The bill, if signed into law, would extend the Trump-era tax cuts from 2017 and introduce new financial pressures on higher education institutions. A key provision in the bill would hold colleges accountable for unpaid student loans, a move that critics argue could reduce access to higher education for lower-income and historically marginalized students.
The legislation is now headed to the Senate, where Republicans hold a 53-person majority. The bill was passed as part of the reconciliation process, allowing the Senate to approve spending-related policies with a simple majority, thus avoiding a filibuster that would require 60 votes to break.
Under the proposed risk-sharing policy, colleges would be required to make payments to the federal government based on a formula tied to the unpaid student loan balances of former students. This policy, Republicans suggest, is intended to increase college accountability regarding student costs and outcomes. According to the House education committee, institutions that continue to saddle their students with debt would face increasing penalties and risk losing access to federal student aid.
However, higher education experts and insiders are concerned that this risk-sharing system could discourage colleges from accepting lower-income and historically marginalized students, who often face more systemic challenges in both education and the workforce. While the bill includes new Promise grants for colleges that provide access to low- and middle-income students, analysis has found that many institutions will still incur significant financial losses.
The American Council on Education (ACE) found that 91% of colleges serving primarily lower-income students would make significant payments to the government if the bill passes. Jordan Nellums, a senior policy associate with The Century Foundation, a think tank, expressed concerns about the bill's implementation, stating, “In terms of its impact, it would be disastrous for institutions that are doing the job of bringing on students that come from communities that are already underrepresented.”
“Fundamentally it’s an astonishing level of federal overreach to essentially lump in all institutions of higher education together—public, private, for-profit—and run a convoluted formula to determine winners and losers at the federal level and then redistribute funding,” said Craig Lindwarm, senior vice president of government affairs for the Association of Public and Land-grant Universities.
To offset the risk-sharing penalty, colleges can qualify for a new pot of funding proposed in the bill called the PROMISE Grant. How much a college would get in PROMISE funding depends on the total value of Pell Grants received and the graduation rate of Pell-eligible students. This new grant program would be funded by other colleges’ risk-sharing payments.
As the bill moves to the Senate, it is widely expected that Republicans will make changes to the legislation. The outcome of these changes and the overall impact on higher education and students remain to be seen.