PROSPER Act: House HEA Reauthorization Bill’s Impact on Pell Grants and Federal Work-Study

By Jill Desjean, Policy and Federal Relations Staff

Editor’s Note: This article is the third in a series that delves into Title IV-related issues contained in the Promoting Real Opportunity, Success and Prosperity Through Education Reform (PROSPER) Act released by House Republicans on Dec. 1, 2017.

The PROSPER Act creates an incentive for accelerated study by adding a Bonus Pell award for up to $300 per award year for students enrolling in a greater than full-time workload for their course of study. It would also introduce, as an anti-fraud measure, a loss of Pell eligibility for any student who completed no credit hours for three payment periods while receiving a Pell Grant as well as new counseling and disclosure requirements.

Federal Work-Study (FWS) for graduate and professional students is eliminated under the bill, as are the requirements that institutions spend 7 percent of FWS funding on community service and that institutions use FWS funds for tutoring and literacy activities. The private sector employment cap is removed. The non-federal share is increased from 25 percent to 50 percent and an “improved institutions” set-aside of 20 percent of FWS appropriations is created. The base guarantee component of the FWS allocation formula is replaced over the next five years with a new fair share formula.

Pell Grants
The PROSPER Act maintains the current funding structure for the Pell Grant program, with appropriations comprised of both mandatory and discretionary funding. However, the bill does not include indexing the maximum Pell Grant to inflation, a provision that expired in fiscal year 2018 and, without which, erodes the purchasing power of the Pell Grant as college costs rise while Pell Grants stagnate.

The bill introduces a Pell Grant Bonus Award, worth up to $300 per award year, to be divided equally among each payment period. For each payment period, Pell Grant-eligible students enrolling in a greater than full-time workload that will lead to the completion of 30 or more credits (or the equivalent coursework) for the award year would be eligible to receive the bonus, which is above and beyond the student’s maximum annual Pell Grant award. The bonus would still be counted toward the 150 percent annual Pell Grant cap that is commonly referred to as Year Round Pell. Additionally, students cannot receive a Pell Bonus in a payment period in which they are also receiving Pell Grant funds that exceed their maximum annual award– that is, when they are using a portion or all of the additional 50 percent Pell eligibility under Year Round Pell. NASFAA, while supportive of the bonus as an incentive for students to accelerate their studies, has suggested changes to the wording of the statute to eliminate any ambiguity that might lead to a misinterpretation of the intent of the law when the Department of Education (ED) develops regulations.

Institutions will now be required to provide annual in-person or online Pell grant counseling to Pell recipients detailing, among other things, the terms and conditions of the grant, budgeting and financial literacy information, lifetime eligibility, and approved use of Pell grant funds. Additionally, ED is directed to create annual notifications to students informing them of their remaining Lifetime Eligibility Used (LEU) along with a Pell calculator. ED will be required to estimate future Pell Grant awards and to explain that eligibility can shift due to changes in family circumstances, federal funding, or enrollment status.

Pell Grant disbursements, like loans, would be made in substantially equal monthly or weekly installments over the period of enrollment, also known as "aid like a paycheck." Unequal disbursements would be permitted to account for unequal costs or unequal financial assistance. Unequal costs include upfront charges such as tuition and fees.

The bill also makes ineligible any student who receives Pell Grant funds for three payment periods without completing any credit hours. Financial aid administrators are, however, granted authority to issue waivers in cases where they determine the failure to complete the credit hours was due to circumstances beyond the student’s control.

Federal Work-Study
The bill authorizes funding for FWS at $1.72 billion, which, if funded at that level, would be almost double the recent appropriations for the program.

The PROSPER Act eliminates FWS eligibility for all graduate and professional students. The purpose of the FWS program is updated, with the community service component replaced with a work-based learning component, defined as "paid interactions with industry or community professionals in real workplace settings that foster in-depth, first-hand engagement with the tasks required of a given career field, that are aligned to a student’s field of study." The requirement that 7 percent of FWS funds be spent to pay students working in community service positions is eliminated.

The bill provides for a set-aside of 20 percent of amounts appropriated to FWS (provided appropriations are at least $700,000,000) to be distributed to institutions with the highest completion rates for Pell Grant recipients and for those institutions with the highest rates of improvement in their Pell Grant recipients’ completion rates. There would be no required non-federal share on these “improved institution” funds, but institutions would need to provide assurances that priority for awarding these additional funds was given to high-need students and to those students employed in work-based learning opportunities. An increase to the amount permitted for job location and development programs, from 10 percent to 20 percent ($150,000 maximum) includes the same requirements relating to prioritizing need and work-based learning.

The allocation formula also sees a phase-out of the base guarantee, similar to NASFAA’s recommendation but with a 5-year timeframe instead of NASFAA’s recommended 10 years. Institutions with large base guarantees may see significant FWS losses during this swift phase-out. The fair share formula would be altered to take into account both the institution’s share of total Pell grants disbursed at all institutions as well as their share of total undergraduate institutional need across all institutions, with each component comprising half of the institution’s fair share allocation.

The bill increases the FWS overaward tolerance from $300 to $500 and increases the general non-federal share from 25 percent to 50 percent over a five-year phase-in period.

Several changes were made to private sector employment agreements, including the elimination of the 25 percent percent private sector employment cap. The bill also permits FWS funds to be used for full-time private sector employment for cooperative education students and adds the requirement that private sector employment not only be academically relevant, but also complement and reinforce the student’s career goals.

Institutions still may, but are no longer required, to use FWS funds for tutoring and literacy activities.


Publication Date: 12/14/2017

Theodore M | 12/18/2017 2:41:53 PM

It seems two of the biggest problems in the allocation formula are not addressed: 1. The more you charge in tuition the more FWS you can get. There should be a cap so that this money is not funneled into the highest cost schools. 2. The income charts have not changed in over 30 years. 60K is no longer wealthy.

David S | 12/14/2017 3:24:32 PM

Despite the demand for post-baccalaureate degrees being at an all-time high, and more and more careers in our economy requiring such degrees, this bill sends the message "if you want to go to graduate school, that's on you." In addition to forcing most grad borrowers to turn to mixed federal/private borrowing, now they're being left out of Work Study, despite a plan to increase funding in this program. No logical explanation for this.

I'm old enough to remember when the HEA focused on improving access. That's relegated to financial aid history books by now.

Melody L | 12/14/2017 11:32:27 AM

I wonder if there is any data that shows how many schools charge tuition by the hour. For our students this year, it would cost them $474 in annual tuition and fees to go from 12 hours to 15 hours in Fall and Spring semesters. Add two additional book purchases on top of that, and the extra $300 Pell bonus falls very short of paying for this.

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