New Accountability Bill Forces Colleges to Spend on Instruction, Bans Transcript Holds, and Creates Financial Report Cards

The PROTECT Students Act of 2025 is a massive overhaul of federal student aid rules designed to put the brakes on schools that overcharge students and underdeliver on career outcomes. This bill is essentially the government giving colleges a strict financial report card and telling them: show us the value, or lose access to federal student loan money.

This legislation tackles three core problems: programs that leave students with debt but no job prospects, schools that mislead students, and institutions that prioritize marketing and executive pay over actual teaching. It does this by creating hard financial metrics for program success, strengthening consumer protection mechanisms, and mandating institutional spending floors on instruction.

The 'Value Check': Show Us the Money

For years, schools have offered programs that load up students with debt but don't pay off in the job market. This bill (SEC. 101) aims to stop that by creating a mandatory financial check for every program that receives federal aid. These programs must now meet two standards to be considered leading to “gainful employment”:

1. Debt-to-Earnings Rate: Graduates must have manageable loan payments relative to their earnings. If both the annual debt-to-earnings rate (loan payment vs. total income) and the discretionary debt-to-earnings rate (loan payment vs. income above 150% of the poverty line) are too high for two out of three years, the program fails.
2. Earnings Premium: Graduates must earn more than the typical high school graduate in their state. If the median earnings of program graduates are zero or negative compared to the high school baseline, the program fails.

If a program fails these tests twice in three years, the school loses the ability to enroll new students in that program using federal aid funds. They have to wait three years before they can try again. This is a huge deal, as it forces institutions to prove their programs provide real financial value, not just a diploma.

No More Holding Transcripts Hostage

Ever been stuck because your school wouldn’t release your transcript over a small outstanding balance? That practice is banned. SEC. 104 explicitly prohibits institutions from withholding official transcripts due to a debt owed by the student. If you ask for your transcript, the school must provide it. This provision removes a common administrative roadblock that prevents students from transferring credits or applying for jobs.

SEC. 104 also bans mandatory arbitration clauses in enrollment agreements. This means if a school lies or breaks its promises, you are no longer forced into private arbitration; you can actually sue them in court, alone or as part of a group. If you win, the school could face damages up to three times the amount of your loss if the court finds they acted knowingly or recklessly.

Easier Debt Relief for Misled Students

If you were misled by your school, getting your loan discharged (canceled) just got much easier (SEC. 102). The bill broadens the definition of a valid “borrower defense to repayment” to include substantial misrepresentation, broken contractual promises, aggressive recruitment tactics, or state law violations. The Secretary of Education must now discharge your debt if it’s more likely than not that the school committed one of these bad acts.

Even better, if your school closes down, the bill mandates automatic loan discharge one year after the closure for any student who didn't complete their program (SEC. 103). You won't have to fill out paperwork or apply; the government will wipe the slate clean, provided you didn't re-enroll at a similar school.

The Instruction Spending Mandate

In a move that directly targets schools that spend heavily on marketing rather than education, the bill introduces a spending floor (SEC. 203). Starting in the 2026–2027 school year, institutions must spend at least 30 percent of their tuition and fee revenue directly on instruction costs. After 2031, the Secretary will set a permanent, higher minimum percentage that schools must spend on instruction and student services combined. This is a clear signal that federal aid is meant to fund education, not just recruitment campaigns.

To enforce this and other rules, the bill creates a new, dedicated Enforcement Unit within the Federal Student Aid office, complete with a Chief Enforcement Officer and the power to use “secret shoppers” and issue subpoenas to investigate misconduct (SEC. 301). It also increases the maximum civil penalty for violations from $25,000 to $100,000 per violation.

What This Means for You

• If you're considering a vocational program: You can expect the Department of Education to publish clear, public data showing whether graduates of that program are actually earning more than high school graduates and if their debt is manageable (SEC. 101, SEC. 401). This is a real-world metric you can use to assess value.
• If you're a current student: Your school cannot legally hold your transcript hostage over an unpaid balance, making it easier to transfer or apply for jobs (SEC. 104).
• If you work at a school: The ban on incentive compensation (paying recruiters based on enrollment numbers) is reinforced, requiring annual independent audits to prove compliance (SEC. 105). Schools must now focus on quality over quantity in admissions.
• If you're a taxpayer: The bill creates a For-Profit Education Oversight Coordination Committee (SEC. 302) bringing together the DOE, DOJ, FTC, and others to better enforce rules and recoup funds from bad actors, aiming to protect federal investment.