AGB Policy Alert: House Education and Workforce Committee Reconciliation Package

The House Education and Workforce Committee recently reported out a budget reconciliation package that would substantially reshape federal student aid, institutional accountability, and regulatory frameworks in higher education. Built largely on the previously introduced College Cost Reduction Act (H.R. 6951, 118th Congress), this legislation is aligned with broader efforts to reduce federal spending and diminish the U.S. Department of Education’s role. If enacted as part of the larger budget reconciliation bill, these changes would directly impact governance, enrollment strategies, financial aid administration, and institutional accountability measures.

What Is in the House Budget Reconciliation Package

Student Eligibility Changes

• Alters need analysis formulas to tie need-based aid to a national median program by program cost rather than individual institution pricing.
• Caps need-based aid at this national program by program benchmark.

Loan Program Overhaul

• Eliminates Grad PLUS and subsidized undergraduate loan programs.
• Establishes new borrowing caps: $50,000 for undergraduates, $100,000 for graduate students, and $150,000 for professional students.
• Alters Parent PLUS: Requires students to borrow maximum allowable amounts before parent loans; caps Parent PLUS at $50,000.

Loan Repayment Reforms

• Cancels the Biden administration’s SAVE Plan and all income-contingent repayment options.
• Creates two new repayment plans: a Standard Plan based on amount borrowed and a Repayment Assistance Plan (RAP) tied to total adjusted gross income, with no interest capitalization and incentives based on principal payments. RAP would offer loan forgiveness after 30 years of payments.
• Revises Public Service Loan Forgiveness (PSLF) eligibility during medical and dental residencies and defers interest while in such residencies.
• Prorates student loans similarly to Pell Grant proration.
• Reduces loan eligibility for certain categories of noncitizen students.

Pell Grant Modifications

• Adjusts Pell Grant eligibility using foreign income and asset thresholds.
• Redefines full-time enrollment as 30 credits per year and half-time enrollment as 15 credits per year.
• Students enrolled less than half time would not receive Pell Grants.
• Expands Pell Grant eligibility to include short-term programs at Title IV institutions and non-accredited entities that agree to sign a program participation agreement with the secretary of education.

Institutional Accountability Measures

• Requires institutions to share financial responsibility for unpaid loans (risk-sharing).
• Authorizes PROMISE Grants to incentivize cost guarantees for students.

Regulatory Rollbacks

• Repeals borrower defense to repayment and gainful employment regulations.

Limitations on Executive Authority

• Restricts the ability of future administrations to regulate student loan repayments.
• Prevents the secretary of education from issuing economically significant rules or rules that would increase subsidy costs for the federal government in financing federal student aid.

Key Implications for Governing Boards

These wide-ranging reforms would recalibrate federal student aid with broad governance, financial, and strategic consequences:

• Financial Aid Structures: Revised eligibility formulas, loan caps, and changes to Pell Grants will require careful realignment of institutional financial aid models and enrollment management strategies.
• Risk-Sharing Responsibilities: New cost-sharing rules will place fiscal pressure on institutions when students don’t repay their loans or receive forgiveness through income-driven plans or public service loan forgiveness. These rules underscore the need for stronger student outcomes and debt management programs.
• Access Challenges: Stricter Pell Grant requirements may impact access for low-income and nontraditional students, challenging institutional commitments to diversity and inclusion, and may affect enrollment trends.
• Governance Oversight: A less robust regulatory approach from the U.S. Department of Education and changes to income-driven repayment plans signals greater reliance on internal governance to ensure institutional accountability and student success.

Strategic Recommendations for Governing Boards

In anticipation of possible passage of the budget reconciliation package, AGB recommends the following actions for governing boards:

• Review financial aid policies to assess alignment with the new cost of attendance and loan cap frameworks.
• Strengthen risk management practices focused on student borrowing, repayment success, and default prevention strategies.
• Assess institutional capacity to adapt to new Pell Grant eligibility requirements and maintain access commitments.
• Engage in strategic scenario planning to navigate evolving federal regulations, including a potentially diminished regulatory role of the U.S. Department of Education.
• Strengthen data governance and transparency regarding student outcomes, loan repayment rates, and fiscal health indicators.

Questions for Governing Boards to Consider

• How will new borrowing caps affect our students’ ability to finance their education?
• Are our financial aid and enrollment strategies resilient to a restructured federal aid system?
• What plans do we have in place to address institutional risk-sharing requirements?
• How will changes to Pell Grant eligibility impact access for underserved student populations?

Call to Action

The proposed reconciliation package underscores the urgent need for proactive, mission-centered leadership from governing boards. Federal policy shifts may dramatically reshape higher education’s financial, regulatory, and competitive landscapes. Boards must embrace this moment to deepen oversight, strengthen fiduciary stewardship, and reaffirm their institutions’ commitment to excellence, access, and student success.