I 
119TH CONGRESS 
1ST SESSION 
H. R. 713 
To impose a financial penalty on certain institutions of higher education 
with high percentages of students who default or make insufficient pay-
ments on Federal student loans, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 23, 2025 
Ms. VAN DUYNE introduced the following bill; which was referred to the Com-
mittee 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 
A BILL 
To impose a financial penalty on certain institutions of high-
er education with high percentages of students who de-
fault or make insufficient payments on Federal student 
loans, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Preventing Financial 
Exploitation in Higher Education Act’’. 
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SEC. 
2. 
INSTITUTIONAL 
ACCOUNTABILITY 
FOR 
DE-
FAULTED, DELINQUENT, AND UNDERPAID 
STUDENT LOANS. 
Part D of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1087a et seq.) is amended by inserting 
after section 454 the following: 
‘‘SEC. 454A. INSTITUTIONAL ACCOUNTABILITY FOR DE-
FAULTED, DELINQUENT, AND UNDERPAID 
STUDENT LOANS. 
‘‘(a) IN GENERAL.—In accordance with subsection 
(b), a covered institution of higher education shall pay to 
the Secretary— 
‘‘(1) a penalty based on the institution’s cohort 
default rate for each fiscal year; 
‘‘(2) a penalty based on the institution’s cohort 
delinquency rate for each fiscal year; and 
‘‘(3) a penalty based on the institution’s cohort 
underpayment rate for each fiscal year. 
‘‘(b) PHASE-IN OF COHORT DEFAULT RATE PEN-
ALTY.— 
‘‘(1) FISCAL YEAR 2025.—A covered institution 
of higher education— 
‘‘(A) with a cohort default rate (as cal-
culated under section 435(m)) for fiscal year 
2025 that is 11 percent or more, shall pay to 
the Secretary a penalty in an amount equal to 
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30 percent of the total outstanding balance of 
principle and interest due on all loans under 
this part that are included in the calculation of 
such cohort default rate for such fiscal year; 
‘‘(B) with a cohort delinquency rate (as de-
termined by the Secretary) for fiscal year 2025 
that is 10 percent or more shall pay to the Sec-
retary a penalty in an amount equal to 28 per-
cent of the total outstanding balance of prin-
ciple and interest due on all loans under this 
part that are included in the calculation of such 
cohort delinquency rate for such fiscal year; and 
‘‘(C) with a cohort underpayment rate (as 
determined by the Secretary) for fiscal year 
2025 that is 9 percent or more shall pay to the 
Secretary a penalty in an amount equal to 26 
percent of the total outstanding balance of prin-
ciple and interest due on all loans under this 
part that are included in the calculation of such 
cohort underpayment rate for such fiscal year. 
‘‘(2) FISCAL YEAR 2026.—A covered institution 
of higher education— 
‘‘(A) with a cohort default rate (as cal-
culated under section 435(m)) for fiscal year 
2026 that is 10 percent or more, shall pay to 
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the Secretary a penalty in an amount equal to 
28 percent of the total outstanding balance of 
principle and interest due on all loans under 
this part that are included in the calculation of 
such cohort default rate for such fiscal year; 
‘‘(B) with a cohort delinquency rate (as de-
termined by the Secretary) for fiscal year 2026 
that is 9 percent or more, shall pay to the Sec-
retary a penalty in an amount equal to 26 per-
cent of the total outstanding balance of prin-
ciple and interest due on all loans under this 
part that are included in the calculation of such 
cohort delinquency rate for such fiscal year; and 
‘‘(C) with a cohort underpayment rate (as 
determined by the Secretary) for fiscal year 
2026 that is 8 percent or more, shall pay to the 
Secretary a penalty in an amount equal to 24 
percent of the total outstanding balance of prin-
ciple and interest due on all loans under this 
part that are included in the calculation of such 
cohort underpayment rate for such fiscal year. 
‘‘(3) FISCAL YEAR 2027.—A covered institution 
of higher education— 
‘‘(A) with a cohort default rate (as cal-
culated under section 435(m)) for fiscal year 
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2030 or any fiscal year thereafter that is 4 per-
cent or more, shall pay to the Secretary a pen-
alty in an amount equal to 16 percent of the 
total outstanding balance of principle and inter-
est due on all loans under this part that are in-
cluded in the calculation of such cohort under-
payment rate for such fiscal year. 
‘‘(c) EFFECT
ON
DEFAULT
STATUS
OF
BOR-
ROWER.—The payment of a penalty under this section by 
a covered institution of higher education shall have no ef-
fect on the rights or obligations of a borrower of a loan 
that is included in the calculation of the institution’s co-
hort default rate, cohort delinquency rate, or cohort un-
derpayment rate for purposes of such penalty. 
‘‘(d) DEFINITIONS.— 
‘‘(1) COHORT DELINQUENCY RATE.—The term 
‘cohort delinquency rate’ means the percentage of 
Federal student loan borrowers included in a cohort 
under subsection (b) who have failed to make pay-
ments on one or more of the Federal student loans 
used for attendance at the institution concerned for 
between 31 and 360 days (inclusive). 
‘‘(2) COHORT
UNDERPAYMENT
RATE.—The 
term ‘cohort underpayment rate’, means the percent-
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age of Federal student loan borrowers included in a 
cohort under subsection (b) who— 
‘‘(A) are making regular payments on the 
Federal student loans used for attendance at 
the institution concerned but for whom the sum 
all outstanding balances of such loans exceeds 
the sum of the original loan balances; and 
‘‘(B) are neither delinquent nor in default 
on such loans. 
‘‘(3) COVERED INSTITUTION OF HIGHER EDU-
CATION.—The term ‘covered institution of higher 
education’ means an institution of higher education 
that is the beneficiary of an endowment fund with 
total value of $2,500,000,000 or more. 
‘‘(4) ENDOWMENT
FUND.—The term ‘endow-
ment fund’ means a fund that— 
‘‘(A) is established by State law, by an in-
stitution of higher education, or by a founda-
tion that is exempt from Federal income tax-
ation; and 
‘‘(B) is maintained for the purpose of gen-
erating income for the support of an institution 
of higher education. 
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‘‘(5) FEDERAL
STUDENT
LOAN.—The term 
‘Federal student loan’ means a loan made under this 
part.’’. 
SEC. 3. PROGRAM PARTICIPATION AGREEMENTS. 
Section 487(a) of the Higher Education Act of 1965 
(20 U.S.C. 1094(a)) is amended by adding at the end the 
following: 
‘‘(30) The institution will comply with the re-
quirements of section 454A.’’. 
SEC. 4. INCREASED TAX ON NET INVESTMENT INCOME OF 
CERTAIN EDUCATIONAL INSTITUTIONS WITH 
LARGE ENDOWMENTS THAT INCREASE TUI-
TION. 
Section 4968 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new sub-
section: 
‘‘(e) INCREASED TAX
ON CERTAIN APPLICABLE 
EDUCATIONAL
INSTITUTIONS
THAT
INCREASE
TUI-
TION.— 
‘‘(1) IN GENERAL.—In the case of any disquali-
fied large applicable educational institution for any 
taxable year beginning after December 31, 2025, 
subsection (a) shall be applied by substituting ‘25 
percent’ for ‘1.4 percent’ for such taxable year. 
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‘‘(2) DISQUALIFIED LARGE APPLICABLE EDU-
CATIONAL INSTITUTION.—For purposes of this sub-
section, the term ‘disqualified large applicable edu-
cational institution’ means, with respect to any tax-
able year, any institution if— 
‘‘(A) such institution is an applicable edu-
cational institution for such taxable year, 
‘‘(B) the average tuition charged to full- 
time students for semesters during such taxable 
year exceeds the inflation adjusted base amount 
for such taxable year, and 
‘‘(C) the aggregate fair market value (de-
termined as of the end of the preceding taxable 
year) of the assets of such institution (other 
than those assets which are used directly in car-
rying out the institution’s exempt purpose) 
equal or exceeds $2,500,000,000. 
‘‘(3) INFLATION
ADJUSTED
BASE
AMOUNT.— 
For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘inflation 
adjusted base amount’ means, with respect to 
any applicable education institution for any tax-
able year which begins in any calendar year, the 
sum of— 
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‘‘(i) the base amount of such institu-
tion, plus 
‘‘(ii) the product of— 
‘‘(I) such base amount, multi-
plied by 
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3) 
for the calendar year in which the tax-
able year begins, determined by sub-
stituting ‘calendar year 2024’ for ‘cal-
endar year 2016’ in subparagraph 
(A)(ii) thereof. 
‘‘(B) BASE
AMOUNT.—The term ‘base 
amount’ means, with respect any applicable 
educational institution, the average tuition 
charged to specified students for semesters dur-
ing calendar year 2025. 
‘‘(4) APPLICATION TO NEW INSTITUTIONS.—In 
the case of any applicable educational institution not 
in existence at all times during calendar year 
2025— 
‘‘(A) the base amount with respect to such 
institution shall be determined with respect to 
the first full calendar year for which such insti-
tution is in existence, 
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‘‘(B) the inflation adjusted base amount 
shall be determined by using the calendar year 
preceding such first full calendar year as the 
year substituted in paragraph (3)(A)(ii)(II), 
and 
‘‘(C) paragraph (1) shall not apply to any 
taxable year beginning before the end of such 
first full calendar year. 
Notwithstanding the preceding sentence, if the aver-
age tuition charged by any applicable educational in-
stitution to specified students during the first full 
calendar year for which such institution is in exist-
ence is higher than such average for any of the 3 
succeeding calendar years, the base amount and in-
flation adjusted base amount with respect to such 
institution shall be determined in such manner as 
the Secretary may provide.’’. 
Æ 
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