Handing Accreditation Over to States Would Raise Costs, Weaken Quality CBO Find

This summer, the House Education and Workforce Committee marked up the Accreditation Choice and Innovation Act, which would allow states to approve and oversee their own accrediting agencies. The idea is not a new one, with similar proposals dating to at least 2015. But it is one that’s gaining traction among conservative groups and politicians, even making an appearance in Project 2025’s list of policy goals. Supporters claim allowing states to approve new accreditors would spur innovation and better ensure quality. The proposal also aligns with Trump administration goals to give more power to states.

However, a new estimate of the bill’s costs, released by the Congressional Budget Office (CBO) shows that policy makers should proceed with caution on proposals to open the floodgates to new accrediting agencies. CBO predicts the legislation would increase costs on the federal government and in its financial aid programs. That's because more colleges would become accredited that wouldn’t otherwise while others colleges would remain accredited because accrediting agencies would likely weaken their standards and be less likely to remove accreditation from a school that is not up to par. Handing accreditation over to the states is a bad idea if the goal of the system is to ensure quality and hold colleges accountable.

The federal government provides billions of dollars each year to ensure students can afford college. In order to help protect these funds from fraud, waste, and abuse, and ensure academic quality, the government relies on accrediting agencies to review and assess colleges, keep bad actors from accessing taxpayer funds, and remove colleges that aren’t serving students well. The U.S. Department of Education, for its part, evaluates accrediting agencies and decides which ones meet standards to serve as gatekeepers to financial aid. Today, the Education Department recognizes over nearly 40 agencies that serve in a gatekeeping role and accredit institutions to provide access to federal aid.

The Accreditation Choice and Innovation Act could dramatically expand the universe of college accrediting agencies. The bill would allow each state to designate and approve agencies, including industry-specific accreditors, to accredit programs and colleges in their state. Each state would need to assess potential accreditors’ standards and agree to monitor the effectiveness of those entities after five years. The states’ processes must be approved by the federal education secretary. Programs or institutions accredited by the new agencies could then become eligible for federal financial aid.

CBO estimates that the proposed legislation would increase the cost of direct spending for federal student aid by $437 million over the next 10 years. Of that amount, roughly $225 million would come from increases in student loans and $212 million would come from increases to mandatory Pell funding. The legislation would also add an additional $1.1 billion in discretionary Pell funding subject to annual appropriations over 10 years. The projected cost increase stems from three factors.

First, CBO expects that new state-recognized agencies would accredit institutions that would not be accredited under the current system. Detractors of the contemporary accreditation model claim it stifles innovation, but it helps keep colleges that don’t meet quality standards from accessing federal funds—the bill would undermine this protection.

Second, CBO predicts that existing accrediting agencies would weaken their standards to avoid having an institution it accredits switch to a different agency. CBO states it “expects that accrediting agencies would have an incentive to reduce their requirements to avoid having a postsecondary institution select another agency that uses less stringent accreditation requirements.” Under the Biden Administration, the Education Department clarified guidance that institutions must get approval from the education secretary before switching accrediting agencies. The guidance was based on a requirement in the Higher Education Act that the education secretary cannot recognize the accreditation of any college that is in the process of changing its accrediting agency unless it demonstrates reasonable cause for doing so. The Education Department said at the time it wanted to avoid accreditation switching that would result in a race to the bottom. CBO’s reasoning confirms the Education Department’s previous concerns but the Department has since revised the guidance allowing for fast approval with little oversight.

Third, CBO predicts that the bill would reduce the number of colleges under sanction and those losing accreditation, resulting in more students eligible for federal aid. These predictions are concerning. Already, the current accreditation system comes under fire for allegations that it rarely removes accreditation when a college is failing to serve students well. A 2014 Government Accountability Office report found that colleges with lower student outcomes were no more likely to have been sanctioned by accreditors than schools with stronger outcomes. CBO’s review of data from 2025 found colleges seldom lost accreditation and predicted these rates would decline further under the legislation. Opening up accreditation too widely to new agencies would likely result in a race to the bottom, with state-selected accreditors rubberstamping colleges to attract and maintain their membership, instead of keeping them out.

Congress previously relied on states as the sole party that would vet colleges and decide whether they could access federal student financial aid. The system failed. After the passage of the 1944 Servicemen’s Readjustment Act, also known as the GI Bill, nearly 6,000 new for-profit colleges were created over a short span of time. They often tried to appeal to veterans to secure a slice of their lucrative aid. They would promise them jobs that were ultimately dead ends. States proved on their own to be an insufficient check. This revelation led to Congress instead turning to accrediting agencies to help determine which colleges could accept federal aid. If states were allowed to authorize accreditors— with 50 separate approval processes– they risk facilitating a flood of bad actors. This would be an environment where fraud and abuse is rampant, and students and taxpayers are taken advantage of.

However, the CBO report gives cause for some optimism. It noted that policymakers could set and enforce quality assurance rules that could filter out some poorly performing institutions and constrain the impact of the legislation. For example, one area of uncertainty is the extent to which current regulations on Financial Value Transparency and Gainful Employment will be implemented and enforced, which would limit eligibility and potentially prevent increased costs in a world of more accrediting agencies. These rules will likely be changed again in a rulemaking process this December. CBO also points to new accountability rules passed under One Big Beautiful Bill which have not yet been implemented. Generally, it notes, these are stronger standards than accreditation. It is important that the Education Department maintain current regulations and ensure strong guardrails when it works to create rules to implement the new accountability provisions in December.

While expanding eligibility for state approval of accrediting agencies could decrease quality oversight, the legislation requires accrediting agencies to create standards on specific student success outcomes, such as completion and loan repayment rates. Setting stronger standards on how students fare could increase quality and ensure better student outcomes. The legislation would also seek to prevent conflicts of interest on accreditor decision-making boards by requiring representation other than individuals affiliated with schools the agency accredits. Such changes could reduce bias in decision-making bodies which is important to judging institutions fairly and taking decisive action when a college is not meeting standards.

Attempts to increase innovation should not come at the expense of quality standards and oversight. Handing over accreditation to the states would circumvent accrediting agencies’ role. Accreditation is in need of improvement but cutting accreditors out and handing the job to the states is a recipe for waste and abuse.