV funds must prepare students for gainful employment in a recognized occupation.
Section 2(1)(D), adding HEA Section 101(e)
Limitations on Eligibility Based on Management History
This provision makes an institution ineligible for federal student aid if the institution or an affiliate has filed for bankruptcy. It also disqualifies an institution if its owner, CEO, or any executive officer has been convicted of, or pled guilty/nolo contendere to, a crime involving Title IV funds, committed fraud or misrepresentation with Title IV funds, engaged in predatory recruitment, violated state consumer protection laws related to Title IV, or was previously involved with a closed Title IV-funded institution.
Section 4, amending HEA Section 487(a)(20)
Prohibition on Tuition Sharing for Recruitment Services
This amendment explicitly prohibits institutions from making payments to unaffiliated persons or entities for recruitment services if the amount of the payment is based on the tuition generated for the institution by those services. This expands the existing prohibition on incentive compensation for recruitment, aiming to prevent indirect forms of payment that could incentivize aggressive or misleading recruitment practices.
Section 5, amending HEA Section 498(e)
Mandatory Personal Liability for Executives
This provision mandates that individuals who exercise substantial control over an institution assume personal liability for financial losses to the federal government, student aid recipients, and other program participants. This liability would be triggered by loan discharges under section 437(c) due to institutional closure or successful borrower defense claims under section 455(h). The Secretary is directed to determine who exercises 'substantial control' for this purpose.
Section 7, adding HEA Section 124
Integrity of Nonprofit Institutions and Conversion Process
This section establishes a new, stringent process for institutions to convert to nonprofit status and be approved by the Secretary of Education. It requires demonstrating true nonprofit status, ensuring assets were not acquired from former owners for more than their value, prohibiting substantial economic benefit to governing board members, requiring 501(c)(3) tax-exempt status, and ensuring core functions are not controlled by a for-profit entity. Converted institutions remain subject to proprietary rules for 5 years.
Section 7, adding HEA Section 124(h)
Establishment of Office to Monitor Nonprofit Integrity
This provision mandates the Secretary of Education to establish an office within the Department of Education, within one year of the bill's enactment, specifically tasked with monitoring the integrity of nonprofit institutions of higher education. This office would possess the necessary expertise to carry out the responsibilities outlined in the new Section 124.
This subsection creates a 'conclusive presumption' that an entity (other than the institution itself) exercises 'significant direction' over an institution if one or more of the entity's employees or owners serve as an officer, board member, or hold similar authority for the institution.
Section 2(1)(D), adding HEA Section 101(c)
Why it matters:This is a technical but critical detail for preventing 'sham' nonprofit conversions. Its placement is standard legislative practice for defining terms and conditions within a new statutory framework.
Case for: Proponents argue this clear-cut rule is essential to prevent former for-profit owners or related entities from maintaining de facto control over a supposedly converted nonprofit institution, thereby ensuring genuine independence and preventing conflicts of interest.
Case against: Opponents might argue that this presumption is overly broad and could prevent legitimate collaborations or transitions where individuals with prior experience might serve on a new nonprofit board without exerting undue control.
Estimated impact: This provision will significantly impact the structure of any for-profit institution attempting to convert to nonprofit status, requiring a complete severance of management ties to former for-profit owners or affiliates.
This section contains numerous technical amendments throughout the Higher Education Act of 1965, striking references to Section 102 (which is repealed by this bill) and updating cross-references to other sections (e.g., changing 'subsection (e)' to 'subsection (d)' in Section 487).
Section 6, Conforming Amendments
Why it matters:This is standard legislative practice to ensure consistency and accuracy across the U.S. Code when major sections are repealed or renumbered. While technical, these changes are crucial for the bill's operability.
Case for: Proponents argue these amendments are necessary to ensure the legal coherence of the Higher Education Act after the significant changes to institutional definitions and eligibility, preventing confusion and legal challenges.
Case against: No specific opposition is typically raised against conforming amendments themselves, as they are technical necessities. Any opposition would be to the underlying substantive changes they reflect.
Estimated impact: These amendments collectively ensure the legal framework of federal student aid programs aligns with the bill's core policy changes, making the exclusion of for-profit institutions and new eligibility rules legally sound.