By Jill Desjean, Director of Policy Analysis

Last week, the House Committee on Education & Workforce released and advanced its portion of a reconciliation bill, which proposes several extensive changes to Department of Education (ED) programs and initiatives. This article – the first in a three-part series of deep dives examining the specifics of the proposal – focuses on changes to the Pell Grant program, and introduces a new campus-based Promise Grant program.

For background and a full recap of the reconciliation process, see NASFAA’s earlier coverage. 

Student Eligibility

The proposal changes the citizenship categories that qualify a student to receive Title IV student aid. Current statute includes U.S. citizens or nationals, and individuals who are able to provide evidence from the Immigration and Naturalization Service (INS) that they are in the U.S. for reasons other than a temporary purpose, with the intention of becoming a citizen or permanent resident.

ED currently interprets this statutory language to include, in addition to citizens and permanent residents, individuals with an Arrival Departure Record (I-94) showing any of these statuses: 

• Refugee

• Asylum Granted

• Conditional Permanent Resident

• Cuban-Haitian Entrant

• Conditional Entrant (only if issued before April 1, 1980)

• Parolee (paroled for at least one year, and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose with the intention of becoming a U.S. citizen or permanent resident)

• Modified parole requirements for

• • Ukrainian citizens and nationals paroled into the United States between Feb. 24, 2022, and Sept. 30, 2024

  • Afghan citizens and nationals paroled into the United States between July 31, 2021, and Sept. 30, 2023

• T-visa holders for victims of human trafficking or children of parents with a T-1 nonimmigrant status

• Battered immigrant-qualified aliens or children of a person designated as such under the Violence Against Women Act

• Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau

The new proposed definition codifies as eligible non-citizens only: Cuban-Haitian Entrants, Ukrainian and Afghan parolees, and citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau. The remaining categories listed above (refugees; asylees; parolees; conditional entrants; human trafficking victims & their children, and battered immigrants and their children) are not explicitly included in the text. While it is unclear what authority ED would have to further define who falls under the new eligibility classifications, the committee’s stated intent was to “streamline” the categories of non-citizens who qualify for Title IV aid.

Need Analysis

A major change to the calculation of a student’s need is introduced in the legislation, redefining need as the median cost of college (MCOC) minus the Student Aid Index (SAI) minus other financial aid, beginning with the 2026-27 aid year. The MCOC would be the national median of all programs with the same 6-digit Classification of Instructional Programs (CIP) code at the same credential level, meaning need would be capped at a figure lower than the institution’s actual cost of attendance (COA) for half of all institutions.

It is NASFAA’s understanding that the committee intended to cap only federal need-based aid at the MCOC. However, we believe it could unintentionally limit institutions’ ability to award their own need-based institutional funds up to COA for students with federal need-based aid. We also have serious concerns about the ability of ED to calculate the MCOC for thousands of programs, and for financial aid management systems and institutions to incorporate the MCOC into their systems.

The bill resurrects the asset reporting exemption for family farms and small businesses, both of which were eliminated in the FAFSA Simplification Act. The foreign income exclusion would be moved from treatment as untaxed income to treatment as part of the Adjusted Gross Income, which would prevent families that used the foreign income exclusion from receiving the automatic maximum or minimum Pell Grant based on artificially low incomes. The legislation also addresses the issue of so-called “Pellionaires”— families with low incomes but significant assets who qualify for the automatic minimum Pell Grant despite a high SAI from the asset contribution. Moving forward, beginning in July 2025, in such cases the bill would prevent students from receiving Pell Grants if their SAI exceeds twice the maximum Pell Grant award.

Pell Grants

Also effective July 1, 2025, students would have to be enrolled in at least 30 credit hours per academic year, up from the current 24 credits, to receive a Pell Grant for full-time study. Students enrolled less than half-time would no longer qualify for Pell Grants under the proposal.

If the legislation were enacted, Pell Grant eligibility would be expanded for students enrolled in short-term programs, effective for the 2026-27 aid year.

Two provisions in the proposal address need analysis issues that caused some students to receive Pell Grants despite having a Student Aid Index (SAI) outside of Pell Grant eligibility range. The first fix relates to the foreign income exclusion, which is currently an untaxed income item but would be considered part of Adjusted Gross Income (AGI) beginning on July 1, 2025. Adding the foreign income exclusion amount to AGI would prevent students from receiving the automatic maximum Pell Grant amount due to an artificially low AGI. It would also presumably prevent institutions from having to determine whether it is appropriate to use professional judgment (PJ) to increase the AGI by the amount of the exempted foreign income to determine the student’s eligibility for the automatic maximum Pell Grant.

The second fix addresses the issue of “Pellionaires,” or families who qualify for the automatic minimum Pell Grant due to relatively low AGI despite significant assets resulting in a high SAI. The legislation includes a provision to prevent students from receiving a Pell Grant if their SAI equals or exceeds twice the maximum Pell Grant amount for the academic year. Both fixes would be effective July 1, 2025.

A new Workforce Pell Grant would be available beginning in the 2026-27 aid year to students enrolled in short-term programs of between 150 and 600 clock hours offered for a period of between 8 and 15 weeks. For a program to offer Workforce Pell Grants, it would have to be determined by the state in which it is located to provide an education aligned with the requirements of high-skill, high-wage, or in-demand industry sectors or occupations. Such programs would have to offer stackable credentials that would apply toward further study. Eligible students could not be enrolled in a short-term program that leads to a graduate credential or have already attained a graduate credential.

Finally, the bill addresses the predicted Pell Grant budget shortfall with additional appropriations beginning in fiscal year 2026, when the shortfall is expected.

Campus-Based Aid

The bill introduces a new campus-based program, the Promoting Real Opportunities to Maximize Investments and Savings in Education, or PROMISE Grant, which would be available beginning with the 2028-29 award year and funded through institutional risk-sharing for unpaid portions of student loans. Detailed coverage of the bill’s risk-sharing provisions will be included in the third article in this series, to be published later this week.

PROMISE Grants would be awarded to institutions on a non-competitive basis upon successful completion of an application to participate in the program, and could be used for a variety of purposes related to ​​​​postsecondary affordability, access, and success. Institutions applying to receive the performance-based PROMISE grants would have to meet a maximum total price guarantee requirement and demonstrate they will continue to meet that requirement for students first enrolling at the school within a six-year grant period. Additionally, institutions would need to show how they plan to use the PROMISE grant funds to promote affordability, postsecondary access, and student success.

This program was initially introduced as part of the College Cost Reduction Act (CCRA), and more details can be found in NASFAA’s earlier coverage of that legislation. One significant change from the CCRA is that the reconciliation bill is funded solely by the aforementioned risk-sharing payments and funds returned to ED as a result of the Return of Title IV Funds calculation and, if those funds prove insufficient, requires ED to reduce institutional PROMISE Grants proportional to the amount of the overall shortfall.

Stay tuned to Today’s News for more deep dives into other provisions of the legislation and for the latest on the budget reconciliation process.

Publication Date: 5/5/2025

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