NCSL Urges Congress to Maintain Pell Eligibility, Avoid Risk-Sharing in Higher Education

NCSL Urges Congress to Maintain Pell Eligibility, Avoid Risk-Sharing in Higher Education

Dear Chairman Cassidy and Chairman Walberg:

While state legislatures have recently called on Congress to reauthorize the Higher Education Act on a bipartisan basis, NCSL recognizes you are currently considering significant higher education policy changes through the FY25 budget reconciliation process.

NCSL recently convened a Task Force on Higher Education Affordability and Student Outcomes to examine the state-federal partnership in higher education and provide updated guidance on the federal role. NCSL strongly believes the federal role must complement the state role, rather than supersede it.

As you consider changes to federal financial aid in the budget reconciliation process, NCSL wishes to share some of its relevant views on the appropriate federal role in affordability and accountability.

Affordability and the Pell Grant

NCSL urges Congress to ensure the Pell Grant serves the broadest number of students. Today's students, who are increasingly working adults, pursue many pathways to postsecondary education and often need flexible programs and financial supports to attain a degree or credential.

The House's proposal to eliminate Pell eligibility for students who are enrolled less than part time could affect roughly 10% of Pell recipients and would impose undue barriers on their path toward a degree.

NCSL asks Congress to preserve the existing Pell eligibility for part-time students, which would continue to provide the flexibility for students to pursue a postsecondary pathway at a pace that is best for them.

Accountability and Student Loan Reform

States, given their direct and constitutional relationship to higher education governance and finance, have long preferred a limited federal role in accountability, one that defers to the states' leadership in ensuring the quality of postsecondary education.

However, the states acknowledge an increased interest among federal policymakers to expand the federal role in accountability as a means of potentially lowering the taxpayer's share of growing student loan program costs.

NCSL recognizes the increased costs of the student loan program and has raised questions about the efficacy of a federal policy strategy that dedicates an increasing share of federal higher education spending on subsidizing student loan repayment. When approaching any reforms to the student loan program, NCSL hopes Congress can find fair terms for borrowers and taxpayers alike.

The House's current proposal significantly reduces the costs of the loan program through changes to student loan terms and repayment programs. However, it also includes an accountability proposal known as "risk-sharing" that would impose penalty payments on colleges and universities based on how their degree programs perform against federally-determined loan repayment metrics. These penalty payments would then be used to fund a first-of-its-kind institutional grant program, known as PROMISE Grants, that would condition federal funds on price guarantees and other commitments.

Risk-sharing would significantly expand the federal role in higher education accountability. This one size fits all federal metric for every degree program in the country would give the U.S. Department of Education broad influence over the availability of degree programs in states.

NCSL believes that states, rather than the federal government, are better positioned to manage their systems of higher education to ensure that institutions and programs meet the educational and economic needs of their states and citizens. As states continue to lead the charge towards better outcomes, federal risk-sharing metrics could duplicate or contradict existing state efforts or discourage states from enacting their own forms of accountability that are better suited to the variety of institutions and programs in their state.

The risk-sharing proposal is remarkably complex and the available modeling suggests institutions would face numerous considerations and complicated trade-offs. Estimating penalty costs has proven difficult and it is very possible that institutions would not understand the consequences of the policy until the penalty payments are due. As others have raised, some of the data used in the calculations are not publicly available. In addition to these uncertainties, the entire process would impose significant compliance costs on institutions.

States especially have major questions about who would ultimately be responsible for paying the penalties imposed on public colleges and universities, which are largely funded by state taxpayers and tuition from students. The policy would create fiscal uncertainty for institutions, as penalty payments and program-level access to student loans could vary from year to year. Since public institutions could not raise tuition without risking further penalties, would institutions be forced to cut services to pay penalties? Or would any new state appropriations from the legislature be used to offset federal penalties?

As penalty payments are then used to fund a new PROMISE Grant program, this proposal would enact a complicated finance system where state public colleges and universities effectively cross-subsidize public institutions in other states, or even private institutions. Furthermore, conditioning the PROMISE Grants on tuition guarantees would for the first time give the federal government influence over setting tuition, another longtime state authority.

In light of the states' leadership and longstanding plenary role in education, NCSL does not believe this is an appropriate time for an expanded federal role in consequential accountability policy through risk-sharing. NCSL urges the federal government to continue to let states lead on enhancing the value of higher education.

NCSL looks forward to continued dialogue on the most appropriate and effective ways for Congress to deliver better student outcomes in higher education in partnership with states. NCSL especially urges you to champion a bipartisan reauthorization of the Higher Education Act, which could emphasize federal efforts to promote transparency and improvement in higher education, rather than pursue expansive affordability or accountability policies.

Sincerely,

Tim Storey
Chief Executive Officer
National Conference of State Legislatures

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