Analyzing the College Affordability Act: Campus-Based Provisions

By Jill Desjean, NASFAA Policy & Federal Relations Staff

Updated Nov. 6, 2019: A markup of this bill took place over three days from Oct. 29-31, 2019 — after the article below was written. An amendment in the nature of a substitute replaced the original bill text, and multiple amendments were adopted during the markup process. The substitute amendment and additional amendments made several minor changes, and this article has been updated to reflect those updates.

Editor's Note: This article is the third in a series of six that delves into Title IV-related issues contained in the House Democrats' bill to reauthorize the Higher Education Act, the College Affordability Act. This article details the proposed changes in the College Affordability Act affecting the campus based aid programs. See all of NASFAA's coverage of the College Affordability Act.

The College Affordability Act (CAA) revises the Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS) program allocation formulas, phasing out the base guarantee and incorporating institutional accountability for enrolling Pell Grant-eligible students into the eligibility requirements to participate in those programs. It also creates a new Emergency Financial Aid Grant program, and resurrects the expired Perkins Loan program as the Federal Direct Perkins Loan Program. 

Federal Supplemental Educational Opportunity Program 

The bill authorizes $1.15 billion for the FSEOG program for 2021, an amount that increases annually through 2025 to $1.75 billion. The current FSEOG authorization is for “such sums as may be necessary.”

The base guarantee portion of the allocation formula would be phased out over five years (NASFAA’s Campus Based Aid Allocation Formula Task Force recommended a 10-year phase-out) under the CAA, after which each institution’s allocation would be determined exclusively through a new fair share formula. That formula is based on two equally-weighted measures: the institution’s ratio of total Pell Grant funds awarded at all FSEOG-participating institutions, and the institution’s ratio of total undergraduate need at all FSEOG-participating institutions. The CAA calculation of undergraduate need is changed to the lesser of the sum of average cost of attendance minus each student’s expected family contribution (EFC), or the total annual federal loan limit. There is no change to the FSEOG non-federal match requirements. 

Under the new allocation formula, institutions would not receive an allocation if their Pell Grant recipients represented less than 7% of their enrolled undergraduate students for two years out of any three-year period.

The Emergency Financial Aid Grant program (Emergency Grant), with $12.5 million authorized for 2021 and for each of the following five years, is created under the FSEOG program. Institutional participation would be by application, with priority given to institutions with at least 30% of enrolled students eligible for Pell Grants. Institutions would be required to provide assurances to the Department of Education (ED), as a condition of participation in the Emergency Grant program, that they would make means-tested benefits eligibility information available to students. A 50% non-federal match would be required of institutions, with the exception of Historically Black Colleges and Universities (HBCUs) and Hispanic Serving Institutions (HSIs), which would qualify for a 100% federal contribution. 

Individual Emergency Grants could be made for up to $750, with a $2,000 aggregate cap. Application receipt acknowledgment and distribution of Emergency Grant funds would need to take place in a timely manner, as determined by ED. The application process would require, to the extent practicable, an in-person interview, and provide at least one opportunity for the student to appeal.

Federal Work-Study Program 

The bill authorizes $1.5 billion for FWS for 2021, increasing each successive year to $2.5 billion in 2025. The current authorization is for “such sums as may be necessary.” It includes authorization for a set-aside from appropriated funds for the lesser of $150 million, or 20% of appropriated funds in excess of $700 million, for improved institutions. Improved institutions are defined as those:

  • Whose percentage of Pell Grant recipients graduating within 150% of program length falls within the top 75% of institutions;

  • Whose percentage of Pell Grant recipients is within the top 50% of institutions; and

  • Whose annual increase in percentage of Pell Grant recipients graduating within 150% of program length is within the top 50% of all institutions

Improved institution funds would be automatically allocated to institutions in an amount equal to the greater of the institution’s ratio of total Pell Grant funds awarded at all improved institutions, or $5,000. Awarding priority for these funds would have to be given to students who demonstrate exceptional need and who are employed in work-based learning positions. Work-based learning is defined in the bill as “sustained interactions with industry, community or academic professionals in real workplace settings,” and could include on-campus positions, internships, research assistantships, teacher residencies, fellowships, and certain apprenticeships.

The FWS allocation formula also changes under the bill, phasing out the base guarantee over five years, and then allocating FWS funds using only the new fair share formula. The new fair share formula, like the proposed FSEOG formula, would equally weigh the institution’s share of total Pell Grant recipients and its share of total undergraduate need, but would also give consideration for graduate need, given that FWS is available to both undergraduate and graduate students. The non-federal match requirements remain the same, except that HBCUs and MSIs would no longer have a matching funds requirement.

Also like the FSEOG formula, no allocation would be made to institutions enrolling fewer than 7% of Pell Grant recipients among undergraduates for two of three years. The FWS allocation formula adds another provision that graduate-only institutions would not receive allocations if they enrolled fewer than 5% of students with EFCs of zero.

Other changes to FWS reflect a committee priority to strengthen the link between work-study jobs and a student’s educational and career goals. The requirement for institutions to spend 7% of their FWS funds on community service positions has been replaced by a requirement to spend the same percentage on work-based learning positions instead. Like the existing community service requirement, waivers would be permitted. FWS employment priority under the CAA would have to be given to homeless students.

An additional 3% of FWS funds awarded to the institution through the improved institutions set-aside would need to be spent on exceptionally needy students employed in work-based learning during a period of qualified non-enrollment, which is defined as a period of no more than six months, and which falls between a completed period of enrollment and an anticipated period of enrollment. Up to $2,500 of earnings from these periods could be excluded from Estimated Financial Aid (EFA). This 3% spending requirement could be waived.

New flexibility is introduced in the bill that would allow students to continue earning FWS funds awarded in a prior award period, provided those earnings are accounted for in the need analysis. 

Institutions receiving waivers to use more than 25% of their FWS funds for private sector employment would be subject to a 50% cap on that spending under a new provision in the bill. 

Job location and development (JLD) funding is increased from the lesser of 10% or $75,000, to the lesser of 20% or $150,000 of the institution’s allocation, and a requirement is added that priority for jobs created using JLD funds be given to students with exceptional need.

The CAA also creates a work-based learning opportunities pilot program under FWS, reserving $30 million of appropriated funds to make awards of up to $1 million to institutions for jobs in high-demand fields for students with exceptional need. The positions created would need to provide a minimum of 12 weeks of employment, at 15 hours per week during enrolled periods, or 30 hours per week for non-enrolled periods, with less than 25% of job duties devoted to administrative tasks. The pilot would also allow for career coaching and opportunities for students to meet with employers in related fields.

The bill requires ED to create online, consumer-tested surveys for students, institutions, and employers participating in the FWS program. The surveys would include questions on the overall experience with the FWS program, provide an opportunity to register complaints, and would gather data such as award amounts, hours worked, FWS job duties, and other data useful to measuring the impact of the program. The Comptroller General would be required to conduct a study on best practices for assisting students participating in the FWS program, such as connecting with employers, finding jobs, and balancing work with academic demands. 

In addition, any institution that receives FWS funds would be required to send a notification, by email or other means, to any student who may be eligible to participate in the Supplemental Nutrition Assistance Program (SNAP). The institution’s notice must provide the student with how to obtain more information about the program and how to access benefits under SNAP. 

New Federal Direct Perkins Loan Program

The bill authorizes $2.4 billion annually from funds authorized under the Direct Loan program for the new Federal Direct Perkins Loan program, to be allocated to participating institutions. The Direct Perkins Loan Program would have the same terms and conditions as the Federal Direct Unsubsidized Loan, but annual and aggregate loan limits would match the limits set under the expired Perkins Loan program, and interest would be set at a fixed 5% rate. 

Both undergraduate and graduate students would be eligible for the Direct Perkins loan in accordance with their institutional packaging policies. While students would not be required to demonstrate need to qualify for Direct Perkins loans, institutions would be required to prioritize awarding to exceptionally needy students.

Institutions would no longer be required to make the pre-disbursement and pre-repayment student disclosures that had been required under the previous Perkins loan program. 

The Direct Perkins loan fair share allocation formula would be the same as the FWS formula, with the exception that institutional allocations could not be less than the average of the institution’s total principal amount of Perkins loans made for each of the years 2012-13 through 2016-17.

Changes are also made to loans made under the expired Perkins loan program. The Administrative Cost Allowance formula is replaced with a payment to institutions servicing loans made prior to 2021, equal to 0.5% of the outstanding principal and interest balance. ED would be required to reimburse institutions for the amount of canceled loans, less the federal share, for loans made prior to 2021. Finally, the formula for the distribution of assets from the Perkins loan fund is revised to take into account the institution’s administrative costs and outstanding loan cancellation costs.


Publication Date: 10/24/2019

David S | 10/24/2019 1:28:18 PM

I understand the motivation to tie funding to things like the % of Pell Grant recipients a school enrolls. But that thinking assumes that colleges pick their students; the reality is that students pick us. For starters, your applicant pool is what it is; the significant majority of students in this country apply to and enroll in schools close to home. Admissions staff has no idea who among the applicants is eligible for Pell Grants, especially at schools with need-blind admission policies. Some (not all, but some) students who start off Pell-eligible might be ineligible the following year because of just a slight change in their EFC (or whatever standard this legislation uses to determine Pell eligibility).

If the magic number is 7% of your students who need to be Pell recipients in order to receive campus-based funding (or whatever else people propose be tied to this number), a school with 5% or 6% or 6.9% is very likely doing nothing wrong. Taking away campus-based funding from them will hurt those 5% or 6% or 6.9% more than it hurts anyone else.

Nichole Davis M | 10/24/2019 9:40:41 AM

So would the new Perkins loan be UN-Subsidized?

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