Colleges Worry Pell Grant Expansion Could Set ‘Dangerous Precedent’

A bipartisan bill to expand the Pell Grant to short-term workforce training programs—those that run between eight and 14 weeks—could set a troubling precedent, representatives of colleges and universities warned this week.

The House had been scheduled to consider the legislation today, but that vote was scrapped Wednesday evening, Politico reported.

The latest version of the Bipartisan Workforce Pell Act, which advanced out of committee in December, requires a couple dozen wealthy private institutions that are subject to an endowment tax to reimburse the Education Department for unpaid student loans in order to pay for expanding the program that provides federal financial aid for low-income students. 

The Association of American Universities and other higher education associations said this requirement would amount to “a second new arbitrary tax” that targets one group of institutions to benefit another—and that it could take money away from need-based grants and scholarships at top universities. If the proposal is enacted, the association said in letters to the House, some colleges might choose to leave the federal student loan program or opt to not enroll students considered to be at risk of not repaying their loans.

“While AAU remains supportive of the expansion of the Pell Grant program to include short-term programs, the proposal to finance this new program is misguided, arbitrary, and should not be enacted,” AAU President Barbara Snyder wrote to the House. The reimbursement requirement would set “a historic and dangerous precedent” that could be expanded to other colleges and universities, she said. 

Yale president Peter Salovey expressed similar concerns. In a letter to House lawmakers, Salovey said the provision is “comparable to doubling” Yale’s existing endowment tax and would undermine the university’s efforts to reduce costs for students.

The House had planned to consider the bill under a suspension of the rules, which would have limited debate and required a two-thirds majority to pass. Higher education lobbyists had expected a close vote.

The Pell Grant expansion is a top priority for both North Carolina Representative Virginia Foxx, the Republican chairwoman of the House Education and Workforce Committee, and Virginia Representative Bobby Scott, the senior Democrat on the committee. Foxx, who is stepping down from her committee post at the end of the year, is eyeing a legacy bill to make her mark on higher education.

Initially, lawmakers planned to pay for the expansion by cutting off federal student loans to the heavily endowed universities—a move that prompted strong opposition from higher ed groups. Because the expansion would cost an estimated $1.7 billion over 10 years, lawmakers have to find some way to offset that expense.

“It is worth noting that we do not expect the Senate to include this offset in any Workforce Pell bill they take up,” Scott wrote in a Dear Colleague letter to House members. “Any members with ideas to cover the $1.7 billion offset should speak up. However, we should not defeat the Bipartisan Workforce Pell Act in the House because of this provision.”

The Senate has its own version of legislation to expand the Pell Grant that hasn’t moved forward yet. If this bill passes the House, it will head to the upper chamber and negotiations over a potential compromise bill could begin. 

The American Federation of Teachers and the National Education Association have voiced opposition to the House bill along with consumer protection advocates, citing the funding mechanism as well as broader concerns with the policy itself.

The teachers’ unions were particularly concerned about the proposed formula to determine how much the affected universities would owe the Education Department. What universities would owe would depend in part on how much interest is waived through graduates' income-driven repayment plans and the balances of loans forgiven through debt relief programs such as Public Service Loan Forgiveness.

AFT wrote in a letter to the House that the funding mechanism “would create a strong financial incentive for colleges and universities that are subject to the endowment tax to steer their students and alumni away from public service and away from the most affordable repayment plans available to those borrowers.”

Rachel Fishman, director of the higher education program at New America, a left-leaning think tank, said the House is rushing the bill to the finish line without taking into consideration what the offset could mean for students and institutions. New America opposes the legislation and the policy more broadly, citing a lack of evidence showing that students benefit from the shorter programs.

Fishman is also concerned about the sustainability of the Pell Grant program in general. The Committee for a Responsible Federal Budget said last week that the program could run out of money by 2026, if not sooner. (The Pell expansion would amount to less than 1 percent of the current program, according to the Congressional Budget Office.)

It’s unclear how senators will find an alternative way to pay for an expanded Pell, Fishman said, given the limited options available to lawmakers to offset the cost. “There’s not too many areas where the money is going to come from,” she said. “That’s why this is what has been agreed to.”

The American Council on Education raised another concern in its letter opposing the legislation, saying that the offset wouldn’t cover all the costs of the expansion—meaning that lawmakers who write the federal budget will still have to figure out how to pay for it.

“Attaching a poison pill offset is contrary to the goals of the bill and unnecessarily complicates what would otherwise be a broadly supported bipartisan bill,” ACE wrote.

The fight over how to pay for the expansion has muddied the waters on an issue that’s attracted more and more bipartisan support over the years. Historically, talks about the expansion have broken down over whether to include for-profit institutions and how to ensure the training programs are of high quality. Critics have argued that a bar on for-profit and exclusively online programs is needed to keep out low-quality, predatory programs. The Senate legislation excludes for-profits and online programs.

The House legislation would allow for-profit programs to be eligible. All programs would have to meet certain eligibility requirements, including showing that their graduates earn more than the typical high school graduate in their state.

Critics of the legislation argue those guardrails aren’t enough to ensure that the programs are a good investment for students and taxpayers. But the bill’s sponsors and other supporters say its provisions will protect students from bad actors. 

“Despite what some parties allege, eligibility criteria are extremely rigorous and ensure workforce programs would be of the highest quality and lead to strong outcomes for students,” said David Baime, senior vice president for government relations at the American Association of Community Colleges.

The Pell Grant expansion is a key priority for AACC, which is one of the few higher ed associations to support the legislation. However, Baime said he hopes the offset can be changed as the process moves forward. AACC doesn’t support any form of risk-sharing, which puts colleges on the hook for unpaid student loans.

Baime said the Pell Grant expansion could help community colleges enroll more low-income students in the workforce training programs. “Despite the low cost of community college programs, tuition and related expenses remains a significant barrier for low-income students,” he noted.

Business groups, executives at technology companies, career education colleges and others also support the legislation, saying it would grow the talent pipeline and train adults for high-demand jobs. 

“Adding the Workforce Pell Grant to the list of financial aid options available to students will allow them to choose the educational setting and career path that matches their interests and skill set,” wrote Jason Altmire, president of Career Education Colleges and Universities, which represents the for-profit higher education sector, in a letter to the House.