Sponsors (4)
The bill makes philanthropic loan-repayment grants tax-free and channels targeted support to underserved communities—encouraging private relief and transparency—but reduces federal revenue, restricts who can give and who qualifies, and adds compliance burdens.
People with student loans (especially young and low-income borrowers) can receive loan repayments from qualifying grants that are excluded from taxable income, so grant-based forgiveness is not treated as taxable income.
Borrowers who live and work in lower-college-attainment or otherwise designated 'applicable' communities can receive targeted loan-repayment support aimed at underserved or rural areas.
Private foundations can make these qualifying loan-repayment grants without triggering taxable expenditure status, encouraging philanthropic organizations to fund loan-repayment programs.
Federal tax revenue will likely fall because grant-based loan repayments are excluded from taxable income, which could create pressure for budget offsets or spending cuts.
Borrowers who do not live and work in the designated 'applicable communities' may be ineligible for these tax-favored repayments, leaving many borrowers excluded from the benefit.
Limiting eligible grantmakers to certain private foundations and community trusts excludes many nonprofits from offering tax-favored loan-repayment grants, narrowing who can provide assistance.
Based on analysis of 2 sections of legislative text.
Excludes from taxable income nonprofit post-graduation grants that repay qualified student loans for recipients who live and work in lower-degree-attainment communities, with reporting and anti-double-benefit rules.
Official title: To amend the Internal Revenue Code of 1986 to exclude certain post-graduation scholarship grants from gross income in the same manner as qualified scholarships to promote economic growth.
Introduced February 17, 2026 by Darin Lahood · Last progress February 17, 2026
Creates a tax exclusion for post-graduation scholarship grants that repay qualified student loans when paid on behalf of an individual, and sets conditions on who can make the grants and who can receive them. Limits eligible grantmakers to certain 501(c)(3) private foundations and community trusts, requires recipients to live and work in communities with below-average bachelor’s-degree attainment, prevents double tax benefits with the student-loan interest deduction, and directs Treasury to write regulations and reporting rules plus GAO and Treasury reporting to Congress. The change applies to taxable years beginning after enactment.