Congress Opens the Credential Floodgates

The Senate’s proposed higher education bill departed from the House version in many ways, but one provision remained almost completely untouched. That was workforce Pell, which would extend eligibility for the federal financial aid grant to students enrolled in short-term credential programs running between eight and 15 weeks long.

If it passes, workforce Pell would give federal financial aid to likely hundreds of thousands more students a year and provide aid to many community college students in particular who don’t currently qualify.

It would also incentivize an explosion of interest in the burgeoning credentials sector. With few guardrails against for-profit and unaccredited providers, that could mean a flood of unvetted programs receiving federal funds to enroll vulnerable students.

Lawmakers have been trying to pass some version of workforce Pell for years. It’s gone by many names—the JOBS Act, Short-Term Pell, the Bipartisan Workforce Pell Act—and many of its iterations have had substantial backing from both sides of the aisle. Its proponents say that giving Pell Grants to students in short-term programs would increase access to a postsecondary pathway that is typically less expensive and time-consuming, provide a boost to much-needed workforce training initiatives, and benefit many low-income and nontraditional students.

But the provision in the current budget bill differs from past versions in some crucial ways: Namely, it opens up the Pell Grant to thousands of unaccredited program providers. It also lacks some of the stricter oversight provisions in earlier bipartisan proposals, like a requirement that short-term programs be separately accredited before they can qualify for Pell.

The House and Senate bills do include some limitations on short-term programs’ eligibility: They must demonstrate job-placement and graduation rates of at least 70 percent, and their total tuition and fees can’t exceed graduates’ median “value-added earnings,” or the degree to which their income exceeds 150 percent of the federal poverty line. The programs also can’t be brand-new; programs must have existed for one year before Pell eligibility kicks in.

States will play a major role in ensuring program quality, too. The bill gives state lawmakers and boards of higher education the authority to veto a program’s participation in Pell in their state, and to determine which programs should qualify.

Sen. Tim Kaine, a Democrat from Virginia, co-sponsored bipartisan short-term Pell expansion legislation earlier this year. Kaine wrote in an email to Inside Higher Ed that he was “still digging in” to the final megabill but that he’d been “glad to work in a bipartisan way on common sense legislation to expand Pell Grant eligibility to high-quality, short-term career and technical education programs.”

Stephanie Cellini, a professor of public policy at George Washington University who studies the short-term credential market, said she has little faith that workforce Pell’s regulations will do much to discourage unscrupulous providers from benefiting. The earnings and job-placement thresholds, she said, are “easily gameable” since they’re self-reported. And without an accreditation requirement, the bar for entry is, to her, worryingly low.

“This is a subsidy that these providers can use to bring students in the door with very little accountability on the back end,” she said. “It just opens the floodgates for more of these very short-term programs, and I am doubtful that any of the accountability measures in this bill would be particularly effective.”

Lowering the Guardrails

Policy experts are divided over whether the guardrails in workforce Pell are high enough to prevent a mass influx of unvetted programs and for-profit providers from reshaping the credentials sector.

Rachel Fishman, director of the higher education program at the left-leaning think tank New America, said the bill would do more harm than good by rewarding for-profit short-term programs that have historically saddled students with large debt burdens and underwhelming employment prospects.

“When you open a new pot of money up to anyone, but particularly for-profit providers, historically, they’ve really jumped at the opportunity to make money,” Fishman said. “It would be very simple for many of them to transition their programs to meet the short-term requirements and then soak up the Pell Grants.”

Preston Cooper, a senior fellow at the American Enterprise Institute, a conservative think tank, said he believes the regulations protecting students from exploitative or low-quality programs are sufficiently robust. He said that removing other eligibility requirements in previous bipartisan versions of the bill, like a requirement that programs be separately accredited to qualify, will prevent undue regulatory burdens from choking off enrollment in the growing sector.

“Short-term programs, which prepare students for in-demand jobs, are pretty critical to the economy and offer opportunity to students who might not be as well served by the traditional higher education system,” he said. “The outcomes guardrails here take care of any concerns I might have.”

Although workforce Pell could extend the federal grants to thousands more students each year, Fishman said the juice isn’t worth the squeeze if the result is that more students turn to short-term programs with poor outcomes.

“Pell was meant to expand college access,” she said. “It wasn’t meant to help students get short-term credentials that barely lift them out of poverty.”

Disrupting a Burgeoning Sector

Short-term credentials are proliferating rapidly thanks to frustrations with traditional college cost and workforce shortages that have prompted significant state investment in accessible skills-based programs.

There are more than a million secondary and postsecondary credentials offered across the country, according to a 2022 report by Credential Engine, a nonprofit that researches the credentialing landscape—more than triple the number the organization found in 2018. That report also found that these “microcredentials” are offered by 59,692 different providers, thousands of which are online-only programs and more than half of which are not affiliated with traditional academic institutions.

Community colleges have been lobbying for some version of a short-term Pell expansion for more than a decade. Two-year public institutions are one of the major providers of nondegree credentials, which have become a core part of their mission and financial model. In 2010, more than 40 percent of credentials awarded by community colleges were nondegree credentials, and since then that number has grown by another 30 percent at all public colleges, according to the National Center for Education Statistics. Since the pandemic, growth at community colleges in particular has been concentrated largely in the short-term credential space, according to the past few National Student Clearinghouse enrollment reports.

But workforce Pell could end up being a double-edged sword for community colleges. It could grant them access to more federal financial aid dollars, but it could also incentivize an explosion in for-profit and private nonprofit short-term credential programs, allowing them to take a significant chunk out of the community college market share.

Community college organizations are still supporting workforce Pell, arguing that it would give many of their students the aid they need to complete their programs and pursue their careers—not to mention that it would be a major boon to struggling two-year institutions.

David Baime, senior vice president for government relations at the American Association of Community Colleges, said that short-term Pell has been community colleges’ policy white whale for so long that most of his members are more excited about the prospect of its enactment than they are worried over regulatory shortcomings. He also doesn’t think the guardrails are quite as weak as some access advocates say.

“We were never going to oppose the bill just because for-profits were included,” he said.

But Baime has his concerns, and he believes that “allowing unaccredited providers to glom on” to the Pell expansion is a major downside of the bill. So do other community college lobbyists: Carrie Warick-Smith, vice president for public policy at the Association of Community College Trustees, said the organization supports the expansion but is opposed to Congress’s inclusion of “entities that do not qualify as institutions of higher education.”

A Great Unknown

The market for unaccredited credential programs is both massive and largely uncharted and consists of offerings that range from small cosmetology licensing programs to coding boot camps to large online credentials from for-profit companies. Workforce Pell would make all that meet its graduate earnings threshold eligible for Pell Grants.

In 2010, Cellini and a team of researchers published a report estimating more than 700,000 students were enrolled in roughly 4,500 unaccredited short-term programs. Last month, she published a paper attempting to estimate the current number by extrapolating from the short-term market in Texas and found tens of thousands more, including 700 unaccredited short-term programs in cosmetology alone. In Michigan and Florida, unaccredited providers make up roughly half of the short-term credential market.

“There are all these institutions that aren’t even on the radar of the federal government right now,” Cellini said.

That could mean the Congressional Budget Office projections for the program’s cost are far below what the bill might run in reality. CBO estimates currently that workforce Pell will add $298 million to the federal budget, but that’s based on an estimated 100,000 additional students per year qualifying for a grant. If Cellini’s research is correct, the number of students in unaccredited short-term programs alone is seven times that number—and with Pell facing a $2.7 billion budget shortfall, that could put unanticipated financial stress on the program. (The proposed plans from both chambers do add an extra $10.5 billion into the program.)

Even if those prospective students don’t all apply for federal aid, Fishman said the clear unknown factor in the bill is those unaccredited programs, on which there is very little data.

“Whatever Congress says it will cost, it’s going to cost a lot more,” she said. “By an order of magnitude.”

Cooper said he’s not worried about the lack of an accreditation requirement.

“The traditional accreditation system has actually not been very effective at keeping low-quality or scam programs out of Title IV,” he said. “So I think that having that accreditation requirement in there is really just more trouble than it’s worth.”

Fishman said workforce Pell’s “Wild West” style of oversight could also change how traditional institutions recruit and enroll students in their short-term online offerings.

“Institutions are starved for revenue, which is why they turned to online program managers,” she said, referring to the recruitment and enrollment companies that many colleges used to populate their online offerings before some of the biggest names, like 2U, filed for bankruptcy or faced disabling legal and regulatory scrutiny.

“With less scrutiny and in an environment where institutions have even fewer resources, schools could turn back to these kinds of programs to keep the lights on,” Fishman said. “Especially if there’s a federal funding incentive.”