GRADUATE Act

Bill Number

H.R. 7536

Origin Chamber

House

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Introduced

Latest Action

2026-02-12: Referred to the House Committee on Ways and Means.

Last Updated

2026-03-10T08:05:35Z

AI-Generated Summary

Purpose

The GRADUATE Act (H.R. 7536) aims to provide tax relief to individuals with student loan debt by expanding and enhancing a deduction in the Internal Revenue Code (IRC). It shifts the focus from deducting only interest payments to including both interest and principal repayments, while also increasing the deduction's overall value to help more borrowers reduce their taxable income.

Key Provisions

• Deduction Allowance: Taxpayers can deduct the total amounts paid during the tax year on qualified education loans, which now includes both interest and principal payments (previously limited to interest only).
• Maximum Deduction Amount:
• Base amount: $10,000 per taxpayer.
• Additional: $500 for each dependent claimed.
• Income Limitations (Phase-Out):
• The deduction begins to reduce for taxpayers with modified adjusted gross income (MAGI—a measure of income after certain adjustments) above $125,000 (or $250,000 for joint filers).
• It fully phases out over a $25,000 range (or $50,000 for joint filers), meaning higher earners get a partial or no deduction.
• Effective Date: Applies to tax years starting after December 31, 2025.
• Other Updates: Adjusts related IRC sections for consistency, such as updating income thresholds from prior years (e.g., $50,000/$100,000) to the new levels and extending the deduction's availability beyond 2026.

Significant Changes to Existing Law

• Expansion of Deductible Items: Under current law (IRC Section 221), only interest on student loans is deductible, up to a maximum of $2,500 per year. This bill broadens it to cover principal payments as well, treating the full loan repayment like an above-the-line deduction (reducible from total income before other calculations).
• Increased Deduction Limits: Raises the cap significantly from $2,500 to $10,000 (plus extras for dependents) and updates phase-out thresholds to reflect inflation and higher income levels (from figures based on 2001 data).
• Conforming Changes: Updates references in IRC Section 62 to reflect the new "education loan payments" terminology, ensuring it integrates with overall tax filing rules.

Potential Impacts

• On Citizens: Provides greater financial relief for the roughly 45 million Americans with student debt, potentially saving borrowers thousands in taxes annually and encouraging faster loan repayment by making it more affordable. Families with dependents benefit more due to the per-dependent add-on.
• On Government Agencies: The Internal Revenue Service (IRS) will need to update forms, software, and guidance for processing these expanded deductions, which could increase administrative workload. The U.S. Treasury may see reduced tax revenue (estimated in billions over time), potentially affecting federal budgeting.
• On International Relations: No direct impact, as this is a domestic tax policy focused on U.S. education loans.

Main Stakeholders Affected

• Student Loan Borrowers: Primary beneficiaries, especially recent graduates, parents with education debt, and those with multiple dependents.
• Taxpayers in General: Middle-income earners (under the phase-out thresholds) gain the most; higher earners may see limited or no change.
• Government Entities: IRS and Treasury Department for implementation; Congress for overseeing revenue effects.
• Educational Institutions and Lenders: Indirectly affected, as enhanced deductions could boost loan repayment rates without changing lending practices.

Notable Legal, Constitutional, or Political Implications

• Legal: This is a straightforward amendment to the tax code, requiring no new regulations beyond IRS implementation. It maintains the deduction as an "above-the-line" benefit, which doesn't require itemizing (a common tax filing choice). No challenges to loan eligibility criteria (e.g., for qualified higher education expenses) are introduced.
• Constitutional: Aligns with Congress's broad authority under Article I to levy taxes and provide for the general welfare; no apparent free speech, equal protection, or due process issues.
• Political: Represents a bipartisan push for student debt relief (introduced by Democrats but potentially appealing across aisles), amid ongoing debates on education affordability. It could influence future tax reform by setting a precedent for indexing deductions to inflation or family size, but may draw criticism for adding to the federal deficit without offsetting revenue measures.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Goldman, Daniel S. [D-NY-10]

Cosponsors (8)

Rep. Jacobs, Sara [D-CA-51], Rep. Garcia, Robert [D-CA-42], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Figures, Shomari [D-AL-2], Rep. Pingree, Chellie [D-ME-1], Rep. García, Jesús G. "Chuy" [D-IL-4], Rep. Green, Al [D-TX-9], Rep. Schakowsky, Janice D. [D-IL-9]

Recent Actions

• 2026-02-12: Referred to the House Committee on Ways and Means.
• 2026-02-12: Introduced in House
• 2026-02-12: Introduced in House

Bill Versions

• Generating Relief for Academic Debt Using Assisted Tax Efficiency Act — issued 2026-02-12 — PDF (4 pages)