Education Affordability and National Service Bill

At a Glance

  • Aligns federal grants and loans with national workforce shortage areas — no cuts to existing awards
  • Two years of public service earns four years of in-state public college tuition
  • Requires universities with $500M+ endowments to spend at least 5% of value annually on need-based aid
  • Employers get a 50% tax credit for sponsoring employee education, with protections against abusive contracts
  • Students who skip service commitments must repay education costs pro rata, with hardship and disability waivers
Education Affordability and National Service Bill

The promise of higher education—that hard work and academic achievement would open doors to economic opportunity—has become increasingly difficult to fulfill. Over the past four decades, college tuition has risen faster than wages, healthcare costs, and nearly every other household expense[1]. Millions of Americans now carry student debt that delays home purchases, family formation, and retirement savings, while many graduates find their degrees misaligned with available jobs. At the same time, critical sectors of the economy face persistent workforce shortages: healthcare systems lack doctors and nurses[2], manufacturers cannot find skilled technicians, and infrastructure projects stall for want of trained workers. The disconnect between educational investment and economic need represents a failure of planning that harms students, employers, and the nation's competitive position.

Meanwhile, American universities sit on endowments totaling hundreds of billions of dollars[3]—assets that have grown substantially even as tuition has climbed. These institutions benefit from tax-exempt status and federal research funding, yet too often treat their endowments as wealth to be accumulated rather than resources to be deployed for their educational mission. Students graduate burdened with debt while their universities report record endowment growth. This imbalance demands correction.

The human cost is measured in deferred lives. Young Americans delay buying homes[4], starting families, and launching businesses because student loan payments consume the income that would make those milestones possible. Workers in their forties and fifties still carry undergraduate debt. Parents take on loans to help their children only to jeopardize their own retirement. And an entire generation has absorbed the lesson that higher education is a financial gamble rather than a reliable investment—leading many to forgo college entirely, even when their talents and ambitions would benefit from it. The system punishes exactly the kind of aspiration that a healthy economy should reward.

This legislation addresses college affordability and workforce alignment through three complementary approaches. First, federal grants and student loans will be aligned with national workforce needs as forecast by the Department of Labor, with supplemental grants for students pursuing careers in shortage areas such as healthcare, teaching, skilled trades, engineering, and other critical fields. No student's existing Pell Grant or Direct Loan eligibility is reduced; priority-field students receive additional support on top of existing awards. Second, the bill expands pathways to earn free or subsidized post-secondary education through public and military service, and creates a public-private partnership allowing companies to sponsor student education in exchange for equivalent years of service and a federal tax benefit. Recipients who fail to complete their service commitment will be responsible for a prorated share of their education costs, with waivers for hardship, disability, death in the line of duty, and involuntary separation. Third, universities and colleges with endowments over $500 million will be required to spend, each year, at least 5 percent of the trailing three-year average value of their unrestricted endowment assets—or half of their investment returns, whichever is greater—on need-based grants for students. This matches standard prudent endowment spending while ensuring institutional wealth serves students rather than simply growing in perpetuity.

Problems the Bill Aims to Solve

Unsustainable Student Debt Burden. Americans collectively owe approximately $1.7 trillion in federal and private student loan debt[5]. Monthly payments consume income that would otherwise support household formation, homeownership, small business creation, and retirement savings—delaying economic participation for an entire generation.

Disconnect Between Education and Workforce Needs. Federal funding currently flows to students regardless of whether their chosen field addresses national labor shortages. The result is oversupply in some professions and persistent shortages in critical sectors including healthcare, skilled manufacturing, and technical trades.

Critical Workforce Shortages in Essential Industries. Hospitals, manufacturers, infrastructure projects, and other vital sectors cannot find enough qualified workers. These shortages raise costs, delay projects, and weaken national competitiveness—yet the federal education financing system does nothing to steer students toward these opportunities.

Rising Tuition Despite Growing Institutional Wealth. University endowments have reached historic levels, yet tuition continues to climb. Institutions benefit from tax-exempt status and federal support but deploy only a fraction of their resources to reduce student costs, prioritizing endowment growth over affordability.

Limited Pathways to Debt-Free Education. Military service offers educational benefits, but options for civilians to earn education through public service remain limited and underfunded. Students without family wealth face a binary choice: take on debt or forgo higher education.

Employer Training Investments Lack Federal Support. Companies willing to invest in workforce development receive little incentive to sponsor student education directly. A structured partnership between employers, students, and the federal government could expand educational access while ensuring graduates enter jobs aligned with their training.

No Accountability for Students Who Receive Sponsored Education. Without clear service requirements and repayment obligations, education sponsorship programs risk becoming one-sided transfers rather than mutual commitments. Students who benefit from public or private investment should be accountable for fulfilling their end of the agreement.

Education Affordability and National Service Act

120th Congress, 2nd Session

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

Sec. 1. SHORT TITLE.

This Act may be cited as the "Education Affordability and National Service Act."

Sec. 2. DEFINITIONS.

  1. (1) PRIORITY FIELD.—The term "priority field" means a field of study aligned with an occupation designated as a critical shortage area by the Department of Labor, including healthcare (including nursing and primary care), teaching (including K-12 instruction, special education, and early childhood education), social work, skilled trades, engineering, advanced manufacturing, and cybersecurity.
  2. (2) UNRESTRICTED ENDOWMENT ASSETS.—The term "unrestricted endowment assets" means the aggregate fair market value of institutional endowment funds as reported to the Department of Education, excluding funds subject to donor-imposed restrictions on use under the Uniform Prudent Management of Institutional Funds Act or applicable State law.
  3. (3) QUALIFIED SERVICE.—The term "qualified service" means full-time service in a position certified by the Corporation for National and Community Service as serving a critical public need, including AmeriCorps and successor programs, State and local government, and 501(c)(3) nonprofit organizations in healthcare, education, infrastructure, and disaster response. Qualified service positions shall pay not less than the prevailing local living wage stipend and shall not displace any existing paid employee (consistent with 42 U.S.C. § 12637).

Sec. 3. WORKFORCE-ALIGNED FEDERAL EDUCATION FUNDING.

  1. (1) The Secretary of Labor shall publish a Workforce Forecast identifying occupations experiencing critical labor shortages. The Forecast shall be issued as a three-year rolling forecast through notice-and-comment rulemaking, with published methodology, and updated not more frequently than every three years.
  2. (2) Students in priority fields shall be eligible for a supplemental Pell Grant of up to $5,000 per academic year in addition to the maximum Pell Grant award.
  3. (3) No student's Pell Grant or Direct Loan eligibility shall be reduced below amounts available under title IV of the Higher Education Act of 1965 as of the date of enactment.
  4. (4) A student's priority-field status shall be determined at the time of matriculation and shall remain in effect for the normal time-to-degree, not to exceed 5 academic years, regardless of subsequent changes to the Workforce Forecast.
  5. (5) Nothing in this section shall prohibit any student from pursuing any field of study.

Sec. 4. NATIONAL SERVICE EDUCATION PROGRAM.

  1. (1) There is established a National Service Education Program under which eligible individuals may earn post-secondary education through qualified service.
  2. (2) CIVILIAN SERVICE BENEFIT.—An individual who completes 2 years of qualified service shall be entitled to tuition and mandatory fees at the in-state public-institution rate for up to 4 academic years, or an equivalent dollar amount applied toward tuition at a private institution. The benefit shall not duplicate the Segal AmeriCorps Education Award; a participant shall elect between the benefits under this section and the Segal Award.
  3. (3) ANNUAL CAP.—Qualified service slots under paragraph (2) shall be capped at 250,000 participants per program year, subject to appropriations.
  4. (4) MILITARY SERVICE ENHANCEMENTS.—
    1. (a) The tiered benefit structure of section 3311(b) of title 38, United States Code, is retained.
    2. (b) Post-9/11 GI Bill tuition and fee payments at private institutions under section 3313(c) of title 38 shall equal the national maximum plus any Yellow Ribbon match; nothing in this Act waives the in-state rate requirement of section 3679(c) of title 38.
    3. (c) Service under title 32, United States Code, in a federally funded duty status shall count toward benefit thresholds on a day-for-day basis with active duty under title 10.
    4. (d) Section 3319 of title 38 is not amended by this Act; the existing 6-year service threshold and 4-year additional service obligation for transferability of benefits to dependents are retained.
    5. (e) Nothing in this Act alters election rules under sections 3322 or 3327 of title 38, or benefits under chapter 31, chapter 35, or the Marine Gunnery Sergeant John David Fry Scholarship.

Sec. 5. PUBLIC-PRIVATE EDUCATION PARTNERSHIPS.

  1. (1) Qualified employers may sponsor student education in exchange for a commitment to equivalent employment.
  2. (2) Sponsoring employers shall receive a tax credit equal to 50 percent of qualified education expenses paid, not to exceed $25,000 per student per year. Amounts excluded from gross income under section 127 of the Internal Revenue Code shall not qualify for the credit. Related parties and owner-employees (as defined for purposes of section 267 of such Code) are excluded.
  3. (3) Students shall enter written agreements to maintain satisfactory academic progress and commence employment upon completion for a period equivalent to years of education received. Wages paid to a sponsored employee shall meet or exceed the prevailing wage for the occupation and metropolitan area.
  4. (4) ANTI-ABUSE PROTECTIONS.—A service commitment under this section shall be voidable without repayment liability where—
    1. (a) the employer subjects the employee to harassment or unsafe working conditions;
    2. (b) the employer materially alters the job duties or relocates the position more than 50 miles from the original worksite;
    3. (c) the employer fails to pay the prevailing wage required by paragraph (3); or
    4. (d) the employer ceases operations or terminates the employee without cause.

Non-compete provisions shall not be enforceable against an employee sponsored under this section.

Sec. 6. PRORATED REPAYMENT FOR INCOMPLETE SERVICE.

  1. (1) Any individual who receives education benefits and fails to complete the associated service commitment shall be liable for prorated repayment based on months of service not completed.
  2. (2) No interest shall accrue on any amount owed during periods of qualified service or military service.
  3. (3) Repayment obligations shall be collected under income-driven terms, capped at 10 percent of the individual's discretionary income, with any remaining balance forgiven 10 years after repayment commences.
  4. (4) The Secretary shall waive repayment in cases of—
    1. (a) death in the line of duty or service-connected death;
    2. (b) service-connected disability or other medical disability preventing completion;
    3. (c) hardship discharge or reduction-in-force separation;
    4. (d) involuntary separation other than for misconduct (as determined under chapter 33 of title 38 for military service); or
    5. (e) catastrophic family circumstances including serious illness of a dependent.
  5. (5) An individual adversely affected by a repayment determination shall have a right to administrative appeal and, for military participants, to review under the Board of Veterans' Appeals.

Sec. 7. ENDOWMENT SPENDING REQUIREMENT FOR LARGE INSTITUTIONS.

  1. (1) Each eligible institution with unrestricted endowment assets exceeding $500,000,000 shall expend annually, for need-based grants to students covering tuition, fees, room, board, and qualified educational expenses, an amount not less than the greater of—
    1. (a) 5 percent of the trailing 3-year average fair market value of unrestricted endowment assets; or
    2. (b) 50 percent of net investment returns on such assets for the preceding fiscal year.
  2. (2) Amounts already expended by the institution for need-based financial aid drawn from endowment distributions shall count toward the requirement of paragraph (1).
  3. (3) Grants shall be awarded to students who are United States citizens and graduates of secondary school, with priority based on demonstrated financial need. Not less than 25 percent of grants awarded under this section shall be reserved for non-traditional students, veterans, and individuals who have completed qualified service under section 4.
  4. (4) Institutions shall submit annual reports to the Secretary of Education on amounts expended and students served, disaggregated by income band and demographic category.

Sec. 8. PENALTIES FOR NON-COMPLIANCE WITH ENDOWMENT REQUIREMENT.

  1. (1) FIRST YEAR.—Written warning and corrective action plan required within 90 days.
  2. (2) SECOND CONSECUTIVE YEAR.—Civil penalty equal to 25 percent of the shortfall.
  3. (3) THIRD OR SUBSEQUENT CONSECUTIVE YEAR.—An excise tax equal to 100 percent of the shortfall for the applicable year, modeled on section 4942 of the Internal Revenue Code (minimum investment return distribution requirements for private foundations), and ineligibility for any new Federal research grant or contract until the shortfall is cured. Existing research grants and contracts already awarded shall not be revoked.
  4. (4) Section 4968 of the Internal Revenue Code of 1986 is amended by striking "1.4 percent" and inserting "5 percent." The additional revenue collected under this paragraph is appropriated to fund supplemental Pell Grants under section 3 and the National Service Education Program under section 4.

Sec. 9. PAY-FOR; APPROPRIATIONS.

  1. (1) The programs established by sections 3, 4, and 5 shall be funded by (a) the increased excise tax under section 8(4); (b) amounts appropriated by Congress; and (c) redirection of the existing Segal AmeriCorps Education Award appropriation with respect to participants who elect the civilian service benefit under section 4(2).
  2. (2) Authorization levels and appropriations for each program shall be reviewed every 5 years by the Committees on Health, Education, Labor, and Pensions of the Senate and Education and the Workforce of the House.

Sec. 10. EFFECTIVE DATE.

  1. (1) This Act shall take effect on October 1, 2026.
  2. (2) Workforce-aligned funding shall apply to award years beginning July 1, 2027.
  3. (3) The endowment spending requirement shall apply to fiscal years beginning January 1, 2027.

Sources

  1. NCES Digest of Education Statistics, Table 330.10: Average undergraduate tuition, fees, room and board rates, 1963-64 through 2022-23. https://nces.ed.gov/programs/digest/d23/tables/dt23_330.10.asp
  2. Bureau of Labor Statistics, Occupational Outlook Handbook: Healthcare Occupations, 2024-34 projections. https://www.bls.gov/ooh/healthcare/
  3. NCES Fast Facts: Endowments — market value of college and university endowment funds. https://nces.ed.gov/fastfacts/display.asp?id=73
  4. Federal Reserve Board, "Student Loans and Homeownership," FEDS Working Paper 2016-010. https://www.federalreserve.gov/econres/feds/student-loans-and-homeownership.htm
  5. Federal Student Aid, U.S. Department of Education, "Federal Student Loan Portfolio." https://studentaid.gov/data-center/student/portfolio