Workforce Development Through Post-Graduation Scholarships Act of 2026

Bill Summary: Workforce Development Through Post-Graduation Scholarships Act of 2026

Bill Number: HR 7594 | Session: 119 | Jurisdiction: United States

Overview

The Workforce Development Through Post-Graduation Scholarships Act of 2026 is designed to incentivize professionals to live and work in underserved communities by providing tax relief for student loan repayments. The bill achieves this by allowing certain post-graduation scholarship grants—specifically those used to pay off qualified education loans in exchange for service in low-educational-attainment areas—to be excluded from a recipient's taxable gross income.

Key Provisions

1. Tax Exclusion for Grant Recipients

The bill amends the Internal Revenue Code to treat "post-graduation scholarship grants" the same as qualified scholarships. This means that if a person receives a grant that pays off their student loans, that payment is not counted as taxable income for the individual.

2. Definition of a "Post-Graduation Scholarship Grant"

To qualify for this tax exclusion, a grant must meet several strict criteria:
* Eligible Grantor: The grant must be established by a 501(c)(3) organization (such as a private foundation or community trust).
* Loan Repayment: The organization must repay a portion of a "qualified education loan" incurred for higher education expenses.
* Service Requirement: The recipient must be required to live and work in an "applicable community."
* Direct Payment: Payments must be made directly to the loan holder (the lender), not the individual.
* No Conflict of Interest: The grant cannot be provided to an employee of the granting organization.

3. Defining "Applicable Community"

The bill defines an applicable community as any area where the bachelor’s degree attainment rate is lower than the state or national average, based on U.S. Census Bureau data.

4. Prevention of "Double Dipping"

To ensure fairness in the tax code, the bill includes a "denial of double benefit" provision. If interest on a loan is paid via a post-graduation scholarship grant and excluded from income, that same interest cannot be claimed as a separate tax deduction by the individual under Section 221.

Impact and Affected Parties

• Young Professionals/Graduates: Individuals with student debt may find it more financially attractive to move to and work in underserved areas if their loans are being paid off tax-free.
• Non-Profit Organizations & Foundations: 501(c)(3) organizations can now create workforce development programs that offer a higher financial incentive to recruits because the benefit is not eroded by taxes.
• Underserved Communities: Areas with low college-graduation rates may see an increase in skilled professionals (e.g., healthcare workers, engineers, educators) moving into the region.

Procedural Details and Timeline

• Effective Date: The amendments apply to taxable years beginning after the date of enactment.
• Oversight and Reporting:
  • Treasury Report: The Secretary of the Treasury must submit a report to Congress on the implementation and effectiveness of the act within 3 years of enactment.
  • GAO Study: Within 5 years, the Comptroller General must publish a study detailing the amount of funds paid out, the length of the grants, and the identity of the loan holders who benefited.

Legislative Status

As of February 17, 2026, the bill has been introduced in the House and referred to the House Committee on Ways and Means.