Could For-Profit Colleges Lose Access to Pell Grants?
For-profit colleges could lose access to federal student loans and Pell Grants under legislation introduced in the House of Representatives.
Representative Pramila Jayapal sponsored the Students Not Profits Act to strike proprietary institutions from Title IV eligibility under the Higher Education Act of 1965. The move would ban federal student aid to for-profit schools nationwide.
Could For-Profit Colleges Lose Access to Pell Grants?
The bill targets industry marketing practices by banning tuition-sharing agreements with third-party online program managers and outside recruiters. Federal law already prohibits colleges from paying internal admissions recruiters based on enrollment or financial aid figures.
The proposal introduces personal liability for corporate leadership. If the measure passes, those who control an institution of higher learning would face financial liability for unpaid losses when schools abruptly shut down or when borrowers win defense-to-repayment claims in court.
>> Find VA-approved schools — try the College Recon School Finder tool.
What Current Law Says
Under current federal law, colleges must provide training that prepares students for a “recognized occupation,” maintain state authorization, and hold accreditation to participate in Title IV financial aid programs.
Data from the National Center for Education Statistics, cited by The College Investor, show that 70.2% of first-time, full-time undergraduate students at for-profit schools receive Pell Grants, compared with 41.3% of students across higher education as a whole. Federal loans fund 69.8% of these students at for-profit colleges, compared with 41.3% across all postsecondary institutions.
To avoid regulatory restrictions, some for-profit schools have sought conversion to nonprofit status over the past decade. The Students Not Profits Act would limit these transactions.
>> Find VA-approved schools — try the College Recon School Finder tool.
Under the Proposed Law
Under the legislation, any converting institution must continue operating under commercial restrictions for at least five years. A school could not complete a conversion without joint approval from the Department of Education, regional accreditors, state regulators, and the Internal Revenue Service.
The bill establishes two guidelines for conversions:
- No member of the governing board or person with board appointment authority may receive economic benefits from the school.
- No for-profit entity may control core educational or administrative functions.
Approximately 1.1 million students attend for-profit institutions nationwide. The proposed legislation, as written at press time, has no teach-out provisions, grandfather clauses, or phase-in timelines for these students.
It also does not reset lifetime Pell Grant eligibility limits. Students leaving for-profit schools would retain only whatever portion of their regular 12-semester Pell Grant eligibility remains unused when transferring to public or nonprofit institutions.
Next Steps
This legislation faces procedural obstacles in Congress. Introduced on September 24, 2026, the bill had only Democratic cosponsors at press time. Under House rules, the measure expires and dies in Congress if lawmakers take no action before the 119th congressional session concludes on January 3, 2027.
>> Find VA-approved schools — try the College Recon School Finder tool.
About the author
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma.
Wallace is cofounder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter and filmmaker. Joe Wallace is the director of The Camera is Your Friend, a documentary about the Texas psychedelic experimental collective, Crevice. He also directed Cowgirls & Synthesizers, a documentary about the Texas synth-pop band, Hyperbubble.
