Sponsors
The bill pressures wealthy colleges to spend endowment assets and improve loan outcomes—raising federal revenue and accountability—but does so with large taxes and penalties that risk higher tuition, reduced student supports, restricted access, and added compliance uncertainty for schools and taxpayers.
Taxpayers and the federal budget: the bill raises substantial federal revenue by increasing an excise tax on large private-college endowments, creating new funds that could support public priorities.
Students (particularly at wealthy institutions): large endowed universities are incentivized to spend more on financial aid and student programs rather than accumulating non‑operating assets to avoid higher excise taxes.
Students and regulators: the bill ties federal aid eligibility to specified institutional rules (section 454A) and strengthens oversight, encouraging institutions to improve student loan repayment outcomes and providing clearer accountability.
Students and families: large penalties and higher excise taxes on covered institutions are likely to raise institutional costs that universities may offset by increasing tuition, fees, or other student charges.
Low‑ and middle‑income students: affected institutions may cut scholarships, reduce staffing (advising, counseling), or shrink programs to pay penalties or taxes, directly reducing student supports and access.
Prospective students (especially lower‑income/applicants with weaker repayment prospects): institutions could respond by restricting admissions or favoring lower‑risk applicants to avoid penalties, reducing educational access.
Based on analysis of 4 sections of legislative text.
Imposes penalties on colleges with high loan cohort default/delinquency/underpayment rates, conditions federal aid eligibility on compliance, and raises the excise tax on very large high‑tuition institutions' investment income.
Introduced January 23, 2025 by Beth Van Duyne · Last progress January 23, 2025
Imposes new financial penalties on colleges and universities with high student loan cohort default, delinquency, or underpayment rates and makes those penalties a condition of continued eligibility for federal student aid programs. Starts a phased penalty schedule beginning in fiscal year 2025 and directs the Department of Education to collect the amounts tied to cohort performance metrics. Also sharply raises the federal excise tax on net investment income for very large, high‑tuition educational institutions with large non‑operating asset holdings, applying the higher rate to taxable years beginning after December 31, 2025.