AAU Opposes House Bill That Would Require Certain Nonprofit Institutions to Repay Unpaid Federal Student Loan Balances

Association of American Universities (AAU)

Leading Research Universities Report

February 26, 2024

AAU Opposes House Bill That Would Require Certain Nonprofit Institutions to Repay Unpaid Federal Student Loan Balances

The House is expected to vote on a bill this week that, in its present form, would require some schools to reimburse the federal government for federal financial aid provided to their students.

This provision of the revised Bipartisan Workforce Pell Act (H.R. 6585) would apply to private nonprofit colleges and universities that are subject to the endowment tax. Institutions would be required to pay the principal and interest on unpaid loans as well as any loans that were forgiven by the federal government for students who attended those schools and then either defaulted on their federal loans or gained loan forgiveness through programs like Public Service Loan Forgiveness.

The fees are designed to help pay for a new program that would expand federal Pell Grants – which already can be used for tuition in traditional degree programs as well as longer-term non-degree workforce education – to cover short-term workforce development training courses. While AAU supports this expansion of Pell, it is opposed to the proposed cost offset, which sets a historic and dangerous precedent by singling out a specific set of institutions to pay for another congressional priority. As the National Association of Independent Colleges and Universities points out: “Ironically, the colleges and universities being penalized are the very institutions with the highest completion rates, the lowest [loan] default rates, and the lowest costs of low-income students.”

While penalizing schools with large charitable endowments, the bill does not grant those institutions the ability to limit their students’ loan borrowing and shifts the accountability to pay back the loans from student borrowers to educational providers. AAU encourages lawmakers to vote “no” on the bill unless Congress finds another way to offset the costs of short-term Pell Grants.

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