Sponsor
Beth Van Duyne
Representative · R-TX
Representative · R-TX
The bill pressures very large-endowment colleges to deploy funds for student aid and comply with stricter oversight—raising federal revenue and incentivizing aid—while risking higher costs for institutions that may be passed to students, reduced student supports, narrowed access, and added regulatory uncertainty and compliance burdens.
Taxpayers and the federal budget gain new revenue by raising a targeted excise tax on very large non‑operating endowments (from 1.4% to 25%), increasing funds available for public priorities.
Students at large, wealthy colleges are more likely to benefit from increased spending on financial aid and programs because the higher excise tax creates incentives for institutions to deploy endowment assets rather than hoard them.
Requiring institutions to comply with section 454A to remain eligible for federal student aid improves accountability and clarification of eligibility rules, which can protect students and make institutional rules less ambiguous.
Very large institutions (endowments ≥ $2.5B) face steep penalties (up to 30% of outstanding balances in FY2025) and a much higher excise tax, likely increasing institutional costs and creating pressure that could translate into tuition increases, program cuts, or financial strain.
Low- and middle-income students risk losing scholarships, counseling, and other institutional supports if affected colleges cut budgets to pay penalties or taxes, worsening access and affordability for vulnerable students.
Institutions may respond to financial penalties by narrowing admissions or favoring lower‑risk applicants, which would reduce educational access for applicants—particularly low-income or disadvantaged students.
Based on analysis of 4 sections of legislative text.
Imposes big penalties tied to student‑loan cohort performance and raises an excise tax to 25% on very large, high‑tuition institutions with ≥$2.5B non‑operating assets.
Official title: To impose a financial penalty on certain institutions of higher education with high percentages of students who default or make insufficient payments on Federal student loans, and for other purposes.
Introduced January 23, 2025 by Beth Van Duyne · Last progress January 23, 2025
Requires colleges and universities to pay large penalties tied to student loan cohort metrics (default, delinquency, underpayment) beginning in fiscal year 2025 and phases dollar-based penalties in later years; makes compliance with those penalties a condition of federal program participation. Also sharply raises the federal excise tax on net investment income for very large, high‑tuition institutions with big non‑operating assets starting for taxable years after December 31, 2025.