I
119THCONGRESS
1
STSESSION H. R. 2271
To amend the Higher Education Act of 1965 to modify the application
and review process for changes of control, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH21, 2025
Mr. O
WENSintroduced the following bill; which was referred to the Committee
on Education and Workforce
A BILL
To amend the Higher Education Act of 1965 to modify
the application and review process for changes of control,
and for other purposes.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Change of Ownership 4
and Conversion Improvement Act’’. 5
SEC. 2. FINDINGS. 6
Congress finds the following: 7
(1) Institutions of higher education in the 8
United States frequently merge with, consolidate, 9
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and acquire other institutions that result in a 1
change in ownership. 2
(2) These transactions are generally good for 3
students, as they promote innovation, drive competi-4
tion, and prevent stagnation. 5
(3) Changing demographics and evolving higher 6
education enrollment patterns may lead to more 7
mergers and acquisitions in the future. 8
(4) Proprietary institutions that voluntarily 9
convert to nonprofit status or are acquired by non-10
profit and public entities can have a positive impact 11
on students and society. 12
(5) The Department of Education has an inter-13
est in safeguarding Federal student aid funds and 14
therefore should conduct thorough and comprehen-15
sive reviews of all changes in ownership involving in-16
stitutions of higher education. 17
(6) These reviews are necessary to ensure that 18
the acquiring entity has the financial and adminis-19
trative capacity to manage the target institutions. 20
(7) The Department of Education should con-21
duct these reviews in a thorough and comprehensive 22
manner but should do so as quickly as possible to 23
promote the execution of these transactions. 24
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(8) As of May 2021, the Department of Edu-1
cation had ‘‘very few staff’’ assigned to evaluate 2
pretransaction, change of control, and conversion ap-3
plications on a full-time basis. 4
(9) Consequently, these transactions are proc-5
essed by the Department of Education at an ex-6
traordinary slow rate of speed, with some institu-7
tions waiting up to 5 years before receiving a final 8
determination. 9
(10) One of the primary challenges in proc-10
essing these applications quickly is the lack of fund-11
ing to hire enough qualified staff. 12
(11) Currently, general taxpayers are bearing 13
the cost of reviewing these transactions. 14
(12) It is in the interest of institutions and the 15
United States to charge a fee for applications involv-16
ing changes in ownership at institutions of higher 17
education that are submitted to the Department of 18
Education. 19
(13) In consideration for the fee, the Depart-20
ment of Education will be required to guarantee an 21
expedited review process for all applicants, absent 22
compelling circumstances where good cause exists 23
for delay. 24
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(14) The Government Accountability Office has 1
identified weaknesses in the Department of Edu-2
cation’s post-transaction monitoring process, which 3
will likewise require additional staff to be hired to 4
conduct monitoring. 5
(15) Institutions that have converted from pro-6
prietary status to nonprofit status and have an on-7
going financial relationship with the former owners 8
of the institution are at highest risk of entering into 9
financial arrangements that result in improper pri-10
vate inurement. 11
(16) These institutions should be closely mon-12
itored for a period after these transactions occur and 13
should be required to pay a fee to support the hiring 14
of staff to conduct this monitoring. 15
(17) The Government Accountability Office has 16
likewise found weaknesses in the Internal Revenue 17
Service review process for conversion requests and 18
the post-transaction monitoring process. 19
(18) In order to support a more thorough re-20
view of these applications and to conduct moni-21
toring, the Department of Education will remit part 22
of the fee paid by institutions to the Internal Rev-23
enue Service for these purposes. 24
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SEC. 3. MODIFYING THE APPROVAL PROCESS FOR 1
CHANGES OF CONTROL. 2
(a) A
MENDMENTS.—Section 498(i) of the Higher 3
Education Act of 1965 (20 U.S.C. 1099c(i)) is amended— 4
(1) in the subsection heading, by inserting 5
‘‘
ANDPROPOSEDCHANGES OFOWNERSHIP’’ after 6
‘‘O
WNERSHIP’’; 7
(2) in paragraph (1)— 8
(A) by striking ‘‘(1) An eligible institu-9
tion’’, and inserting the following: ‘‘(1)(A) An 10
eligible institution’’; 11
(B) by striking ‘‘the requirements of sec-12
tion 102 (other than the requirements in sub-13
sections (b)(5) and (c)(3))’’ and inserting ‘‘the 14
applicable requirements of section 102 or 15
103(13)’’; and 16
(C) by adding at the end the following: 17
‘‘(B)(i) Prior to a change in ownership resulting in 18
a change of control, an institution may seek a 19
pretransaction determination about whether the institu-20
tion will meet the applicable requirements of section 102 21
or 103(13) and this section after such proposed change 22
in ownership by submitting to the Secretary a materially 23
complete pretransaction review application. 24
‘‘(ii) In reviewing applications submitted under clause 25
(i), the Secretary shall only provide a comprehensive re-26
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view of each such application, and may not provide an ab-1
breviated or partial review. 2
‘‘(iii) If an institution submits a materially complete 3
pretransaction review application at least 90 days prior 4
to the transaction and the Secretary approves the applica-5
tion, the subsequent change in ownership application shall 6
also be approved and the institution shall be certified as 7
meeting the requirements for such transaction, provided 8
that the institution— 9
‘‘(I) complies with the applicable terms of this 10
section; and 11
‘‘(II) the transaction resulting in a change of 12
control does not differ materially in its terms from 13
the transaction proposed in the pretransaction re-14
view application.’’; 15
(3) in paragraph (2)— 16
(A) in subparagraph (E), by striking ‘‘or’’ 17
at the end; 18
(B) in subparagraph (F), by striking the 19
period at the end and inserting ‘‘; or’’; and 20
(C) by adding the following at the end: 21
‘‘(G) in the case of a proprietary institution of 22
higher education, a conversion to a public or other 23
nonprofit institution of higher education.’’; and 24
(4) by adding at the end the following: 25
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‘‘(5)(A) Subject to subparagraph (B), when any insti-1
tution submits an application for a change in ownership 2
resulting in a change in control under this section or sub-3
mits a pretransaction review application under paragraph 4
(1)(B) (other than in the case of a conversion trans-5
action), the institution shall be required to pay to the Sec-6
retary an administrative fee that shall— 7
‘‘(i) be in an amount equal to 0.15 percent of 8
the total institutional revenue derived from this title 9
by such institution for the most fiscal year for which 10
data is available; and 11
‘‘(ii) be used exclusively for expenses related to 12
the processing of such application, and be available 13
to the Secretary without further appropriation, ex-14
clusively for expenses related to the processing of 15
such approval or application. 16
‘‘(B) In the case of a proprietary institution submit-17
ting an application for conversion, or a pretransaction re-18
view application for conversion, the institution shall be re-19
quired to pay to the Secretary an administrative fee that 20
shall— 21
‘‘(i) be in an amount equal to 0.30 percent of 22
the total institutional revenue derived from this title 23
by such institution for the most fiscal year for which 24
data is available; and 25
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‘‘(ii) be used exclusively for expenses related to 1
the processing of such application, and of which— 2
‘‘(I) 50 percent shall be available to the 3
Secretary without further appropriation, exclu-4
sively for expenses related to the processing of 5
such application; and 6
‘‘(II) 50 percent shall be remitted by the 7
Secretary to the Commissioner of the Internal 8
Revenue, and shall be available, without further 9
appropriation, to the Commissioner of Internal 10
Revenue exclusively for purposes of determining 11
whether the institution seeking such conversion 12
or pretransaction review is an institution ex-13
empt from tax and is otherwise in compliance 14
with applicable requirements of the Internal 15
Revenue Code of 1986. 16
‘‘(C) An institution that pays a fee under subpara-17
graph (A) or (B) for a pretransaction application with re-18
spect to a proposed transaction shall not be required to 19
pay another fee under such subparagraph for a change 20
in ownership application with respect to such transaction. 21
‘‘(D) In no case may any fee remitted under subpara-22
graph (A) or (B) exceed $120,000 for any transaction (or 23
pretransaction) application, nor may the Secretary require 24
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an institution that has paid a fee under subparagraph (B) 1
to pay an additional fee under subparagraph (A). 2
‘‘(6)(A) The Secretary shall approve or deny a mate-3
rially complete application (including pretransaction re-4
views and conversion applications) submitted under this 5
section as soon as practicable and not later than the 90- 6
day period beginning on the date of receipt of such an 7
application, except that in a case in which the Secretary 8
determines, on a nondelegable basis, that good cause exists 9
to not make the determination during such 90-day period, 10
the Secretary shall notify the institution in writing detail-11
ing the reasons for a good cause extension. 12
‘‘(B) If the Secretary fails to approve or deny a mate-13
rially complete application during the period described in 14
subparagraph (A) and does not find good cause for exten-15
sion, the materially complete application shall be deemed 16
approved. 17
‘‘(C) In no case may the Secretary grant a good cause 18
extension under this section to an institution for more 19
than one month at a time, or for a total of more than 20
more than 12 months. 21
‘‘(D) To ensure timely submission of all relevant doc-22
umentation, the Secretary may deny an application if an 23
institution does not make a good faith effort to submit 24
to the Secretary, in a timely manner— 25
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‘‘(i) all relevant documentation; or 1
‘‘(ii) a materially complete application. 2
‘‘(E)(i) Upon approving or denying an application 3
under this paragraph, the Secretary shall publish in the 4
Federal Register the reasoning for such approval or de-5
nial, including— 6
‘‘(I) a copy of the approval or denial letter sent 7
to the institution; and 8
‘‘(II) any analysis regarding how the Secretary 9
determined under paragraph 7(A)(iii) that a director 10
of the institution was an interested or disinterested 11
party to the transaction. 12
‘‘(ii) The Secretary shall not publish under clause (i) 13
any information that is otherwise exempt from disclosure 14
under section 552 of title 5, United States Code (relating 15
to the Freedom of Information Act), including trade se-16
crets and commercial or financial information that is privi-17
leged or confidential. 18
‘‘(7)(A) In the case of a proprietary institution that 19
subsequent to the transaction would be owned and oper-20
ated by an entity (in this paragraph referred to as the 21
‘buyer’) seeking to be recognized as a public or other non-22
profit institution, the buyer shall meet the definition of 23
a nonprofit institution under section 103(13) if— 24
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‘‘(i) the buyer pays no more than fair market 1
value for any assets of the proprietary institution; 2
‘‘(ii) the buyer pays no more than fair market 3
value for any service or lease contracts, including 4
such service and lease contracts provided by the en-5
tity selling the proprietary institution; and 6
‘‘(iii) to prevent self-dealing in the case where 7
one or more individuals with a substantial ownership 8
or controlling interests in the proprietary institution 9
will also have substantial or controlling interests in 10
the institution seeking to be recognized as a public 11
or other nonprofit institution (meaning that one or 12
more individuals are on both sides of the trans-13
action), the change of control transaction, and any 14
substantial asset acquisition, service, or lease agree-15
ments with the proprietary institution shall be ap-16
proved by a disinterested committee of directors of 17
the entity that seeks to be recognized as a public or 18
other nonprofit institution. 19
‘‘(B) For the purposes of this paragraph, parties to 20
the transaction are entitled to a rebuttable presumption 21
that the assets, lease contracts, and service contracts that 22
are part of the transaction are purchased at fair market 23
value if— 24
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‘‘(i) the acquiring entity pays no more than fair 1
market value for such assets, lease contracts, or 2
service contracts; and 3
‘‘(ii) the value of the assets, lease contracts, or 4
service contracts are evaluated by at least one inde-5
pendent third-party entity hired by parties on both 6
sides of the transaction. 7
‘‘(8)(A) An institution that has been approved for 8
conversion by the Secretary shall be subject to a moni-9
toring period for a 5-year period beginning on the day 10
after the date of such approval. In conducting the moni-11
toring of the institution under this paragraph, the Sec-12
retary— 13
‘‘(i) shall only conduct monitoring to ensure 14
that the institution is in compliance with the re-15
quirements of section 103(13) and paragraph (7) of 16
this subsection; and 17
‘‘(ii) may require the institution to submit reg-18
ular reports or conduct audits of such institution re-19
lating to such compliance. 20
‘‘(B) Each institution that is subject to the moni-21
toring period under this paragraph shall remit an annual 22
fee to the Secretary— 23
‘‘(i) in an amount equal to 0.15 percent of the 24
total revenue derived from this title by such institu-25
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tion for the most recent fiscal year for which data 1
is available; and 2
‘‘(ii) that shall be exclusively for expenses re-3
lated to monitoring of the institution for the period 4
described in subparagraph (A)— 5
‘‘(I) of which 50 percent shall be used by 6
the Secretary, without further appropriation, 7
exclusively for expenses related to monitoring of 8
the institution during such period; and 9
‘‘(II) of which 50 percent shall be remitted 10
by the Secretary to the Commissioner of Inter-11
nal Revenue, to be available to such Commis-12
sioner, without further appropriation, exclu-13
sively for monitoring compliance with the Inter-14
nal Revenue Code of such institution during 15
such period. 16
‘‘(C) An institution may not be subject to an annual 17
fee under subparagraph (B) for monitoring related to a 18
conversion that exceeds $60,000. 19
‘‘(D) If the Secretary determines that an institution 20
should be subject to the monitoring under this paragraph 21
beyond the 5-year period described in subparagraph (A), 22
the Secretary shall provide the reasons justifying an exten-23
sion in writing to the institution (and in the Federal Reg-24
ister) at least 30 days before the expiration of such period. 25
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‘‘(E) Any institution that is subject to monitoring 1
under this paragraph may seek a waiver to be exempt from 2
such monitoring (including the annual fee under subpara-3
graph (B)) on an annual basis for any year during the 4
monitoring period and the Secretary shall grant such waiv-5
er if there is no ongoing contractual or financial relation-6
ship between the institution and the former entity or indi-7
viduals that previously owned the institution. The Sec-8
retary may grant a waiver for more than 1 year in the 9
case where the entity that formerly owned the proprietary 10
institution has closed or no longer exists and the Secretary 11
determines the institution is not at risk of violating the 12
requirements of section 103(13) or paragraph (7) of this 13
subsection. 14
‘‘(9) Any institution that submits an application for 15
conversion shall not promote or market itself, in any man-16
ner, as a public or other nonprofit institution of higher 17
education unless— 18
‘‘(A) the Secretary has provided final approval 19
of the conversion of the institution to a public or 20
other nonprofit institution of higher education under 21
this section; 22
‘‘(B) an accrediting agency or association recog-23
nized by the Secretary pursuant to section 496 has 24
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approved such public or nonprofit status of the insti-1
tution; 2
‘‘(C) the State has given final approval to the 3
institution as a public or nonprofit institution of 4
higher education, as applicable; and 5
‘‘(D) in the case of an institution seeking non-6
profit status, the Commissioner of Internal Revenue 7
has approved the institution as tax exempt pursuant 8
to the Internal Revenue Code of 1986. 9
‘‘(10) Not later than 270 days after the date of enact-10
ment of the Change of Ownership and Conversion Im-11
provement Act, and periodically thereafter, the Secretary 12
shall publish (and update as necessary) in the Federal 13
Register— 14
‘‘(A) descriptions of the documents and mate-15
rials the Secretary expects or requires institutions of 16
higher education to submit (including any standard-17
ized forms) as part of any pretransaction application 18
or change in ownership application under this sec-19
tion, including a description of what the Secretary 20
considers to be a materially complete application; 21
and 22
‘‘(B) after at least a 30-day notice and com-23
ment period, responses to any public comments re-24
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ceived with respect to such descriptions or updates 1
to such descriptions. 2
‘‘(11) In a case in which the Secretary requests a doc-3
ument under this section as part of a pretransaction or 4
change in ownership application that is not described in 5
the Federal Register under paragraph (10), the Secretary 6
shall— 7
‘‘(A) substantiate, in writing to the institution, 8
the reasons why the Secretary is requesting such 9
documents; and 10
‘‘(B) publish such reasons in the Federal Reg-11
ister, including whether the Secretary may request 12
other institutions that submit applications under this 13
section to produce similar documentation. 14
‘‘(12)(A) Not later than 18 months after the date of 15
enactment of the Change of Ownership and Conversion 16
Improvement Act, and annually thereafter, the Secretary 17
shall submit a report to authorizing committees, and post 18
such report on a publicly available website regarding im-19
plementation of the amendments made to this section by 20
such Act, including the following information: 21
‘‘(i) The mean and median length of time taken 22
by the Secretary to review applications under this 23
section during the preceding 12-month period. 24
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‘‘(ii) The number of applications approved or 1
denied during the preceding 12-month period. 2
‘‘(iii) For any application not processed during 3
the 90-day period beginning on the date of receipt 4
of the application for which the Secretary found 5
good cause under paragraph (6)(A) to extend the 6
deadline in which the application shall be processed, 7
a copy of the letter sent to the institution explaining 8
why the Secretary believed good cause existed for 9
such extension. 10
‘‘(iv) For any application not processed during 11
such 90-day period, which was deemed to be auto-12
matically approved by the requirements of this sec-13
tion under paragraph (6)(B), the name of each insti-14
tution involved and an explanation for why the appli-15
cation was not processed in a timely manner. 16
‘‘(v) Any legislative suggestions the Secretary 17
may have to improve the application or monitoring 18
process under this section. 19
‘‘(B) If the Secretary fails to submit a report under 20
this paragraph by not later than 90 days after the dead-21
line for such submission under subparagraph (A), the Sec-22
retary may not, for the 12-month period following such 23
failure, spend the fees remitted by institutions under this 24
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section or remit such fees to the Commissioner unless 1
Congress provides for such use by further appropriation. 2
‘‘(13) For the purposes of this subsection, the term 3
‘conversion’ means any transaction under which— 4
‘‘(A) a proprietary institution is reorganized 5
and seeks recognition as a public or other nonprofit 6
institution; or 7
‘‘(B) the control of a proprietary institution is 8
transferred as a result of a sale, donation, or other 9
method to an entity that seeks certification under 10
this section as a public or other nonprofit institu-11
tion.’’. 12
(b) A
PPLICATION.—The amendments made by this 13
section shall be apply with respect to applications sub-14
mitted for change of control or conversion submitted on 15
or after January 1, 2026. 16
SEC. 4. GOVERNMENT ACCOUNTABILITY OFFICE. 17
Not later than 5 years after the date of enactment 18
of this Act, the Comptroller General shall submit to the 19
Committee on Education and Workforce of the House of 20
Representatives and the Committee on Health, Education, 21
Labor, and Pensions of the Senate, a report on the imple-22
mentation of the amendments made by this Act, including 23
recommendations to improve— 24
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(1) the application process under section 498(i) 1
of the Higher Education Act of 1965 (20 U.S.C. 2
1099c(i)), as amended by section 3, for institutions 3
of higher education seeking a change in ownership 4
resulting in a change in control; or 5
(2) the monitoring process under such section 6
for institutions of higher education that have re-7
cently converted from being recognized as a propri-8
etary institution to a public or other nonprofit insti-9
tution. 10
Æ
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