Three Things House Members Must Know Before Voting on the Bipartisan Workforce Pell Act

Blog Post
An image of the House of Representatives of the U.S. Congress.
Flickr -- USCapitol
Feb. 23, 2024

Next week, the House is expected to vote on the Bipartisan Workforce Pell Act (BWPA). This bill, a compromise struck by Chair Virginia Foxx (R-NC) and Ranking Member Bobby Scott (D-VA) of the Education and Workforce Committee, will expand the Pell Grant to very-short-term credentials that are less than a semester’s length. The expansion of Pell Grants, which are already available for programs as short as 15 weeks, to very-short-term programs is problematic. These types of 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.

If anything, what little evidence we have on very-short-term credentials should give policymakers pause. Instead, they’ve carried on with the idea, putting insufficient guardrails in to try and force it across the finish line. Now, the House is racing to pass BWPA under suspension of the rules, allowing no room for amendments like more guardrails that would protect students and taxpayer dollars. The rush is a huge cause for concern, given a deeply alarming new pay-for that puts Public Service Loan Forgiveness (PSLF) and income-driven repayment programs like the new SAVE plan at risk. This critical new information, along with emerging details around a looming shortfall for the Pell Grant program, is getting overlooked during a busy time while Congress is trying to avert a government shutdown.

Before getting to a vote next week, House members should know these critical details:

  1. The new 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 original pay-for in BWPA would have prohibited students from being able to access federal student loans to attend prestigious institutions subject to the endowment tax. That pay-for faced bipartisan criticism and opposition by several members of the Education and Workforce committee for potentially cutting off access to graduate schools—particularly prestigious medical schools. A new pay-for has emerged that would require 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 PSLF program.

    This new pay-for 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.
  2. The Pell Grant program will soon see its surplus evaporate into a shortfall. Over the past few years the Pell Grant program has seen increases in overall awards and expansion of eligibility. Recently, 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.
  3. The pay-for won’t pay for enough. 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 new 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.

As the House continues to push forward on BWPA, Representatives shouldn’t make any hasty decisions. The bill deserves full consideration and not a rushed suspension vote that prevents adding more consumer protection guardrails to the bill, provides disincentives that will limit access to low-income students and public good programs, undermines PSLF and the new SAVE repayment plan, and includes a pay-for that harms the future of the Pell Grant program.

Related Topics
Higher Education Accountability & Consumer Protection