Bipartisan Progress on Pell Grant Expansion, but Hurdles Remain

As Congress gears up to head home for the holiday season, proponents who have hoped to see a breakthrough on the long-running issue of expanding Pell Grants to career-training programs lasting fewer than 15 weeks have received an early gift—a bipartisan deal in the House.

Key lawmakers in both parties have wrangled for years over the expansion, with talks breaking down over whether to include for-profit institutions and how to ensure the programs are of high quality. Supporters of what’s commonly referred to as short-term or workforce Pell say it will help low-income students access training programs they need to find better-paying jobs. Opponents have questioned whether the Pell Grant should be used as a workforce development tool—and whether the short-term programs actually pay off.

Still, the Pell Grant expansion has steadily gained momentum and garnered bipartisan support in recent years; experts predicted that if any higher-education bill could pass this Congress, it would be this.

The House bill, introduced last week and officially dubbed the Bipartisan Workforce Pell Act, could prove them right. The House Education and Workforce Committee will mark up the bill today.

Experts say the bipartisan breakthrough, which would expand the Pell Grant to workforce programs lasting between eight and 14 weeks, represents a meaningful step forward, especially since the committee’s top Republican and Democrat co-sponsored the legislation. But for some colleges and universities, the bill amounts to a lump of coal. Lawmakers are proposing to cut off federal student loans to a couple of dozen wealthy private institutions, such as Harvard University and Stanford University, that are subject to the endowment tax—a provision that could hurt the legislation’s chances of passing the House and Senate and becoming law.

Higher education associations say the proposal undermines the federal student aid system and would be an “unprecedented shift” away from providing loans to students based on their individual need. The bill would cut off student loans to those institutions starting July 1, 2024. The short-term Pell bill authorizes $160 million in new spending toward implementing the expansion.

“We have huge concerns with the offset, and the biggest problem is that the federal government is undermining student choice,” said Sarah Flanagan, vice president for government relations and policy development at the National Association of Independent Colleges and Universities. “Loans and grants are supposed to go to the student and give students the dignity and the power to choose the institution that best fits them.”

Expanding the Pell Grant to short-term programs has been a priority for the House committee, and the release of the legislation comes after months of negotiations between the Republicans and Democrats. Lawmakers also will mark up a bill Tuesday that will reauthorize the Workforce Innovation and Opportunity Act, which includes funding to support skills-based training and programs at community colleges.

The American Association of Community Colleges, which has worked for years to make short-term Pell a reality, supported both bills in a letter sent Monday to the committee but noted that the eligibility standards are stricter than those for other types of programs.

“These ‘guardrails’ are so rigorous that in some cases, quality community college workforce education programs will find it difficult to qualify for support,” the letter said. “Therefore, we look forward to working with the committee to refine these provisions, particularly the path to eligibility for new programs.”

The association also urged the committee to find an alternative way to offset the new expenses in the short-term Pell bill.

David Baime, senior vice president for government relations at AACC, said the WIOA reauthorization is a significant advancement in improving the underlying statute. The bill codifies a $65 million grant program to help community colleges improve their workforce education offerings.

“We thank you for the many hours that have been devoted to crafting this legislation and welcome its bipartisan nature,” AACC wrote in a letter to the committee. “Together these bills will help our current and future students better participate in our economy, enabling them to generate family-sustaining wages.”

‘Too Fast and Too New’

NAICU estimates that about 64,000 students would lose $1.8 billion in federal student loans under the short-term Pell bill. The proposal would affect both undergraduate and graduate students.

The offset hadn’t been part of previous short-term Pell proposals and caught higher education groups by surprise. “I think it’s too fast and too new to know what will happen,” Flanagan said. “It’s a bipartisan agreement—I don’t know who suggested this.”

The 1.4 percent tax on net investment income applies to all private colleges with endowments larger than $500,000 in assets per student.

About 50 to 60 institutions are subject to the tax, according to the National Association of College and University Business Officers, which said there isn’t a publicly available list. The Wall Street Journal reported in October 2022 that about 33 institutions were taxed in 2021. Other public reporting of endowments shows that students at Harvard, Stanford, Grinnell College, Berry College and Claremont McKenna College, among others, likely would be ineligible for federal student loans.

“They’re saying the federal government is going to give really good loans only to people who choose certain institutions,” Flanagan said. “It undermines the premise of the federal student aid program. Certainly when Congress starts to say, ‘We don’t like this kind of institution over another type of institution’—once they start doing this, they can do it any way they want, depending on the philosophy of whatever party is in control.”

Lawmakers also want to place new conditions on colleges subject to the tax. Under an amendment introduced Monday afternoon, colleges and universities subject to the endowment tax would have to cover the total cost of attendance for students who receive the Pell Grant in order to participate in the Supplemental Educational Opportunity Grant (SEOG) program, which provides additional financial support to students.

That’s a change from the bill’s initial proposal to require those institutions to provide emergency hardship grants to Pell students. Universities also would have to maintain or increase the percentage of undergraduate students who are Pell eligible in order to access the SEOG funds. The House budget zeroes out the SEOG program.

Flanagan said Pell Grant students at the institutions in question already receive a tremendous amount of aid. However, under the other proposed SEOG changes, institutions likely wouldn’t be able to continue with need-blind admission policies.

“These schools have an incredible success rate with students,” she said. “The four-year completion rates are about the highest in the country. And they already are giving a tremendous amount of aid to low-income students. There’s this huge concern in Congress right now with competing with China, and these are some of the most promising students as we look at international competitiveness, and we’re pulling out aid from them with little notice. I don’t get the policy.”

‘Massive Step Forward’

The House bill, if it passes, faces an uphill climb in the Democratic-controlled Senate, where Democrats likely will balk at the proposed offset and the decision to include for-profits and fully online programs in the expansion. The Senate also has its own bipartisan bill that excludes for-profit programs.

Senator Tim Kaine of Virginia, a Democrat, reintroduced the Jumpstarting Our Businesses by Supporting Students (JOBS) Act along with Republican senator Mike Braun of Indiana earlier this year. That bill is backed by several higher education and business groups and would require programs to be approved by state workforce boards in addition to the Education Department, among other requirements. The JOBS Act was scheduled for a markup in July, but that hearing was canceled. The bill hasn’t moved forward since.

The JOBS Act also doesn't cut off federal loans to students at universities subject to the endowment tax.

Despite the uncertainties ahead, advocates and lobbyists say the proposal in the lower chamber is progress, given that a bipartisan deal has previously eluded House lawmakers and that key committee leaders are onboard.

Jennifer Stiddard, a senior fellow with the National Skills Coalition, which supports short-term Pell and has endorsed Kaine’s bill, said the House bill was a “nice surprise” to end the calendar year.

“Even though this is a massive step forward, that doesn’t mean clear sailing,” she said, pointing to the difficulty in reaching a bipartisan and bicameral deal on this issue. “It demonstrates once again that this is really a high-level issue that is visible for Congress right now.”

A Kaine spokesperson said in a statement to Inside Higher Ed that the House bill is a sign of the growing bipartisan momentum around expanding Pell eligibility. “Conversations will be ongoing around the best way to get legislation through both chambers that can help us do that,” the spokesperson said.

The House bill includes several eligibility requirements that are similar to those in the JOBS Act. For example, to be eligible for Pell Grant funding, programs must run for at least eight weeks and be approved by state workforce boards. An accrediting agency also must determine whether the program offers a recognized postsecondary credential that can leads to one or more certificates or degrees and if it’s portable across more than one employer and transferable to other institutions.

But the bill’s quality assurance metrics go beyond what’s in the JOBS Act.

Programs will have to provide a positive return on investment for students and taxpayers. To determine that, the House bill compares a students’ median earnings one year after receiving a credential to 150 percent of the federal poverty line. If the total tuition and fees are less than the difference between the earnings and federal poverty line, then the program passes muster. Eligible programs also would have to show that their graduates are earning more than a high school graduate in their state.

Julie Peller, executive director of Higher Learning Advocates, a bipartisan nonprofit that works to improve outcomes for students and supports short-term Pell, called the quality assurance measures in the bill a “good step in the right direction for today’s students.”

“I really do think that there’s a lot to be said about the requirement that these programs provide credentials and learning that is portable, stackable and transferable,” she said. “That gets employers, accreditors and others at the institution into the conversation about the educational quality of these programs.”

At this point, Peller doesn’t have a preference between the House Pell bill and the JOBS Act.

“Either way,” she said, “the movement of increasing access … to these high-quality, shorter-term programs is incredibly good for today’s students, and I’m here for all of the conversations.”

Alison Griffin, senior vice president at Whiteboard Advisors and former policy adviser to the House education committee, said that while the House legislation isn’t perfect, the bipartisan agreement is significant.

“The concern I have is whether policymakers can sustain bipartisan agreement through to the Senate and to the president’s desk in order to actually enact new policy,” she said. “That’s where I’m less certain, to be honest. It’s a function of the calendar. It’s not necessarily a function of political will. But I frequently say every day, the closer we get to the November 2024 election is one day further away from reaching consensus on anything.”

Access and Equity Concerns

Rachel Fishman, director of higher education policy at New America, a left-leaning think tank, said the guardrails in the House bill don’t go far enough in protecting students. Fishman and New America are generally opposed to expanding the Pell Grant to programs that run from eight to 14 weeks, citing a lack of evidence showing that students benefit from the shorter programs.

“At a minimum, I was dismayed to see both the inclusion of the for-profit sector and online programs—both of which will turbocharge the growth of these credentials and [increase] stratification by race and income and gender of our higher education system,” she said.

Fishman added that the proposed offset means “cutting off access to some of the wealthiest, high-quality institutions that have really good economic return for low- and middle-income students.”

The proposed language could negatively affect graduate students who rely on federal loans to pay for medical or law school at impacted institutions, she said. Without federal student loans, they’ll have to use private student loans and won’t be eligible for the Public Service Loan Forgiveness program.

“There’s lots and lots of access concerns and equity concerns, particularly in the graduate space,” she said. “I think it’s slipping under the radar, which is a shame, because the pay-for on its own should concern us all deeply in what it means for access to these wealthier schools.”

Fishman and others are sounding alarms because the proposed offset, with bipartisan support in the House committee, could move forward.

“The Democrats and the Republicans agreed to this, and so I think we should all be concerned that even if it sounds extremely bonkers, there’s not a lot of easy pay-fors that they can agree to,” she said. “They really want it to be bipartisan, and so they agreed to this.”