Sponsors (4)
The bill provides tax-free, targeted loan-repayment assistance and incentivizes philanthropic funding, but reduces federal revenue, restricts who qualifies by geography and eligible grantmakers, and adds administrative burdens.
People with student loans (students, young adults, low-income borrowers) receive qualifying loan repayments that are excluded from taxable income, increasing their after-tax income and lowering their effective cost of borrowing.
Recipients who live and work in lower-college-attainment or designated 'applicable' communities can access targeted loan-repayment support, directing benefits to underserved or rural areas.
Private foundations and qualifying philanthropic entities are encouraged to fund loan-repayment programs because making these grants will not automatically trigger taxable expenditure status, potentially increasing philanthropic support for borrowers.
Taxpayers may face reduced federal revenue from excluding these grants from taxable income, creating pressure for offsetting revenue increases or spending cuts elsewhere.
Borrowers who do not live and work in the designated 'applicable communities' are excluded from the tax-favored repayments, leaving many borrowers ineligible and raising equity concerns.
Recipients whose loans or interest are paid via these grants cannot also claim the student loan interest deduction for those amounts, eliminating a separate tax benefit for some borrowers.
Based on analysis of 2 sections of legislative text.
Excludes from taxable income scholarships that repay qualified student loans when paid by qualifying 501(c)(3) foundations for graduates who live/work in low bachelor-degree attainment communities; adds reporting and oversight.
Introduced February 17, 2026 by Darin Lahood · Last progress February 17, 2026
Excludes from gross income certain post-graduation scholarship grants that repay qualified student loans when the payments are made on behalf of an individual by qualifying 501(c)(3) private foundations or community trusts. Grants must be paid directly to loan holders for qualified education loans and are limited to graduates who live and work in communities with below-average bachelor’s-degree attainment; the change includes reporting requirements, an anti-double-benefit rule with the student-loan interest deduction, and related Treasury and GAO reports.