The House Education and Workforce Committee is slated on Tuesday to mark up legislation to comply with the fiscal year 2025 budget resolution’s reconciliation instructions, which direct the committee to save $330 billion over 10 years.
The legislation will likely pass on a party-line vote. Democrats plan to offer an array of amendments, most of which are expected to be rejected.
The measure has several features that affect federal student aid. Some of the major ones impacting community colleges follow.
Pell grants and student aid eligibility
The bill makes changes to student aid eligibility and students’ access to Pell grants. These changes include:
- Eliminating Pell Grant eligibility for less than half-time students.
- Requiring a student to take the equivalent of 30 semester hours each year to qualify as a full-time student and receive the maximum Pell Grant.
- Eliminating Pell Grant eligibility for a student whose Student Aid Index (SAI) exceeds the maximum grant amount by more than 200%. As a result, some students at the upper end of the Pell Grant eligibility will not qualify for relatively small grants.
- Reinstating the exemption of the value of family farms and small businesses from assets to determine a student’s SAI.
- Defining cost of attendance to determine a student’s aid eligibility as the median cost of college for the program of study across the United States. This is a significant change from current policy.
The American Association of Community Colleges (AACC) strongly opposes the elimination of eligibility for less than half-time students and is concerned about the new enrollment intensity requirement to qualify for the maximum Pell grant. AACC applauds the restoration of the family farm and small business exemption, which will help more students access student aid.
Workforce Pell
The reconciliation bill includes provisions to establish Workforce Pell grants. Many basics of how the new grants would work and what programs would be eligible are similar or the same as previous legislation in this area. They include:
- Extending Pell Grant eligibility to students in programs between 150 and 599 clock hours, offered over at least eight but fewer than 15 weeks.
- Awarding Workforce Pell grants to eligible students using the same application and eligibility procedures as for the general Pell Grant program.
- Eligible programs must provide an education that aligns with the skills requirements of high-wage, high-skill or in-demand occupations, as determined by governor in consultation with the state workforce development board.
- To be eligible, programs must already have existed for at least one year and have 70% completion and job placement rates.
- Program completers’ median “value-added earnings” must exceed the cost of the program in a given award year. Value-added earnings are defined in the risk-sharing section of the bill to mean the amount by which program completers’ earnings exceed 150% of the federal poverty line for an individual (with some opportunities for adjustment based on geographic region, etc.)
- Programs must lead to a recognized postsecondary credential (as defined in Workforce Innovation and Opportunity Act) that either is stackable and portable across more than one employer or is the only recognized postsecondary credential for the occupation that the program prepares students to enter.
- Programs must prepare students for further education by ensuring that at least one certificate or degree program awards credit for the work done in the Workforce Pell Grant program.
In a dramatic and unexpected change from previous workforce Pell bills, entities other than institutions of higher education (IHE) could award Workforce Pell grants. They would be subject to all the requirements above (as well as some basic requirements regarding institutional fitness), which would limit eligibility on the number of non-IHEs, but this is still a significant concern.
On the plus side, many of the onerous reporting requirements contained in other Workforce Pell bills are not included in these provisions, in part because they do not adhere to the rules attached to budget reconciliation legislation.
AACC supports the inclusion of Workforce Pell grants in the reconciliation legislation, with an amendment to limit eligibility to IHEs as in previous versions of the legislation.
Pell Grant shortfall
The committee has provided approximately $10.5 billion to shore up the Pell Grant program, which faces a significant funding shortfall. AACC advocated for inclusion of funding for the Pell Grant shortfall and is pleased that the committee aims to provide substantial resources to help meet the cost of the Pell program.
Risk-sharing/PROMISE grants
The bill maintains a problematic new risk-sharing scheme, coupled with new grants to institutions to reward performance. Both risk-sharing payments and PROMISE grant amounts are determined by complex, multifactor formulas, but in general:
- Institutions will have to make “risk-sharing” payments to the federal government based on, among other things, the earnings of program completers relative to the cost of the program, how much they borrowed and how much of their loans are ultimately repaid. Payments also must be made for non-completers. Due to the low cost of community college programs, their low borrowing rates, and the limited amounts, their assessment should be lower than those for other sectors. However, it appears that hundreds of community colleges would still have to make payments.
- The new PROMISE Grants will go to institutions that graduate a high percentage of Pell Grant recipients at low cost within 100% of the “normal time” to completion and meet other conditions.
AACC continues to strongly oppose risk-sharing of any kind. Community colleges appreciate that the formula for payments is crafted in a way that requires relatively low payments by member institutions, but that does not change the views of community colleges on the basic concept. Community colleges welcome federal support to enhance completion efforts, but suggest revisions to the PROMISE Grant program, particularly by establishing a completion time frame that is more reflective of community college students.
Loan limits and other changes
The reconciliation bill makes significant changes to how students can borrow to finance their education. While only 12% of community college students take out loans, these policies may have a significant effect on students who do borrow. The changes include:
- Termination of Federal Direct Subsidized loans for all undergraduate students.
- Capping the maximum borrowing amount for unsubsidized loans in any academic year to the difference between the median cost of college for each program and the student’s Pell Grant award.
- New aggregate borrowing limits of $50,000 for each undergraduate program.
AACC opposes the elimination of Federal Subsidized Loans for undergraduate students. While only a small percentage of community college students borrow to finance their education, those who do often face significant financial hardship, and the subsidized loan program functions as a key piece of our federal student aid system.
AACC supports giving campuses discretion to lower annual loan maximums for certain programs to help promote strong post-college repayment outcomes.
Loan repayment
The reconciliation bill makes significant changes to loan repayment options for borrowers. It streamlines repayment options by creating new terms for a fixed standard repayment plan based on loan volume and a new income-driven repayment plan – the Repayment Assistance Plan.
Regulatory policy
The legislation makes significant changes to regulations and procedures at the U.S. Education Department, including:
- Eliminating the secretary’s authority to regulate on the basis of “gainful employment.”
- Dramatically limiting the secretary’s authority to regulate in ways that increase costs for the federal government. This appears to be a response to the Biden administration’s actions regarding loan policies and forgiveness.
AACC has supported certain aspects of the gainful employment rules, but maintains that Congress should make decisions regarding program eligibility of this nature. The association opposes the “earnings standard” as promulgated by the Biden administration and technically in effect.
If and when the House Education and Workforce Committee approves the reconciliation bill, it will be bundled with the work of other committees and put into a single bill.
