Sec. 4. Pay for success initiatives
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Part B of title I of the Higher Education Act of 1965 ( 20 U.S.C. 1011 et seq.) is amended by adding at the end the following: In this section: The term eligible entity means a partnership between— a private entity (which may include a private nonprofit entity); and an institution of higher education, a Federal, State, or local public entity, or a Tribal entity. The term pay for success initiative means a performance-based grant, contract, or other agreement— between an eligible entity and the Secretary or a grant recipient, as authorized under subsection (b)(1); in which— a commitment is made to pay the eligible entity for improved outcomes, including measureable improvement in the lives of service recipients or meaningful output measures strongly correlated to outcomes, that result in increased public value or social benefit to students and the public sector, such as increased effectiveness in improving outcomes, direct cost savings or cost avoidance, or increased public revenue; and the entity providing the funds under the grant, contract, or agreement imposes minimal administrative requirements to allow for maximum flexibility to achieve improvement in the lives of service recipients, or increased public value and social benefit; and that requires— a review or study describing how the proposed intervention is based on evidence of effectiveness, which may be a review or study not exclusively developed for the specific grant, contract, or other agreement and may be based on information already available; a rigorous, third-party evaluation that uses experimental or quasi-experimental design or other research methodologies that allow for the strongest possible causal inferences to determine whether the initiative has met its expected outcomes; or a third-party, scientifically valid assessment or analysis of administrative data that verifies measurable improvements in the lives of service recipients or is correlated with improved long-term positive outcomes, with safeguards using available data to ensure that any apparent improvements are not the result of statistical differences in the service recipients compared with the target population at large; an annual, publicly available report on the progress of the initiative; and that payments be made to the recipient of the grant, contract, or agreement only when agreed-upon outcomes are achieved, except as provided under paragraph
(2)or
(3)of subsection (b). The term pay for success initiative does not include any initiative that— reduces the benefits to a student or the obligations of an entity under this Act, the Rehabilitation Act of 1973 ( 29 U.S.C. 701 et seq.), the Americans with Disabilities Act of 1990 ( 42 U.S.C. 12101 et seq.), the Individuals with Disabilities Education Act ( 20 U.S.C. 1400 et seq.), or any other law; or reduces services that an individual is entitled to receive under Federal, State, or local law. Notwithstanding any other provision of this Act and except as provided under subsection (c)— any recipient of a grant under this Act may request to use grant funds to carry out a pay for success initiative that accomplishes the objectives of the grant and meets all requirements of the grant (except to the extent a requirement is specifically modified by the pay for success initiative), if such use is proposed in the application or plan submitted for such grant; and the Secretary may approve not more than 5 pilot demonstrations each fiscal year from the grant applications or plans that contain a request to carry out a pay for success initiative. If the Secretary, or a grant recipient, is authorized to carry out a pay for success initiative under paragraph (1), the Secretary or grant recipient may use funds available for the pay for success initiative— to conduct the review or feasibility study required under subsection (a)(2)(A)(iii)(I) or the rigorous third-party evaluation required under subsection (a)(2)(A)(iii)(II); or to provide funds to the entity carrying out the pay for success initiative for the costs of the initial costs associated with starting the initiative. Notwithstanding any other provision of law, if the Secretary or a grant recipient is carrying out a pay for success initiative under paragraph
(1)and the pay for success initiative has met or exceeded its proposed outcomes, the Secretary or grant recipient may use any funds remaining at the conclusion of the pay for success initiative to enter into an additional agreement, through a competitive process, with an eligible entity to expand capacity under the pay for success initiative or to carry out additional pilot demonstrations of pay for success initiatives. A pay for success initiative shall not be supported with funds under this Act if the pay for success initiative would adversely affect the funding of, or student access to, individual student aid awards made under section 401 or any other program supported under this Act. A grant or aid provided directly to a student under a pay for success initiative supported with funds under this Act shall not be considered in determining that student’s need for grant, loan, or work assistance under title IV of this Act, except that in no case shall the total amount of student financial assistance awarded to a student through a pay for success initiative and under title IV exceed that student’s cost of attendance, as defined in section 472. Notwithstanding any other provision of this Act, any funds made available for a fiscal year to an entity for a pay for success initiative authorized under this section shall remain available until expended. .
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