Introduction by Barbara K. Mistick

Dear Colleagues,

Due to the July 4^th holiday, we are publishing this week’s Washington Update early to ensure you have the most up-to-date information related to the reconciliation bill.

By a 218-214 vote, the House just passed the Senate’s budget reconciliation legislation (NAICU’s bill summary), marking the final stage of this legislative process. The bill will now be sent to President Trump to be signed into law.

On Tuesday, the Senate approved its version of a reconciliation bill by a 51-50 vote, with Vice President Vance casting the tie-breaking tally (see below for detail on several of the changes that were made to key higher education provisions). Despite a razor-thin majority and general uneasiness with the Senate’s reconciliation policies and processes, Speaker Mike Johnson (R-LA) overcame steep political challenges in securing the votes needed to pass the Senate’s bill.

NAICU will host a webinar on Wednesday, July 9 at 3:00 p.m. EDT [Register] to provide an analysis of the final reconciliation bill and its implications for private, nonprofit higher education.

A combination of rulings from the Senate Parliamentarian and general legislative maneuvering altered the text of some of the Senate’s higher education proposals. Here are highlights of several of the biggest changes:

• Endowment Tax Revisions. The Senate preserves the higher marginal tax rates on private college and university endowments of 1.4%, 4%, and 8% as determined by assets per student, but substantially narrows the pool of affected institutions. The student-enrollment threshold rises from 500 to 3,000 tuition-paying students, the special carve-outs for religious and non-Title IV participating institutions are eliminated, and earlier language excluding international students from head-count calculations has been dropped. These moves sharply reduce the number of campuses caught by the levy even as the House retains its steep, graduated tax schedule on some institutions. NAICU continues to call for the complete repeal of the endowment tax.

• Pell Reforms Tweaked. Responding to concerns raised by NAICU and veterans' organizations, the Senate tweaked its Pell Grant eligibility proposal to clarify that “other federal sources” are not included on the list of external grant aid sources that preclude Pell Grant eligibility. This change was likely made to prevent confusion and ensure agency interpretation doesn’t improperly include military education benefits. The Senate further clarified that the changes to Pell Grant eligibility for students who receive full cost of attendance scholarships from outside organizations is intended to be quite narrow in scope and will likely only affect about 2,000 students out of the nearly 7 million students who received a Pell Grant last year.

• Workforce Pell Proposal Narrowed. The controversial expansion of Pell Grant eligibility to short-term workforce credentials has been curtailed, to only include programs offered by accredited institutions. This important consumer and quality protection will help prevent bad actors and unproven educational entities from accessing Pell Grants without the same rigor as traditional institutions of higher education. NAICU raised objections to the potential threats to students and the integrity of the Pell Grant program that would accompany a policy that would allow unaccredited institutions to access Pell Grants in the original proposal.

• “Gainful Employment for All” Gets Calibrated. Responding to sector concerns, the Senate clarified its earnings test. The calculation will now only include program completers (rather than all former enrollees) and earnings will be calculated four years post-completion for all programs, which isn’t a change for undergraduate programs, but shortens the time horizon for earnings for many graduate programs. Despite its flaws, NAICU views the “gainful employment for all” accountability proposal as a significant policy improvement over the House risk-sharing accountability proposal and is pleased that the Senate responded to concerns raised by NAICU and its members.

While this legislation contains harmful cuts to federal higher education programs, it is significantly improved, and we are in a stronger position today because of your actions.

However, there are negative policy outcomes, including significant cuts to the federal graduate lending programs, the expansion of the endowment tax, and the creation of a new federal accountability metric.

That said, thanks to our collective advocacy, Congress preserved billions of dollars in tax benefits that help students and families save and pay for college, including the expansion of IRC Sec. 127, employer-provided education assistance. We also succeeded in blocking the most punitive elements of the House’s accountability framework, including the proposed institutional risk-sharing scheme. We fought hard to protect the undergraduate lending programs, including the in-school interest subsidy for undergraduates, and succeeded in those efforts.

Additionally, while some modest adjustments to Pell Grant eligibility were included in the final package, we successfully protected the program from far deeper and more damaging cuts. Importantly, the overall Pell shortfall was addressed, preserving the long-term stability of this vital aid for low-income students.

I would like to thank our membership for its leadership and engagement throughout the reconciliation process. Our collective work is not finished, but we are buoyed by the strength and unity of our community. I hope you have the opportunity to rest and recharge during the upcoming holiday weekend and I look forward to continuing our efforts together with renewed energy and a shared sense of purpose.

For more information, please contact:
Barbara K. Mistick, D.B.A.