Proposed Bill Would Cut Off Federal Student Aid To For-Profit Colleges

Rep. Pramila Jayapal (D-WA) introduced the Students Not Profits Act of 2026 (H.R. 10562) on September 24, 2026. The bill would strike the “proprietary institution” category from the Higher Education Act, which is how for-profit colleges qualify for federal student aid today. Without that category, for-profit schools could no longer receive Pell Grants or Direct Student Loans on behalf of their students.

In her announcement, Jayapal said Congress “must act to protect students from the exploitative practices of for-profit corporate universities.” Reps. Jesús “Chuy” García, Chellie Pingree, Ayanna Pressley, and Rashida Tlaib signed on as cosponsors.

The American Federation of Teachers, The Century Foundation, and Protect Borrowers endorsed it, groups that have long pushed for stronger borrower defense to repayment rules.

Why It Matters

For-profit colleges enrolled 1,111,466 students in fall 2024, or 5.6% of U.S. college enrollment, according to IPEDS data. Those students lean on federal student aid far more than the average student. Among first-time, full-time undergraduates in 2023-24, 70.2% of for-profit students received a Pell Grant to help cover college costs, compared with 41.3% across all colleges.

Student loan borrowing follows the same pattern. Nearly 70% of those for-profit students took federal loans, with an average loan of $7,149, compared with $5,479 at all colleges.

For-profit students have also filed the bulk of fraud claims. The Century Foundation found that 98.6% of borrower defense claims filed through August 2017 involved for-profit schools. Many of those schools appear on our list of for-profit colleges tied to loan forgiveness.

What The Bill Would Change

The bill text goes beyond ending for-profit eligibility. It also rewrites the rules for the nonprofit and public schools that remain, including some practices that have long set for-profit colleges apart from nonprofits:

• Enrollment caps: Schools could enroll no more than 50% of students in distance education, no more than 25% incarcerated students, and no more than 50% students without a high school diploma or equivalent.
• Bankruptcy and fraud: A school would lose eligibility if it or certain affiliates filed for bankruptcy, or if owners or executives had findings of fraud, misrepresentation, or predatory practices.
• Tuition sharing: Schools would face limits on paying outside recruiters a share of tuition.
• Personal liability: People with substantial control over a school would be personally liable for certain losses from closures and successful borrower defense claims.

What Would Happen To Current For-Profit Students?

The bill doesn’t say. H.R. 10562 has no teach-out, grandfathering, or phase-in language for the roughly 1.1 million students now enrolled at for-profit schools. Without federal aid, most of those schools would have to cut prices sharply, convert to a non-profit under the new rules, or close. Students would then face the same choices as those at a college that shuts down or misleads its students.

Losing federal financial aid eligibility is different from a closure under current law. A closed school discharge wipes out federal loans only when a school closes while the student is enrolled or shortly after they leave.

A school that stays open without federal aid wouldn’t trigger it, so students would likely need to transfer, and credits from for-profit schools don’t always carry over.

A student who used Pell at a for-profit school would keep their remaining lifetime Pell eligibility for a public or nonprofit college. Any version that advances would need transition rules to address those students.

How Would It Treat For-Profit Conversions?

Converting to nonprofit status would no longer be an easy escape hatch. A GAO review found 59 for-profit-to-nonprofit conversions between January 2011 and August 2020, and about one-third involved insiders who kept a financial stake. The Century Foundation calls these schools covert for-profits, and fraud claims at former for-profit schools have pushed up loan forgiveness claims at nonprofit colleges.

Under H.R. 10562, a converting school would need to prove it is a 501(c)(3) and that it didn’t overpay former owners for assets or services. No board member could receive a substantial economic benefit, and no outside for-profit company could control core functions like recruiting or curriculum.

Approved converters would stay under for-profit rules for at least five years, and they couldn’t call themselves nonprofit until the Education Department, accreditor, state, and IRS all signed off. Students weighing a recently converted school can check how it ranks in borrower fraud claims by college.

How This Connects

The Education Department is already moving on for-profit accountability, though in a different direction. Its earnings accountability rule, finalized in 2026, replaces gainful employment with a single earnings test that covers every for-profit program, with the first loss of loan eligibility expected in 2028. The department also loosened its 90/10 rule guidance in March 2026. Those program-level tests matter for students weighing short-term options like Workforce Pell Grants, which can fund programs at for-profit schools.

What’s Next

H.R. 10562 went to the House Education and Workforce Committee, which Republicans control. Jayapal introduced an earlier version in 2019, and it never received a vote, though its conversion provisions went into House Democrats’ 2019 Higher Education Act rewrite.

With no Republican cosponsors and the 119th Congress ending January 3, 2027, this version is unlikely to advance. Students at for-profit schools today should check how their school ranks in student loan forgiveness claims by college before borrowing more.

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