Preventing Financial Exploitation in Higher Education Act
Preventing Financial Exploitation in Higher Education Act
Plain Language Summary
# Preventing Financial Exploitation in Higher Education Act (HR 713) - Summary **What the Bill Does:** This bill would penalize wealthy colleges and universities for student loan problems among their graduates. Specifically, it targets institutions with endowments of $2.5 billion or more that have high rates of student loan defaults, late payments, or underpayments. These schools would face financial penalties paid to the Department of Education based on how many of their former students struggle with federal student loans.
The bill also would impose an additional tax on investment income for these same institutions if they raise tuition beyond certain levels. **Who It Affects:** The bill primarily targets large, well-endowed universities and colleges. It would also indirectly affect their students and families by potentially influencing how these institutions operate. Proponents argue it encourages schools to be more responsible stewards of student finances, while critics might contend it places financial pressure on institutions or affects their ability to fund other programs. **Current Status:** The bill was introduced by Representative Beth Van Duyne (R-TX) in the 119th Congress and is currently in committee, meaning it has not yet been debated or voted on by the full House of Representatives.
CRS Official Summary
Preventing Financial Exploitation in Higher Education ActThis bill establishes financial penalties for institutions of higher education (IHEs) with endowments of $2.5 billion or more that have specified percentages of current and former students who default, are delinquent, or underpay on their federal student loans. The bill also imposes an increased excise tax on net investment income of certain IHEs that increase tuition beyond certain levels.Specifically, the bill requires such an IHE to pay penalties to the Department of Education based on the IHE'scohort default rate (the percentage of how many borrowers default on their federal student loans in a fiscal year),cohort delinquency rate (the percentage of borrowers who are between 31- and 360-days past-due on their federal student loans), andcohort underpayment rate (the percentage of borrowers who are making regular payments on their federal student loans, are neither delinquent nor in default on those loans, but for whom the outstanding balances on their loans exceed the sum of the original loan balances).For example, for FY2025, an IHE with a cohort default rate of 11% or more must pay a penalty in an amount equal to 30% of the total outstanding balance of principal and interest due on all federal student loans.The bill also imposes an increased excise tax equal to 25% of the net investment income of an IHE with an endowment of $2.5 billion or more that charges tuition exceeding the inflation adjustment base amount for the taxable year.
Latest Action
Referred to the Committee on Education and Workforce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.