Community college advocacy pays off in Senate reconciliation text
On Tuesday, the Senate Committee on Health, Education, Labor, & Pensions released its budget reconciliation proposal containing changes to higher education student aid and repayment policies. This text directly responds to and in some areas builds on the higher education provisions of the House-passed One Big Beautiful Bill Act.
Thanks in significant part to advocacy from community college leaders, the Senate Committee fully rejected the House’s problematic changes to Pell Grant eligibility based on enrollment intensity and the House’s complicated risk-sharing scheme. In another major win for community colleges, the Senate bill joins the House in including Workforce Pell Grants.
Like the House-passed bill, the Senate legislation includes provisions around the Pell Grant program, institutional accountability, and student loan origination and repayment (presented in greater detail below).
Pell Grants
- In a huge win for community colleges, the Senate completely rejected the House bill’s redefinition of “full-time” as 15 credit hours per term for Pell Grant eligibility, as well as its elimination of grant eligibility for less than half-time students.
- The Senate bill introduces a new provision eliminating Pell eligibility for students receiving scholarships that cover the full cost of attendance at an institution. This provision is not expected to have a significant effect on community college students or college financing.
- Both the Senate and House bills reinstate the exclusion of the value of family farms and small businesses from assets for determining a student’s aid eligibility.
- The Senate bill also provides $10 billion for to shore up the Pell Grant program, in light of the predicted shortfall.
Workforce Pell
- The Senate bill would create new Pell Grant eligibility for short-term workforce programs between 150 and 599 clock hours in length that are at least eight weeks. The provisions are largely identical to those in the House-passed bill, including extending eligibility to providers other than institutions of higher education.
- Programs must meet key completion, job placement and earnings metrics to maintain eligibility, including verifying that program completion leads to “value added earnings” – the amount that earnings exceed 150% of the poverty standard, with regional adjustments.
Accountability
- The Senate version rejects the House’s risk-sharing proposal and adopts its own approach to institutional accountability, dubbed in the field as “gainful employment for all.” While community colleges would not have proactively advocated for this enhanced accountability system, it is far preferrable to risk-sharing.
- Under the Senate accountability framework, degree programs must meet an earnings premium measure to participate in the Federal Direct Loan program. Failure to meet the earnings premium measure will not result in ineligibility to offer Pell Grants.
- “Low-Earning Outcome Undergraduate Programs” lose eligibility to offer Federal Direct Loans if the median earnings of Title IV recipients who exited the program four years prior are less than the median earnings of high school graduates aged 25-34 in the state for at least two of the prior three years.
- Students enrolled at an institution of higher education when the earnings snapshot is taken are not included in the cohort, nor are those who are not working at that time. Likewise, the high school graduate benchmark cohort does not include those enrolled in an institution of higher education.
- Institutions can appeal the determination of median earnings for a given cohort.
Loan origination
- Both the Senate and House bills change annual, aggregate and lifetime loan limits for graduate and professional borrowers (though the overall limits are not as low in the Senate bill) and eliminate the Grad PLUS loan program.
- In another welcome change, the Senate bill rejects the House’s elimination of the Federal Direct Subsidized loan program and the House’s proposal to tie annual borrowing limits to the median cost of college for each program.
- The Senate also preserves two features of the House bill long supported by community colleges – prorating annual borrowing limits to enrollment intensity and creating new institutional discretion to limit loan maximums at the program level.
Loan repayment
- The Senate bill largely adopts the major repayment overhauls included in the House bill, designed to require more borrowers to repay a greater portion of their loans than under existing repayment plans.
- The two bills streamline 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.
- The new fixed repayment plans would tie the period of repayment to the amount of loans taken out, in effect delivering lower monthly payment amounts for larger-balance borrowers spread over a longer stretch of time.
- The Senate’s Repayment Assistance Plan is largely the same as the House proposal. The plan extends the forgiveness timeline to 30 years and assesses monthly payment amounts based on a percentage of adjusted gross income rather than discretionary income, with a minimum monthly payment of $10 for all borrowers.
- Both the House and Senate include provisions to aid in full repayment, including eliminating interest capitalization and providing a mechanism to help lower-income borrowers pay down their principal amount.
- As in the House bill, the Senate bill allows for a second loan rehabilitation opportunity, but it also eliminates economic hardship and unemployment deferments and limits forbearance to no more than 9 months every 24 months.