More Guardrails, Fewer Loopholes:

Last week, the Committee on Health, Education, Labor, and Pensions released the higher education provisions of the Senate’s version of the One Big Beautiful Bill Act, which included $300 billion in cuts and unlocked the next phase of an ongoing budget reconciliation process. (The House released its version of the bill in late April.) While investments in higher education are needed, the Senate bill provides a clear framework for holding colleges and universities accountable for delivering value to those they enroll, helping to ensure students end up better off than if they did not attend. In addition, it largely protects and adds resources to the Pell Grant program, and it takes steps in line with the House’s recent efforts to streamline student loan repayment.

As the reconciliation process moves forward, both chambers of Congress must resolve differences in their proposals. As they do so, policymakers can strengthen the accountability- and loan repayment-related provisions in the Senate bill in key ways—including by considering elements from the House’s version—to protect students’ and borrowers’ financial futures and taxpayer resources.

The Senate bill would hold all degree programs accountable for ensuring the majority of students receive the earnings boost that should come with a college degree. It should be a given that students earn more after completing a program than if they had not enrolled at all. Under the accountability framework, if earnings are too low for 2 out of 3 consecutive years, the program loses eligibility for student loans. The legislation also requires programs with low earnings in any given year to inform students that it is at risk of losing loan eligibility.

While programs with low earnings lose access to student loans, they maintain access to other financial aid including Pell Grants. The legislation also allows institutions to appeal a loss of eligibility while maintaining access to aid, and it allows programs that lose eligibility to regain it after two years.

This proposal is not only relatively easy to understand and implement compared to other proposals, but it also marks a significant step toward ensuring students receive a minimum value from their programs—and that taxpayer dollars aren’t wasted on those programs that fail to deliver. To strengthen these provisions, policymakers should also add key concepts from the House legislation to better ensure value for students:

1. Include Certificate Programs. The Senate bill only holds college degree programs accountable for low earnings and excludes certificate programs from any accountability and in doing so, misses some of the worst outcomes in a growing field. In 2023-24, the number of students completing a certificate program increased, following a ten-year trend, while the number of students earning an associate or bachelor’s degree decreased. A review of the available research finds that outcomes for certificates are mixed, depending on the program length and field of study, with some having no to modest increases in wages and overall lower rates of employment for certificate holders. Recent data from the College Scorecard shows that graduates of the average undergraduate certificate program earn a median wage of just $13 per hour. Not including certificate programs accountable could further lead to their growth without a guarantee in increased earnings for students who invested time and resources in attending a program. Congress should seek to hold all programs accountable, as the House does in its version of the bill.
2. Add a Measure to Account for Programs with Unmanageable Debt. Accounting for earnings is a necessary metric to account for programs that leave their students no better off than if they hadn’t attended at all. But in today’s landscape of growing higher education costs and high debt, it does not account for students who take on more debt than they can reasonably repay based on a program's earnings, even if their students see an increase in wages after attending. Accounting for programs that leave graduates with unmanageable debts is one area with bipartisan support, and the House’s version of the bill includes an accountability measure that uses a ratio of price to earnings applied to an unpaid debt balance. The Senate bill does leave some protection in place by not repealing Gainful Employment (GE), which is an important protection for students enrolled at career training programs. However, millions of students are enrolled at programs that are not subject to GE, and they should be protected too. Policymakers should ensure a final version of the bill includes a measure that accounts for high-debt programs.
3. Loss of Eligibility Should Include Loss of Pell Access. Under the Senate proposal, programs that leave students with low earnings lose access to Federal student loans but maintain access to Pell Grants and other federal aid. If a program does not provide students with a return on investment, it should lose access to all Federal aid, not just loans. Pell Grant recipients should also see an earnings premium from attending higher education, and those taxpayer dollars shouldn’t fund low-value programs.
4. Don’t Allow Appeals to be a “Get Out of Jail Free” Card. The Senate proposal allows any college that fails the earnings test to appeal the earnings and maintain access to Federal aid while the appeal is ongoing. History has shown that when a college is allowed the opportunity to appeal a decision, it is unlikely to lose access to aid. Take, for example, the Cohort Default Rate (CDR)--a measure of how many borrowers default on their loans within three years of leaving school. Schools that have high CDRs are cut off from access to aid. The CDR metric is ineffective in part because it allows a school at risk of losing aid to access a variety of appeal options. For CDR, institutions with repeated high-default rates continue to maintain access to aid by continuously appealing. For example, in 2018, among 7 institutions that failed the CDR metric, all 7 had successful appeals. One institution that failed the measure 4 years in a row successfully appealed each time. An appeals process is inherently political, which makes real accountability a challenge. No policymaker wants a college in their State or district to lose access to aid and will lobby on behalf of the school. One of the benefits of a formula for determining a minimum expected value is that it minimizes politics and the loopholes that an appeals process can create. The Senate should put guardrails around the appeals or eliminate them altogether to ensure the measure is effective.
5. Address Completion Through a Different Metric. One measure of ensuring that programs are serving students effectively is a relatively low level of noncompletion. The Senate bill attempts to account for completion by including students who don’t complete a program in its earnings measure. In theory, noncompleters are unlikely to see the same boost in earnings as those who complete a degree, and this should be reflected in the median earnings. If noncompletion rates are high enough, a program would not meet the measure and would lose access to aid.

In practice, this provision would be challenging to implement because many students do not declare a major or choose a program before dropping out. For this reason, the House accountability provision addressed noncompleters at the institutional level. Policymakers should consider including measures of noncompletion in a separate metric. For example, Congress could extend the three-year cohort default rate period by an additional two years for institutions with high rates of noncompletion, especially since those who leave school without a degree or credential are disproportionately likely to default on their student loans, a financially punitive outcome, especially for low-income students. Addressing college completion through CDR ensures that colleges with a high level of noncompletion—which could result in high default rates more than three years into the future—lose eligibility to access aid altogether.

The Senate bill offers stronger protections to the Pell Grant program—the bedrock program to provide college access for low-income students—compared to the House bill. First, like the House bill, it shores up funding for the program, which is facing a shortfall. Without a fix, eligibility or awards could be cut. While the House version of the bill cut eligibility for students enrolled less than half-time and cut awards if students didn’t enroll in additional courses, the Senate version largely protects eligibility, ensuring low-income students can continue to access a college degree.

However, like the House version, the Senate bill would put the program at risk by opening up Pell Grants to very-short-term programs—as short as 8 weeks long, providing as few as 150 hours of training—with few meaningful guardrails. Both the House and Senate versions allow for-profit colleges and non-credit programs to access Pell funding. Worse, both bills would allow these Pell dollars to go to new non-institutional, non-accredited providers. With the number of non-credit programs and accredited providers already in the tens of thousands and rising, this expansion puts the Pell program at risk by potentially exploding the cost of the program and leading to future shortfalls.

Instead of being consistent by using the broader accountability provisions in the Senate bill, which seek to hold programs accountable for ensuring students receive a boost in earnings, the short-term Pell provision would require that the published tuition and fees of such a program do not exceed the value added earnings of students that received aid under the program. Unlike the House version, the Senate version would measure earnings after 3 years instead of one, which means new providers offering programs as short as 8 weeks would be able to operate using short-term Pell funds for 3 years before they are ever held accountable for meeting the metric. That means programs could produce many cohorts of students who earn subpar wages before their eligibility is at risk. The proposal would promote funneling low-income students into very short credentials with the promise of landing a middle-class job, which is unlikely to lead to the boost in earnings they seek. There are several changes policymakers should make to provide better safeguards for students.

1. Eliminate Eligibility for Non-Institutional, Non-Accredited Providers. Opening up Pell to new unaccredited providers is a dramatic policy shift that would allow new entities to operate under minimal oversight and no track record of student success. It has the potential to dramatically increase the cost of the Pell program while allowing students to use up their Pell eligibility on programs that do not result in an increase in employment prospects or earnings. It's a provision that is opposed by the largest champions of short-term Pell for these reasons. Policymakers should eliminate eligibility for new unaccredited providers from the final version.
2. Measure Earnings After One Year. All programs should be held accountable for the same metrics and outcomes, including short-term Pell. Policymakers should align the earnings accountability metric for short-term Pell programs with the same measure applied to other programs. That would mean using an earnings measure rather than the price to earnings ratio carried over from the House version. It should also measure earnings at one year after completion rather than three. This is particularly important because multiple studies have shown very-short-term programs yield low wages. For example, a new report from the American Enterprise Institute showed that only 12 percent of non-degree programs delivered a wage gain of 10 percent or more. Furthermore, research has shown that any earnings boost those programs provide often fades within a few years. Allowing such a short-term program to operate for three years before it is ever held accountable to an earnings metric would allow tens of thousands of students to use Pell Grants without any guarantee of an increase in earnings.

The Senate and House bills both take similar steps to streamline the loan repayment system for new borrowers: Those who take out loans after July 1, 2026, have access to two repayment plans—an income-driven plan (the Repayment Assistance Plan, or RAP) and a fixed-payment plan in which the length of repayment is adjusted based on the amount borrowed—instead of the wide array of plans currently available. The Senate bill also maintains the House’s provisions that correct for barriers in the existing repayment system, ensuring no borrower who makes on-time payments in RAP has a growing balance from interest, increasing the number of pathways available to exit default and return to repayment, and investing $1 billion in the administration of the loan program. These changes provide helpful tools as the Department seeks to address a wave of defaults as borrowers re-enter repayment after an extended student loan repayment pause.

While recent analyses indicate that RAP would produce monthly payments similar to or lower than those made under existing plans for middle-income borrowers, it would result in higher payments for those with the lowest incomes (and some borrowers would repay for longer periods, as RAP does not provide forgiveness until borrowers have been in repayment for 30 years). These higher monthly payments are a result of a new $10 minimum payment provision, a lower threshold for making more than the minimum payment, and the lack of a provision protecting a certain portion of borrowers’ incomes, which exists under current income-driven plans.

In addition to eliminating the minimum payment and reducing the number of years to forgiveness, protections for low-income borrowers can be strengthened by:

1. Raising the Threshold at which Borrowers Pay More than the Minimum. In RAP, borrowers’ monthly payments are a percentage of their incomes, and borrowers with higher incomes pay higher percentages of their income, ensuring high earners pay more over time. However, those enrolled in RAP making relatively little—$12,001, or only approximately 75 percent of the current federal poverty guidelines—would owe more than the minimum payment. To better target the benefits of RAP within the current structure of the bill, policymakers should increase the level at which borrowers are required to pay more than the minimum. For example, the minimum payment could be in place until borrowers hit the next threshold ($20,000) or higher, at which point borrowers would pay the requisite percentage of their incomes.
2. Tying Repayment Thresholds to Inflation. In the House and Senate bills, the thresholds that dictate the percentage of borrowers' incomes that must be paid toward their student loan balances are static instead of being tied to inflation or a measure that takes inflation into account, such as the federal poverty guidelines. As a result, over time, RAP’s benefits will become even less targeted for low-income borrowers, and legislative changes to the bill will be required to reset these thresholds in the future. To strengthen the current proposal and reduce the need for future legislation, policymakers could, for example, tie repayment amounts to percentages of the federal poverty guidelines instead of fixed income amounts. For instance, instead of borrowers who make $30,001 - $40,000 owing 3 percent of their incomes, as the House and Senate bills currently state, borrowers who make between 200-250 percent of the federal poverty guidelines (currently $31,300 - $39,125 for a single individual) would owe 3 percent of their incomes. When the poverty guidelines are updated to reflect the income at which the government considers people to be financially insecure, required monthly payments would reflect this change.

We believe the best way to make large-scale changes to higher education should be done through a bipartisan reauthorization of the Higher Education Act, which would include robust hearings and time to discuss and consider alternatives. However, the changes proposed above could better help Congress deliver on a simplified system that supports the most vulnerable students and borrowers and holds colleges accountable for how well they are served.