Findings

Congress finds the following: (1) Institutions of higher education in the United States frequently merge with, consolidate, and acquire other institutions that result in a change in ownership. (2) These transactions are generally good for students, as they promote innovation, drive competition, and prevent stagnation. (3) Changing demographics and evolving higher education enrollment patterns may lead to more mergers and acquisitions in the future. (4) Proprietary institutions that voluntarily convert to nonprofit status or are acquired by nonprofit and public entities can have a positive impact on students and society. (5) The Department of Education has an interest in safeguarding Federal student aid funds and therefore should conduct thorough and comprehensive reviews of all changes in ownership involving institutions of higher education. (6) These reviews are necessary to ensure that the acquiring entity has the financial and administrative capacity to manage the target institutions. (7) The Department of Education should conduct these reviews in a thorough and comprehensive manner but should do so as quickly as possible to promote the execution of these transactions. (8) As of May 2021, the Department of Education had very few staff assigned to evaluate pretransaction, change of control, and conversion applications on a full-time basis. (9) Consequently, these transactions are processed by the Department of Education at an extraordinary slow rate of speed, with some institutions waiting up to 5 years before receiving a final determination. (10) One of the primary challenges in processing these applications quickly is the lack of funding to hire enough qualified staff. (11) Currently, general taxpayers are bearing the cost of reviewing these transactions. (12) It is in the interest of institutions and the United States to charge a fee for applications involving changes in ownership at institutions of higher education that are submitted to the Department of Education. (13) In consideration for the fee, the Department of Education will be required to guarantee an expedited review process for all applicants, absent compelling circumstances where good cause exists for delay. (14) The Government Accountability Office has identified weaknesses in the Department of Education’s post-transaction monitoring process, which will likewise require additional staff to be hired to conduct monitoring. (15) Institutions that have converted from proprietary status to nonprofit status and have an ongoing financial relationship with the former owners of the institution are at highest risk of entering into financial arrangements that result in improper private inurement. (16) These institutions should be closely monitored for a period after these transactions occur and should be required to pay a fee to support the hiring of staff to conduct this monitoring. (17) The Government Accountability Office has likewise found weaknesses in the Internal Revenue Service review process for conversion requests and the post-transaction monitoring process. (18) In order to support a more thorough review of these applications and to conduct monitoring, the Department of Education will remit part of the fee paid by institutions to the Internal Revenue Service for these purposes.