Preventing Financial Exploitation in Higher Education Act

H.R. 713, the Preventing Financial Exploitation in Higher Education Act, would create new financial penalties for the wealthiest colleges and universities and add a parallel tax measure aimed at those institutions that grow tuition while holding very large endowments. The core idea is to hold “covered” institutions financially accountable for how their students repay Federal student loans. Beginning in 2025, such institutions would owe penalties based on three cohort metrics—default rate, delinquency rate, and underpayment rate—calculated annually and phased in through 2030 and beyond. The bill designates as “covered” only those institutions with endowments of at least $2.5 billion. In addition, the bill would impose a 25% tax on net investment income for certain large endowment institutions that increase tuition beyond an inflation-adjusted base, effectively targeting tuition growth at wealthy institutions. Institutions would also need to sign onto program participation agreements confirming compliance with the new accountability requirements. The measure also amends program participation and related higher ed tax rules to align with these new penalties and to require compliance. Importantly, penalties paid by institutions do not affect borrowers’ rights or obligations. The overall aim is to deter financial practices that may shift loan-related risk onto students while retaining a focus on endowment-rich institutions.