Sponsors
The bill forces accountability and raises significant revenue from the wealthiest colleges to curb untaxed endowment growth and improve borrower outcomes, but it risks higher costs for students, reduced institutional supports, expanded administrative and legal burdens, and uneven effects concentrated on very large institutions.
Taxpayers: the bill raises federal revenue by sharply increasing the excise tax on investment income of very wealthy private colleges (25% vs 1.4%).
Students (at covered institutions) and taxpayers: penalties tied to borrower outcomes create incentives for very large-endowment schools to reduce defaults, delinquencies, and underpayments, which can improve borrower outcomes and lower federal losses.
Students and enrolled consumers: requiring Title IV participants to follow section 454A standardizes compliance and can strengthen consumer protections and required disclosures.
Students and middle-class families: institutions may raise tuition or fees to offset large fines, higher excise taxes, and added compliance costs, increasing the cost of higher education.
Students (especially low-income) and employees: affected colleges may cut services, financial aid, hiring, or programs to pay penalties or taxes, reducing supports that benefit students and staff.
Schools/universities and the IRS: the bill creates substantial new administrative and compliance burdens (measuring baselines, exclusions, inflation adjustments, and complying with section 454A) that raise costs and complexity for institutions and tax administrators.
Based on analysis of 4 sections of legislative text.
Introduced January 23, 2025 by Beth Van Duyne · Last progress January 23, 2025
Requires very large-endowment colleges to face financial penalties tied to their student-loan cohort performance and conditions participation in federal student aid on compliance; penalties phase in beginning in fiscal year 2025. Also raises the excise tax on net investment income from 1.4% to 25% for certain large institutions whose average tuition exceeds an inflation-adjusted base and whose non-exempt assets total at least $2.5 billion, effective for taxable years beginning after Dec. 31, 2025.