PROTECT Students Act Targets College Accountability: Sets Debt-to-Earnings Rules, Expands Loan Forgiveness & Student Lawsuit Rights

The Preventing Risky Operations from Threatening the Education and Career Trajectories of Students Act of 2025, or PROTECT Students Act, proposes a significant overhaul of accountability rules for colleges receiving federal student aid. It aims to protect students and taxpayers by linking federal funding to student outcomes, strengthening consumer protections, and increasing transparency across higher education. Key measures include new standards for program value, easier paths for loan forgiveness in cases of institutional misconduct or closure, and enhanced government oversight.

Making Sure Degrees Pay Off (and Fixing It When They Don't)

A major focus is ensuring educational programs lead to decent earnings relative to their cost. The bill introduces strict 'gainful employment' metrics (Section 101, adding 498C). Programs could lose federal aid eligibility if, over several years, their graduates consistently have high debt payments compared to their earnings or earn less than the typical high school graduate in their state. This means a program churning out grads with $30,000 in debt but only landing jobs paying slightly above minimum wage could face consequences. Data sharing between the IRS, Social Security, and the Department of Education is mandated to calculate these earnings.

The Act also beefs up protections when things go wrong. It strengthens 'borrower defense' rules (Section 102, amending 455(h)), making it clearer how students can get federal loans discharged if their school made 'substantial misrepresentations' (defined broadly to include misleading statements or omissions about programs, costs, or job prospects), failed contractual obligations, or used aggressive recruitment tactics. If a school closes, the bill expands automatic loan discharge eligibility for students enrolled within 180 days of closure, with potential extensions (Section 103). It also strengthens the ban on 'incentive compensation' (Section 105), aiming to prevent colleges from paying recruiters based purely on enrollment numbers, a practice often linked to predatory recruitment.

Raising the Bar for Colleges and Their Partners

This legislation seeks to change how schools interact with students and manage their operations. Crucially, it prohibits institutions from forcing students into mandatory arbitration or preventing them from joining class-action lawsuits (Section 104). If your school violates certain rules or misleads you, you retain the right to sue them in court. The bill also bans the practice of withholding official transcripts because a student owes money (Section 104), removing a major barrier for students seeking jobs or further education.

Schools would also face new financial and operational standards. A requirement is introduced for institutions to spend at least 30% of tuition and fee revenue on instruction starting in 2026, with a combined instruction and student services threshold to be set later based on spending data (Section 203). This aims to ensure money is going towards education, not just marketing or profits. Oversight is extended to 'third-party servicers' – companies hired for recruitment, instruction, or managing aid (Section 201). The bill mandates a standard definition for 'job placement rates' (Section 202) and requires schools advertising these rates to provide clear backup data. Furthermore, institutions would be barred from hiring executives or contracting with companies that have a documented history of fraud or major legal violations related to federal funds (Section 204).

More Eyes on the Money and Operations

To enforce these rules, the bill significantly ramps up federal oversight and transparency. It establishes a dedicated enforcement unit within the Office of Federal Student Aid, equipped with subpoena power and the ability to levy higher civil penalties (up to $100,000 per violation or 1% of Title IV funds) against schools and their servicers (Section 301). An interagency 'For-Profit Education Oversight Coordination Committee' (Section 302) would bring together agencies like the Departments of Education, Justice, Veterans Affairs, the FTC, and CFPB to coordinate actions against problematic schools.

A centralized complaint system (Section 303) would be created for students to report issues with schools, loan servicers, or federal aid, requiring timely responses. Eligibility and certification rules for schools would be tightened (Section 304), ending automatic recertification and allowing provisional status for high-risk institutions. Oversight by states (especially for online programs crossing state lines, Section 305) and accrediting agencies (Section 306) is also strengthened, requiring them to actively monitor institutional risk. Finally, the bill mandates extensive public disclosure (Title IV). Information like detailed institutional spending breakdowns, third-party servicer contracts, borrower defense claim data, school financial statements, letters of credit, program participation agreements, and accreditor actions would become publicly available, aiming to give students, policymakers, and watchdogs a clearer view of institutional performance and risk.