[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7831 Introduced in House (IH)]

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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.

    Be it enacted by the Senate and House of Representatives 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''.

SEC. 2. INSTITUTIONAL ACCOUNTABILITY FOR DEFAULTED, 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 DEFAULTED, 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 Penalty.--
            ``(1) Fiscal year 2024.--A covered institution of higher 
        education--
                    ``(A) with a cohort default rate (as calculated 
                under section 435(m)) for fiscal year 2024 that is 11 
                percent or more, shall pay to the Secretary a penalty 
                in an amount equal to 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 determined 
                by the Secretary) for fiscal year 2024 that is 10 
                percent or more shall pay to 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 delinquency rate for such fiscal year; and
                    ``(C) with a cohort underpayment rate (as 
                determined by the Secretary) for fiscal year 2024 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 principle 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 2025.--A covered institution of higher 
        education--
                    ``(A) with a cohort default rate (as calculated 
                under section 435(m)) for fiscal year 2025 that is 10 
                percent or more, shall pay to 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 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 principle 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 8 percent or more, shall pay to the Secretary a 
                penalty in an amount equal to 24 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 underpayment rate for such 
                fiscal year.
            ``(3) Fiscal year 2026.--A covered institution of higher 
        education--
                    ``(A) with a cohort default rate (as calculated 
                under section 435(m)) for fiscal year 2026 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 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 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 principle 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 7 percent or more, shall pay to the Secretary a 
                penalty in an amount equal to 22 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 underpayment rate for such 
                fiscal year.
            ``(4) Fiscal year 2027.--A covered institution of higher 
        education--
                    ``(A) with a cohort default rate (as calculated 
                under section 435(m)) for fiscal year 2027 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 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 determined 
                by the Secretary) for fiscal year 2027 that is 7 
                percent or more, shall pay to the Secretary a penalty 
                in an amount equal to 22 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 delinquency rate for such 
                fiscal year; and
                    ``(C) with a cohort underpayment rate (as 
                determined by the Secretary) for fiscal year 2027 that 
                is 6 percent or more, shall pay to the Secretary a 
                penalty in an amount equal to 20 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 underpayment rate for such 
                fiscal year.
            ``(5) Fiscal year 2028.--A covered institution of higher 
        education--
                    ``(A) with a cohort default rate (as calculated 
                under section 435(m)) for fiscal year 2028 that is 7 
                percent or more, shall pay to the Secretary a penalty 
                in an amount equal to 22 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 determined 
                by the Secretary) for fiscal year 2028 that is 6 
                percent or more, shall pay to the Secretary a penalty 
                in an amount equal to 20 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 delinquency rate for such 
                fiscal year; and
                    ``(C) with a cohort underpayment rate (as 
                determined by the Secretary) for fiscal year 2028 that 
                is 5 percent or more, shall pay to the Secretary a 
                penalty in an amount equal to 18 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 underpayment rate for such 
                fiscal year.
            ``(6) Fiscal year 2029 and subsequent fiscal years.--A 
        covered institution of higher education--
                    ``(A) with a cohort default rate (as calculated 
                under section 435(m)) for fiscal year 2029 or any 
                fiscal year thereafter that is 6 percent or more, shall 
                pay to the Secretary a penalty in an amount equal to 20 
                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 determined 
                by the Secretary) for fiscal year 2029 or any fiscal 
                year thereafter that is 5 percent or more, shall pay to 
                the Secretary a penalty in an amount equal to 18 
                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 delinquency 
                rate for such fiscal year; and
                    ``(C) with a cohort underpayment rate (as 
                determined by the Secretary) for fiscal year 2029 or 
                any fiscal year thereafter that is 4 percent or more, 
                shall pay to the Secretary a penalty in an amount equal 
                to 16 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 
                underpayment rate for such fiscal year.
    ``(c) Effect on Default Status of Borrower.--The payment of a 
penalty under this section by a covered institution of higher education 
shall have no effect on the rights or obligations of a borrower of a 
loan that is included in the calculation of the institution's cohort 
default rate, cohort delinquency rate, or cohort underpayment 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 payments 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 percentage 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 education.--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 `endowment fund' means a 
        fund that--
                    ``(A) is established by State law, by an 
                institution of higher education, or by a foundation 
                that is exempt from Federal income taxation; and
                    ``(B) is maintained for the purpose of generating 
                income for the support of an institution of higher 
                education.
            ``(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 requirements of 
        section 454A.''.

SEC. 4. INCREASED TAX ON NET INVESTMENT INCOME OF CERTAIN EDUCATIONAL 
              INSTITUTIONS WITH LARGE ENDOWMENTS THAT INCREASE TUITION.

    Section 4968 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(e) Increased Tax on Certain Applicable Educational Institutions 
That Increase Tuition.--
            ``(1) In general.--In the case of any disqualified large 
        applicable educational institution for any taxable year 
        beginning after December 31, 2024, subsection (a) shall be 
        applied by substituting `25 percent' for `1.4 percent' for such 
        taxable year.
            ``(2) Disqualified large applicable educational 
        institution.--For purposes of this subsection, the term 
        `disqualified large applicable educational institution' means, 
        with respect to any taxable year, any institution if--
                    ``(A) such institution is an applicable educational 
                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 (determined 
                as of the end of the preceding taxable year) of the 
                assets of such institution (other than those assets 
                which are used directly in carrying 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 taxable year which begins 
                in any calendar year, the sum of--
                            ``(i) the base amount of such institution, 
                        plus
                            ``(ii) the product of--
                                    ``(I) such base amount, multiplied 
                                by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 2023' for 
                                `calendar 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 during calendar year 2024.
            ``(4) Application to new institutions.--In the case of any 
        applicable educational institution not in existence at all 
        times during calendar year 2024--
                    ``(A) the base amount with respect to such 
                institution shall be determined with respect to the 
                first full calendar year for which such institution is 
                in existence,
                    ``(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 average tuition 
        charged by any applicable educational institution to specified 
        students during the first full calendar year for which such 
        institution is in existence is higher than such average for any 
        of the 3 succeeding calendar years, the base amount and 
        inflation adjusted base amount with respect to such institution 
        shall be determined in such manner as the Secretary may 
        provide.''.
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