The Senate Committee on Health, Education, Labor and Pensions on Tuesday evening unveiled its reconciliation proposal containing changes to higher education student aid and repayment policies.
While the bill builds on the higher education provisions of the House-passed One Big Beautiful Bill Act, it fully rejects the House bill’s problematic changes to Pell Grant eligibility based on enrollment intensity and institutional risk-sharing — a significant win for community colleges. The bill also includes new eligibility for Workforce Pell grants, a change long sought by community colleges, and changes to loan and repayment policies modeled on the House legislation.
Altogether, the American Association of Community Colleges (AACC) thanks the Senate for heeding its sector’s concerns and for proposing a bill that is far more palatable for community colleges than its House counterpart. AACC is deeply thankful to the scores of community college leaders who communicated their concerns to the Senate. The particulars in this bill are due, in significant part, to dedicated advocacy from community college officials.
Pell grants
The Senate 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-halftime students. Taken together, these changes would have reduced or eliminated Pell grants for more than one million community college students. Preserving Pell, in this respect, was AACC’s top priority once the House had passed is measure.
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.
The Senate bill preserves some changes in the House legislation, including reinstating 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 $10.5 billion for to shore up the Pell Grant program, in light of the predicted shortfall.
AACC is supportive of new funding for the Pell Grant program and thanks the Senate for taking steps to put the program on more sound financial footing without coupling it with harmful eligibility changes.
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. A longtime priority of community colleges, AACC thanks both the House and Senate for including this eligibility in their reconciliation bills.
Accountability
In another significant change from the House’s reconciliation bill, the Senate version rejects risk-sharing and adopts its own approach to institutional accountability. It is modeled on legislation introduced by Senate Republicans last Congress. The Senate approach has been dubbed “gainful employment (GE) for all” because it is similar to the existing GE regulations.
Under the Senate accountability framework, programs must meet an earnings premium measure to participate in the Federal Direct Loan program. “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.
In a welcome change from the previous Senate proposal, 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 also can appeal the determination of median earnings for a given cohort.
While the Senate accountability framework is not perfect (e.g., AACC has long preferred a debt-to-earnings measure over an earnings premium measure and for cohorts to be limited to program completers), this approach is a significant improvement from the House’s complicated risk-sharing scheme. If accountability provisions are included in a final reconciliation package, the Senate approach will be much less harmful for community colleges than the version that cleared the House, while still providing incentives aimed at program improvement.
Loan and repayment policies
Finally, the Senate bill draws on provisions of the House-passed legislation that significantly overhaul loan origination and repayment policies. While only 12% of community college students use federal loans, these policies will significantly affect students who borrow.
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. However, 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.
AACC thanks the Senate for preserving Federal Subsidized Loans for undergraduate students. The subsidized loan program functions as a key component of the federal student aid system.
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.
On the repayment side, the Senate bill largely adopts the major 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. Copied from the House proposal, 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.
Like with the House bill, AACC welcomes the streamlining of existing repayment plans, which have proven confusing both to borrowers and the public. AACC also supports several of the new provisions of the Repayment Assistance Plan, including ending interest capitalization and providing assistance to borrowers struggling to pay down their principal balance amounts. However, AACC continues to ask Congress for a shorter timeline to forgiveness for small-balance borrowers.
What’s next
Unlike the House, the Senate bill will not go through a committee markup. Instead, the entire Senate reconciliation package will go directly to the floor to be considered by the full Senate. If the bill passes the Senate, it will be sent back to the House for its approval or, more likely, a conference to come to a compromise bill.
As has been noted, community colleges will fare better under the provisions of the Senate bill, particularly around changes to the Pell Grant program and accountability/risk-sharing. AACC will continue to work with member colleges to limit provisions that will harm community colleges and their students in a final reconciliation bill.
