NAICU Washington Update

Reconciliation Agreement Puts Pell Increase at the Forefront of Higher Education Efforts

October 29, 2021

The long-awaited Build Back America reconciliation agreement among Democrats kept a significant increase to the Pell Grant maximum and support for Historically Black Colleges and Universities (HBCUs), Tribal Colleges and Universities (TCUs), and Minority-Serving Institutions (MSIs) at the forefront of the final deal on higher education provisions.

The bill would increase the Pell Grant maximum by $550, a $50 increase over the original House reconciliation proposal.  The increase would be an automatic add-on for the coming four years to any amount that Congress appropriates during the normal funding process.  Other provisions also make any student who was eligible (or whose parents or spouse were eligible) for a federally means-tested program in the prior 24 months eligible for the maximum Pell Grant.  DACA students and students under temporary protected status or deferred enforcement departure would also be eligible for Title IV student aid.  Students at for-profit institutions will not be eligible for the increase. 

This is a significant boost to the Pell program and one that reflects the strong grassroots efforts across the nation and across the higher education sectors to increase Pell funding.

Federal support for HBCUs, TCUs and MSIs also received an increase in support in the final bill.  An additional $6 billion is given to these vital institutions through mandatory funding in the Higher Education Act (HEA).  Additionally, the package creates a new research and development infrastructure program with $3 billion in funding under the education provisions in the bill and more than a billion dollars under other agencies. 

On the tax front, the bill maintained a host of higher education benefits from the initial Ways and Means Committee bill, including:
  • Providing endowment/net investment income tax relief for private colleges.  While not a repeal of the endowment tax, the provision will allow private colleges paying the tax to offset taxable amounts with amounts provided in student aid.
  • Making Pell Grants tax-free.  Under current law, portions of Pell Grants not used for tuition are taxable.
  • Repealing the prohibition of individuals with state or federal drug convictions to claim the American Opportunity Tax Credit (AOTC).
  • Creating a new infrastructure research grant program that will award $500 million annually in credits to public colleges only for STEM projects on an application basis run by the Treasury Department.
Unfortunately, the bill significantly trimmed many high-cost provisions, including the reinstatement of advanced bond refinancing that was in the initial House bill.

Also in the agreement was a greatly scaled down college completion grant program available to states or systems of higher education to promote evidenced-based practices to increase student success among traditionally underserved students, including in job market outcomes.  The program has a total funding of $500 million over nine years.  This figure is far below the $9 billion figure in the original House bill.  Private, nonprofit institutions remain eligible to participate in any state completion programs. Several teacher preparation programs also received hundreds of millions of dollars in additional funding.

Finally, for many non-citizens in the DACA/Dreamer population, the bill adjusts the U.S. immigration registry date from 1972 to 2010.  This would allow undocumented citizens who entered the U.S. between January 1, 1972 and December 31, 2009 the ability to register for U.S. citizenship and become eligible for a green card, subject to a $1,500 fee.

The bill now has to go through the legislative gauntlet of first getting sign off from all democratic senators and nearly all democratic house members, which could also free up the hold the progressive House democrats have had on the bi-partisan infrastructure bill since last summer.  Also, as a reconciliation bill, each provision is open to review by the Senate Parliamentarian as to its germaneness to the reconciliation process. That review has caused many past reconciliation provisions to flounder, making the bill still a long way from complete. 

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