I 

118TH CONGRESS 

2D SESSION H. R. 7831 

To impose a financial penalty on certain institutions of higher education 

with high percentages of students who default or make insufficient payments on Federal student loans, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 26, 2024 

Ms. VAN DUYNE introduced the following bill; which was referred to the Committee on Education and the 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 

A BILL 

To impose a financial penalty on certain institutions of higher education with high percentages of students who default or make insufficient payments on Federal student 

loans, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Preventing Financial 

5 Exploitation in Higher Education Act’’. 


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1 SEC. 2. INSTITUTIONAL ACCOUNTABILITY FOR DE2 FAULTED, DELINQUENT, AND UNDERPAID 

3 STUDENT LOANS. 

4 Part D of title IV of the Higher Education Act of 

5 1965 (20 U.S.C. 1087a et seq.) is amended by inserting 

6 after section 454 the following: 

7 ‘‘SEC. 454A. INSTITUTIONAL ACCOUNTABILITY FOR DE8 FAULTED, DELINQUENT, AND UNDERPAID 

9 STUDENT LOANS. 

10 ‘‘(a) IN GENERAL.—In accordance with subsection 

11 (b), a covered institution of higher education shall pay to 

12 the Secretary— 

13 ‘‘(1) a penalty based on the institution’s cohort 

14 default rate for each fiscal year; 

15 ‘‘(2) a penalty based on the institution’s cohort 

16 delinquency rate for each fiscal year; and 

17 ‘‘(3) a penalty based on the institution’s cohort 

18 underpayment rate for each fiscal year. 

19 ‘‘(b) PHASE-IN OF COHORT DEFAULT RATE PEN20 ALTY.— 

21 ‘‘(1) FISCAL YEAR 2024.—A covered institution 

22 of higher education— 

23 ‘‘(A) with a cohort default rate (as cal24 culated under section 435(m)) for fiscal year 

25 2024 that is 11 percent or more, shall pay to 

26 the Secretary a penalty in an amount equal to 


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1 30 percent of the total outstanding balance of 

2 principle and interest due on all loans under 

3 this part that are included in the calculation of 

4 such cohort default rate for such fiscal year; 

5 ‘‘(B) with a cohort delinquency rate (as de6 termined by the Secretary) for fiscal year 2024 

7 that is 10 percent or more shall pay to the Sec8 retary a penalty in an amount equal to 28 per9 cent of the total outstanding balance of prin10 ciple and interest due on all loans under this 

11 part that are included in the calculation of such 

12 cohort delinquency rate for such fiscal year; and 

13 ‘‘(C) with a cohort underpayment rate (as 

14 determined by the Secretary) for fiscal year 

15 2024 that is 9 percent or more shall pay to the 

16 Secretary a penalty in an amount equal to 26 

17 percent of the total outstanding balance of prin18 ciple and interest due on all loans under this 

19 part that are included in the calculation of such 

20 cohort underpayment rate for such fiscal year. 

21 ‘‘(2) FISCAL YEAR 2025.—A covered institution 

22 of higher education— 

23 ‘‘(A) with a cohort default rate (as cal24 culated under section 435(m)) for fiscal year 

25 2025 that is 10 percent or more, shall pay to 


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1 the Secretary a penalty in an amount equal to 

2 28 percent of the total outstanding balance of 

3 principle and interest due on all loans under 

4 this part that are included in the calculation of 

5 such cohort default rate for such fiscal year; 

6 ‘‘(B) with a cohort delinquency rate (as de7 termined by the Secretary) for fiscal year 2025 

8 that is 9 percent or more, shall pay to the Sec9 retary a penalty in an amount equal to 26 per10 cent of the total outstanding balance of prin11 ciple and interest due on all loans under this 

12 part that are included in the calculation of such 

13 cohort delinquency rate for such fiscal year; and 

14 ‘‘(C) with a cohort underpayment rate (as 

15 determined by the Secretary) for fiscal year 

16 2025 that is 8 percent or more, shall pay to the 

17 Secretary a penalty in an amount equal to 24 

18 percent of the total outstanding balance of prin19 ciple and interest due on all loans under this 

20 part that are included in the calculation of such 

21 cohort underpayment rate for such fiscal year. 

22 ‘‘(3) FISCAL YEAR 2026.—A covered institution 

23 of higher education— 

24 ‘‘(A) with a cohort default rate (as cal25 culated under section 435(m)) for fiscal year 


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1 2026 that is 9 percent or more, shall pay to the 

2 Secretary a penalty in an amount equal to 26 

3 percent of the total outstanding balance of prin4 ciple and interest due on all loans under this 

5 part that are included in the calculation of such 

6 cohort default rate for such fiscal year; 

7 ‘‘(B) with a cohort delinquency rate (as de8 termined by the Secretary) for fiscal year 2026 

9 that is 8 percent or more, shall pay to the Sec10 retary a penalty in an amount equal to 24 per11 cent of the total outstanding balance of prin12 ciple and interest due on all loans under this 

13 part that are included in the calculation of such 

14 cohort delinquency rate for such fiscal year; and 

15 ‘‘(C) with a cohort underpayment rate (as 

16 determined by the Secretary) for fiscal year 

17 2026 that is 7 percent or more, shall pay to the 

18 Secretary a penalty in an amount equal to 22 

19 percent of the total outstanding balance of prin20 ciple and interest due on all loans under this 

21 part that are included in the calculation of such 

22 cohort underpayment rate for such fiscal year. 

23 ‘‘(4) FISCAL YEAR 2027.—A covered institution 

24 of higher education— 


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1 ‘‘(A) with a cohort default rate (as cal2 culated under section 435(m)) for fiscal year 

3 2027 that is 8 percent or more, shall pay to the 

4 Secretary a penalty in an amount equal to 24 

5 percent of the total outstanding balance of prin6 ciple and interest due on all loans under this 

7 part that are included in the calculation of such 

8 cohort default rate for such fiscal year; 

9 ‘‘(B) with a cohort delinquency rate (as de10 termined by the Secretary) for fiscal year 2027 

11 that is 7 percent or more, shall pay to the Sec12 retary a penalty in an amount equal to 22 per13 cent of the total outstanding balance of prin14 ciple and interest due on all loans under this 

15 part that are included in the calculation of such 

16 cohort delinquency rate for such fiscal year; and 

17 ‘‘(C) with a cohort underpayment rate (as 

18 determined by the Secretary) for fiscal year 

19 2027 that is 6 percent or more, shall pay to the 

20 Secretary a penalty in an amount equal to 20 

21 percent of the total outstanding balance of prin22 ciple and interest due on all loans under this 

23 part that are included in the calculation of such 

24 cohort underpayment rate for such fiscal year. 


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1 ‘‘(5) FISCAL YEAR 2028.—A covered institution 

2 of higher education— 

3 ‘‘(A) with a cohort default rate (as cal4 culated under section 435(m)) for fiscal year 

5 2028 that is 7 percent or more, shall pay to the 

6 Secretary a penalty in an amount equal to 22 

7 percent of the total outstanding balance of prin8 ciple and interest due on all loans under this 

9 part that are included in the calculation of such 

10 cohort default rate for such fiscal year; 

11 ‘‘(B) with a cohort delinquency rate (as de12 termined by the Secretary) for fiscal year 2028 

13 that is 6 percent or more, shall pay to the Sec14 retary a penalty in an amount equal to 20 per15 cent of the total outstanding balance of prin16 ciple and interest due on all loans under this 

17 part that are included in the calculation of such 

18 cohort delinquency rate for such fiscal year; and 

19 ‘‘(C) with a cohort underpayment rate (as 

20 determined by the Secretary) for fiscal year 

21 2028 that is 5 percent or more, shall pay to the 

22 Secretary a penalty in an amount equal to 18 

23 percent of the total outstanding balance of prin24 ciple and interest due on all loans under this 


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1 part that are included in the calculation of such 

2 cohort underpayment rate for such fiscal year. 

3 ‘‘(6) FISCAL YEAR 2029 AND SUBSEQUENT FIS4 CAL YEARS.—A covered institution of higher edu5 cation— 

6 ‘‘(A) with a cohort default rate (as cal7 culated under section 435(m)) for fiscal year 

8 2029 or any fiscal year thereafter that is 6 per9 cent or more, shall pay to the Secretary a pen10 alty in an amount equal to 20 percent of the 

11 total outstanding balance of principle and inter12 est due on all loans under this part that are in13 cluded in the calculation of such cohort default 

14 rate for such fiscal year; 

15 ‘‘(B) with a cohort delinquency rate (as de16 termined by the Secretary) for fiscal year 2029 

17 or any fiscal year thereafter that is 5 percent 

18 or more, shall pay to the Secretary a penalty in 

19 an amount equal to 18 percent of the total out20 standing balance of principle and interest due 

21 on all loans under this part that are included 

22 in the calculation of such cohort delinquency 

23 rate for such fiscal year; and 

24 ‘‘(C) with a cohort underpayment rate (as 

25 determined by the Secretary) for fiscal year 


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1 2029 or any fiscal year thereafter that is 4 per2 cent or more, shall pay to the Secretary a pen3 alty in an amount equal to 16 percent of the 

4 total outstanding balance of principle and inter5 est due on all loans under this part that are in6 cluded in the calculation of such cohort under7 payment rate for such fiscal year. 

8 ‘‘(c) EFFECT ON DEFAULT STATUS OF BOR9 ROWER.—The payment of a penalty under this section by 

10 a covered institution of higher education shall have no ef11 fect on the rights or obligations of a borrower of a loan 

12 that is included in the calculation of the institution’s co13 hort default rate, cohort delinquency rate, or cohort un14 derpayment rate for purposes of such penalty. 

15 ‘‘(d) DEFINITIONS.— 

16 ‘‘(1) COHORT DELINQUENCY RATE.—The term 

17 ‘cohort delinquency rate’ means the percentage of 

18 Federal student loan borrowers included in a cohort 

19 under subsection (b) who have failed to make pay20 ments on one or more of the Federal student loans 

21 used for attendance at the institution concerned for 

22 between 31 and 360 days (inclusive). 

23 ‘‘(2) COHORT UNDERPAYMENT RATE.—The 

24 term ‘cohort underpayment rate’, means the percentVerDate Sep 11 2014 01:56 Apr 13, 2024 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H7831.IH H7831

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1 age of Federal student loan borrowers included in a 

2 cohort under subsection (b) who— 

3 ‘‘(A) are making regular payments on the 

4 Federal student loans used for attendance at 

5 the institution concerned but for whom the sum 

6 all outstanding balances of such loans exceeds 

7 the sum of the original loan balances; and 

8 ‘‘(B) are neither delinquent nor in default 

9 on such loans. 

10 ‘‘(3) COVERED INSTITUTION OF HIGHER EDU11 CATION.—The term ‘covered institution of higher 

12 education’ means an institution of higher education 

13 that is the beneficiary of an endowment fund with 

14 total value of $2,500,000,000 or more. 

15 ‘‘(4) ENDOWMENT FUND.—The term ‘endow16 ment fund’ means a fund that— 

17 ‘‘(A) is established by State law, by an in18 stitution of higher education, or by a founda19 tion that is exempt from Federal income tax20 ation; and 

21 ‘‘(B) is maintained for the purpose of gen22 erating income for the support of an institution 

23 of higher education. 


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1 ‘‘(5) FEDERAL STUDENT LOAN.—The term 

2 ‘Federal student loan’ means a loan made under this 

3 part.’’. 

4 SEC. 3. PROGRAM PARTICIPATION AGREEMENTS. 

5 Section 487(a) of the Higher Education Act of 1965 

6 (20 U.S.C. 1094(a)) is amended by adding at the end the 

7 following: 

8 ‘‘(30) The institution will comply with the re9 quirements of section 454A.’’. 

10 SEC. 4. INCREASED TAX ON NET INVESTMENT INCOME OF 

11 CERTAIN EDUCATIONAL INSTITUTIONS WITH 

12 LARGE ENDOWMENTS THAT INCREASE TUI13 TION. 

14 Section 4968 of the Internal Revenue Code of 1986 

15 is amended by adding at the end the following new sub16 section: 

17 ‘‘(e) INCREASED TAX ON CERTAIN APPLICABLE

18 EDUCATIONAL INSTITUTIONS THAT INCREASE TUI19 TION.— 

20 ‘‘(1) IN GENERAL.—In the case of any disquali21 fied large applicable educational institution for any 

22 taxable year beginning after December 31, 2024, 

23 subsection (a) shall be applied by substituting ‘25 

24 percent’ for ‘1.4 percent’ for such taxable year. 


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1 ‘‘(2) DISQUALIFIED LARGE APPLICABLE EDU2 CATIONAL INSTITUTION.—For purposes of this sub3 section, the term ‘disqualified large applicable edu4 cational institution’ means, with respect to any tax5 able year, any institution if— 

6 ‘‘(A) such institution is an applicable edu7 cational institution for such taxable year, 

8 ‘‘(B) the average tuition charged to full9 time students for semesters during such taxable 

10 year exceeds the inflation adjusted base amount 

11 for such taxable year, and 

12 ‘‘(C) the aggregate fair market value (de13 termined as of the end of the preceding taxable 

14 year) of the assets of such institution (other 

15 than those assets which are used directly in car16 rying out the institution’s exempt purpose) 

17 equal or exceeds $2,500,000,000. 

18 ‘‘(3) INFLATION ADJUSTED BASE AMOUNT.— 

19 For purposes of this subsection— 

20 ‘‘(A) IN GENERAL.—The term ‘inflation 

21 adjusted base amount’ means, with respect to 

22 any applicable education institution for any tax23 able year which begins in any calendar year, the 

24 sum of— 


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1 ‘‘(i) the base amount of such institu2 tion, plus 

3 ‘‘(ii) the product of— 

4 ‘‘(I) such base amount, multi5 plied by 

6 ‘‘(II) the cost-of-living adjust7 ment determined under section 1(f)(3) 

8 for the calendar year in which the tax9 able year begins, determined by sub10 stituting ‘calendar year 2023’ for ‘cal11 endar year 2016’ in subparagraph 

12 (A)(ii) thereof. 

13 ‘‘(B) BASE AMOUNT.—The term ‘base 

14 amount’ means, with respect any applicable 

15 educational institution, the average tuition 

16 charged to specified students for semesters dur17 ing calendar year 2024. 

18 ‘‘(4) APPLICATION TO NEW INSTITUTIONS.—In 

19 the case of any applicable educational institution not 

20 in existence at all times during calendar year 

21 2024— 

22 ‘‘(A) the base amount with respect to such 

23 institution shall be determined with respect to 

24 the first full calendar year for which such insti25 tution is in existence, 


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1 ‘‘(B) the inflation adjusted base amount 

2 shall be determined by using the calendar year 

3 preceding such first full calendar year as the 

4 year substituted in paragraph (3)(A)(ii)(II), 

5 and 

6 ‘‘(C) paragraph (1) shall not apply to any 

7 taxable year beginning before the end of such 

8 first full calendar year. 

9 Notwithstanding the preceding sentence, if the aver10 age tuition charged by any applicable educational in11 stitution to specified students during the first full 

12 calendar year for which such institution is in exist13 ence is higher than such average for any of the 3 

14 succeeding calendar years, the base amount and in15 flation adjusted base amount with respect to such 

16 institution shall be determined in such manner as 

17 the Secretary may provide.’’. 

Æ 


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