Here We Go Again: Three Things House Members Must Know About the Short-Term Pell Amendment to NDAA

In February, we wrote about how some members of the House were trying to push the Bipartisan Workforce Pell Act (BWPA) over the finish line through a suspension vote. This would have allowed the controversial bill—which extends the Pell Grant from programs as short as 15 weeks, to programs as short as 8 weeks—to sail through the House. There would have been no room for amendments like more guardrails that would protect students and taxpayers or a different pay-for that wouldn’t hurt low-income students at many of our country’s most revered institutions. That vote ended up getting scuttled due in large part to an enormous amount of pressure from unions, higher education institutions, and student and consumer protection groups.

Unfortunately, we are about to experience déja-vu. The House is once again expected to vote on BWPA this week, this time as an amendment to the reauthorization of the National Defense Authorization Act (NDAA). Because NDAA is a must-pass piece of legislation that moves every year, it is a vehicle to get related amendments passed into law. Typically, amendments to NDAA must relate to national security, defense, and military readiness.

For this reason, it is extraordinary that BWPA is being considered as an amendment to NDAA as it has no military tie. In fact, veterans and servicemembers have often been harmed whenever a new pot of money becomes available for higher education. Predatory providers, often for-profit, exploit that new pot of money, heavily recruit eligible students (particularly military and veteran students who also have GI Bill benefits to spend), only to provide a low-quality product. During the height of the COVID-19 pandemic, the federal government provided $386 million in relief for laid off veterans to retrain in “high-demand fields.” While this sounds great, the Washington Post reported dismal outcomes. Some schools closed while students were still enrolled, and some schools were overly predatory in their recruitment tactics. As of August 2022, only about 397 of 6,800 participating veterans landed new jobs. It would set a terrible precedent to let an amendment into NDAA that would create a new opening to exploit veterans and active servicemembers.

Before getting to a vote this week, House members should know three critical details about the poor outcomes of these programs, the problematic pay-for, and the implications for the impending Pell shortfall. Many of our concerns remain the same as when this bill was set to move under a suspension vote:

1. We’ve already been down this road of using taxpayer dollars to fund short-term credentials, and it largely doesn’t work for students, workers, or veterans. Instead of landing a well-paying job, they often attend low-quality and predatory institutions and end up in high-turnover jobs with poverty-level wages. Students already can receive Pell for programs as short as 15 weeks and take out loans for some programs as short as 10 weeks. Nearly half of those programs leave graduates earning less than a typical worker with only a high school diploma. A 2017 gold standard evaluation of short-term programs paid for with Workforce Innovation and Opportunity Act dollars found no evidence of any improvement in earnings.

   Very-short credentials often leave people unemployed or earning poverty-level wages, and will likely lead to further racial stratification of our higher education system, continuing the trend of a “white flight to bachelor’s degrees.” Research has also found that these programs disproportionately recruit low-income, part-time students, and students of color, and leave Black students—particularly Black women with low wages.

2. The pay-for will disincentivize prestigious colleges and universities from having public service-oriented programs and from enrolling low-income students—it will undermine the Public Service Loan Forgiveness program and the benefits of President Biden’s new SAVE repayment plan. The current pay-for requires high-endowment schools to reimburse the government for unpaid student loan balances—including unpaid interest and balances forgiven under income-driven repayment plans and even the public service loan forgiveness (PSLF) program. It creates a challenging set of incentives that will hurt those programs—like social work or medical pathways that serve low-income or marginalized communities—that exist to serve the public good. Because the pay-for essentially operates as a fine on institutions, institutions will steer students and graduates away from careers that are likely to qualify for PSLF or affordable loan repayment options since they’d be on the hook to now cover those costs. It may not be what the authors of the bill intended, but this pay-for is a backdoor attack on PSLF, and important progress made by the Biden Administration to address ballooning interest and reduce monthly payment costs through the new SAVE income-driven repayment plan.

   The pay-for would likely have another concerning effect—it could prevent institutions from recruiting and enrolling low- or moderate-income and low-wealth students given their likelihood that they’d need to take out loans and pay them back through income-driven repayment plans. In the shadow of the Supreme Court’s decision to overturn affirmative action in admissions, this pay-for would impose further restrictions on access for students of color who have less wealth than their white peers to rely on to pay for college. While it is true that many of these institutions provide robust financial aid packages to their low-income undergraduates, their pricey graduate programs in fields like medicine and law are often only attainable to low- and moderate-income students through the federal student loan program. The National Association of Independent Colleges and Universities, the membership organization of private nonprofit colleges, penned a letter to the House of Representatives calling the pay-for, “bad public policy and a bad precedent” that would penalize institutions for enrolling low-income students in institutions that have some of the best outcomes.

3. The Pell Grant program will soon see its surplus evaporate into a shortfall, and the pay-for won’t pay for enough. Over the past few years the Pell Grant program has seen increases in overall awards and expansion of eligibility. The Center for a Responsible Federal Budget (CRFB) published an analysis that estimates the Pell surplus will be exhausted just two short years from now in 2026, leading to more than a $30 billion shortfall by 2034. According to CRFB, to fill this gap benefits would have to be cut by 10 percent or funding would have to increase by 12 percent.

   The expansion of Pell to very-short-term programs—including those at expensive for-profit schools and entirely online programs—could potentially tip the program into a shortfall sooner while placing even more strain on the Pell budget. In the past, policymakers have addressed shortfalls by making eligibility cuts—often cuts that hurt community college students the most. This expansion of very-short-programs could come at the expense of helping marginalized students, while increasing profits at some of the most predatory schools and programs in higher education.

   Unfortunately, the pay-for won’t nearly go far enough to cover the costs of the expansion of Pell to very-short-term programs. While Pell functions as an entitlement where every student who qualifies gets Pell, most of that amount must be funded from discretionary appropriations and only a small amount is funded by mandatory entitlement dollars — 84 percent of Pell costs are discretionary, and the pay-for would only affect that other 16 percent. Every year estimates are used to try and determine how much money needs to be appropriated for the Pell Grant program. Overestimates can lead to a surplus and underestimates lead to shortfalls. But since Pell operates as an entitlement, Congress has to make up the difference during a shortfall which usually happens by cutting benefits instead of finding more appropriations money. The pay-for in BWPA will only cover the small mandatory amount of the Pell Grant expansion without also finding the money to pay for the discretionary costs, throwing more fuel onto the overall shortfall fire.