Sponsors
The bill increases accountability and raises revenue by targeting very wealthy colleges to protect taxpayers and curb tuition growth, but risks shifting costs onto students, discouraging enrollment of vulnerable students, and imposing compliance burdens—especially on smaller institutions.
Students and borrowers at covered wealthy institutions will face stronger accountability and oversight (new performance penalties and Section 454A compliance), which can improve loan repayment outcomes and reduce defaults/delinquency for those populations.
Taxpayers may benefit from reduced federal loan losses and improved program integrity, plus additional federal revenue, because better compliance and an excise tax on very large institutions can lower waste/fraud and raise receipts.
Students and families at or near wealthy institutions may see slower tuition growth because a 1.4% excise tax discourages raising average tuition above inflation at very large colleges.
Students at affected wealthy institutions may face reduced services, program cuts, or higher tuition if colleges shift costs to cover penalties, excise taxes, or new compliance costs.
Low-income and higher-risk students could be disfavored if institutions limit enrollment or program access to avoid penalties.
Large penalties and a new excise tax on endowment/investment income could reduce funds available for scholarships, research, aid, or prompt reductions in philanthropic spending.
Based on analysis of 4 sections of legislative text.
Imposes phased penalties on colleges for high cohort loan default/delinquency/underpayment rates and raises excise tax to 1.4% for very large tax-exempt colleges that raise tuition above inflation.
Introduced January 23, 2025 by Beth Van Duyne · Last progress January 23, 2025
Requires colleges that participate in federal student aid programs to pay sizable, sliding penalties to the Department of Education if their student-loan cohorts show high rates of default, delinquency, or underpayment, with a phased schedule starting in fiscal year 2025. Also adds a new excise tax rule that raises the net-investment-income tax rate to 1.4% for very large tax-exempt colleges (those with at least $2.5 billion in non-purpose-used assets) that increase average tuition above an inflation-adjusted baseline.