On Friday, July 4, President Trump signed the federal Reconciliation bill into law. The bill, spanning 940 pages, continues the Trump era tax cuts, makes significant changes to federal spending, and includes major provisions impacting higher education. Below is a high-level summary of provisions included in the final bill as modified and passed by the Senate and approved by the House. While the legislation contains substantial changes to federal higher education programs, it is significantly improved from the bill as initially passed by the U.S. House in late May. More details can be found in the NAICU Summary attached HERE.

Loan Limits and Loan Repayment Modifications

The bill fully eliminates the Grad PLUS program, caps parent PLUS loans, and caps unsubsidized graduate loan limits that include undergraduate borrowing. The bill also establishes new standard and income driven repayment plans and eliminates all other program options.

Important Pell Grant Changes

The bill provides $10.5 billion to address the Pell Grant Program shortfall and corrects the FAFSA need analysis for family farms and for small businesses. The bill also made an important change to Pell Grant eligibility in that it removes eligibility for the students who receive grant aid from other non-Title IV sources including funds from states, college and universities, and private sources in an amount that equals or exceeds that student’s cost of attendance for that period. Additionally, receipt of these funds during any period counts against their total lifetime Pell Grant eligibility. The bill also creates a new Workforce Pell Grant Program for short-term credentials and outlines specific parameters for program eligibility. For example, the Governor in a state must approve that the program meets certain requirements as defined in the bill for program eligibility and only programs offered by accredited institutions will be eligible.

Accountability Measures

The bill establishes new earning metrics that compare the median earnings of a program’s federally aided graduates to the median earnings of either a high school diploma holder or a bachelor’s degree recipient in their state, depending on the credential level. Institutions must agree that they will not use federal funds for programs that fail the new metrics. While not without flaws, this version is much less damaging than the House’s earlier risk-sharing model and reflects meaningful adjustments given advocacy by the higher education community and institutions.

Endowment Tax 
The bill creates a tiered endowment tax at rates of 1.4 percent, 4 percent, and 8 percent, and dramatically reduces the number of institutions affected. The threshold for inclusion has been raised from 500 to 3,000 tuition-paying students. International students will be included in enrollment counts. These changes are expected to exempt all WAICU institutions from the tax.

Given the strong advocacy to members of Congress from higher education organizations and institutions, the final bill did not include several damaging proposals that had been included in the Reconciliation proposal as passed by the House. Some proposals in the House bill that were removed by the Senate include:

• Removed the provision that only fulltime students can receive Pell Grants.
• Removed the controversial risk-sharing proposal that would have had a detrimental fiscal impact on private, nonprofit institutions.
• Removed language that would have eliminated subsidized federal loans for undergraduates.
• Removed language that would have capped federal aid based on the national median program cost. This proposal would have significantly disadvantaged private, nonprofit institutions that do not receive state funding to subsize the cost of tuition.

Thank you to all WAICU members for contacting their members of Congress at critical times in the legislative process and providing critical feedback on these policy proposals. While not perfect, the final bill resulted in a much-improved federal policy for students and institutions!

For more information, contact WAICU Executive Vice President for External Relations Rebecca Larson.