S-4269-119
Read twice and referred to the Committee on Finance.
Sponsored by Richard Blumenthal (D-CT)
What it does
This bill would repeal several provisions of a 2025 budget reconciliation law (P.L. 119-21) that changed student loan limits, repayment plans, deferment and forbearance rules, Public Service Loan Forgiveness, and Pell Grant eligibility. It would also restore borrower defense to repayment and closed-school discharge rules that the 2025 law delayed. Additionally, it would expand the existing "gainful employment" accountability standard — which can cut off federal aid to low-earning programs — to cover all degree levels, including bachelor's and graduate programs. Finally, it would lock the excise tax on large private university endowments at a flat 1.4%, preventing the rate from rising under a tiered structure enacted in 2025.
Who benefits
Current and future student loan borrowers who would regain access to more generous repayment plans, deferment options, and Public Service Loan Forgiveness terms. Low-income students who would benefit from restored Pell Grant eligibility rules. Students who attended schools that closed or engaged in misconduct, who would regain access to loan discharge pathways. Large private universities with endowments above the threshold, who would face a fixed 1.4% excise tax rather than a potentially higher tiered rate. Borrowers in public service careers (teachers, nurses, government workers) who rely on PSLF.
Who is hurt
Federal taxpayers who would bear the cost of more generous loan forgiveness and repayment terms. Institutions whose programs produce low graduate earnings — including some for-profit colleges, community colleges, and graduate programs — that could lose federal aid eligibility under the expanded gainful employment standard. Students enrolled in those programs who could lose access to federal financial aid if their program is deemed low-earning. Competing institutions that already comply with gainful employment rules and may face a newly leveled playing field. The federal budget, which would forgo revenue from a higher tiered endowment tax on the wealthiest universities.
Supporters argue
Supporters argue that the 2025 reconciliation law made college less affordable by cutting loan repayment options and tightening Pell Grant eligibility for the students who need aid most. They contend that restoring borrower defense and closed-school discharge protections is essential for students defrauded by predatory institutions, and that expanding gainful employment accountability to all degree levels — not just vocational programs — holds all colleges equally responsible for delivering economic value. They also argue that locking the endowment tax at 1.4% provides regulatory certainty and prevents punitive escalation against institutions that serve large numbers of students.
Opponents argue
Opponents argue that the 2025 reconciliation provisions were enacted to reduce the federal deficit and that repealing them would add hundreds of billions of dollars to the national debt over time, shifting costs from borrowers to all taxpayers. They contend that more generous repayment and forgiveness terms encourage colleges to raise tuition by insulating students from the true cost of their degrees, and that fixing the endowment tax at 1.4% shields the wealthiest private universities — some holding tens of billions in endowments — from contributing more to offset the cost of federal student aid programs they benefit from.
Constitutional context
Congress's authority to condition federal student aid on program performance standards flows from the Spending Clause (Art. I, §8, cl. 1), subject to the five-part test in South Dakota v. Dole (1987), which requires conditions to be unambiguous, related to the federal interest, and not coercive. The gainful employment expansion raises a potential major questions doctrine issue under West Virginia v. EPA (2022): if the expanded standard effectively restructures which programs across all of higher education can access federal aid, courts could scrutinize whether Congress has provided sufficiently clear authorization for that sweeping effect.
Checks and balances
Congress would reclaim authority over student loan and aid program terms by repealing executive-branch-friendly reconciliation provisions; the Department of Education would implement the restored rules, subject to notice-and-comment rulemaking; the IRS would administer the fixed endowment excise tax; and federal courts retain review authority over agency implementation.
Historical precedent
The original gainful employment rule, first promulgated by the Department of Education in 2014 and revised in 2023, applied only to vocational and certificate programs; courts upheld its general framework but it was rescinded in 2024, making this bill's expansion to all degree levels a novel statutory step without a direct enacted precedent.