College Merger Bill Imposes Up to $120K Fee to Fast-Track Approvals, Mandates 5-Year Oversight

The newly proposed Change of Ownership and Conversion Improvement Act is essentially an administrative overhaul of how colleges merge, get bought, or switch from being for-profit to non-profit. The core problem this bill tackles is the Department of Education’s notoriously slow review process for these ownership changes—a process that has left some schools waiting up to five years for a decision. This bill aims to solve that by introducing application fees, capped at $120,000, to hire enough staff to get the job done quickly and protect federal student aid funds.

The New 90-Day Clock and the Cost of Speed

If you’re running a college and want to change ownership, be ready to pay. The bill institutes a new fee structure tied to the school’s Title IV funding (federal student aid). For a standard ownership change, the fee is 0.15 percent of the school’s Title IV revenue. The biggest change, though, is the timeline: once an application is submitted, the Department of Education has 90 days to approve or deny it. If they miss that deadline and haven’t officially explained a "good cause" reason for an extension, the application is automatically approved. This is a huge shift, effectively putting the government on a strict deadline and giving institutions certainty, provided they can afford the fee.

Converting to Non-Profit? Expect Higher Fees and Deeper Scrutiny

The bill specifically targets the increasingly common—and often controversial—trend of for-profit colleges converting to non-profit status. If a school is making this switch, the fee jumps to 0.30 percent of their Title IV revenue, still capped at $120,000. Why the higher cost? Because half of that fee goes directly to the IRS. This new funding stream is designed to help the IRS review whether the newly formed entity truly qualifies for tax-exempt status, addressing concerns about former owners maintaining financial ties.

Crucially, this bill mandates strict rules to prevent self-dealing during these conversions. The new non-profit must pay no more than the fair market value for the old for-profit’s assets, and the deal must be approved by a committee of truly independent directors. This provision is designed to protect students and taxpayers by ensuring the conversion isn't just a way for former owners to cash out unfairly while maintaining control.

The 5-Year Watchlist: Post-Conversion Monitoring

For schools that successfully convert from for-profit to non-profit, the scrutiny doesn't end when the deal closes. They are automatically placed under a 5-year monitoring period. During this time, the school must pay an annual monitoring fee of 0.15 percent of its Title IV revenue (capped at $60,000 annually). Like the conversion fee, half of this annual fee is earmarked for the IRS to ensure the school maintains its non-profit compliance. This means a converted school could face up to five years of additional annual costs and oversight, a clear signal that the government intends to keep a close eye on these high-risk institutions.

Real-World Impact: Who Pays and Who Benefits?

This bill shifts the administrative cost of oversight from the general taxpayer to the institutions themselves. For a large university generating tens of millions in federal aid, the $120,000 fee is a cost of doing business that buys them guaranteed, fast approval. For smaller institutions, however, these application and annual monitoring fees could present a new, significant financial hurdle. While the goal is efficiency and student protection—making sure a school is financially sound before it enrolls students using federal aid—it introduces a user-pays model for regulatory compliance.

Finally, the bill mandates transparency: once a decision is made, the Department must publish the decision and the reasoning in the Federal Register. This means that for the first time, taxpayers and students will get a clearer look at why a college merger or conversion was approved or denied, giving everyone better insight into the financial health and structure of the schools receiving federal funds.