Reconciliation Deep Dive: House Committee Proposes New Institutional Accountability Agreement and Regulatory Relief
By Sarah Austin, Policy Analyst
Last week, the House Committee on Education & Workforce released and advanced its portion of a reconciliation bill, which proposes massive changes to federal student aid programs and Department of Education (ED) initiatives. This article, the third in a three-part series analyzing the bill, outlines the proposed risk-sharing agreement for institutional accountability and the elimination of multiple higher education regulations.
Part 1 of this series focused on changes to the Pell Grant program, campus-based aid, need analysis, and student eligibility. Part 2 examined aspects of the bill related to the federal loan system, repayment programs, Public Service Loan Forgiveness (PSLF), and loan servicing. For background and a full recap of the reconciliation process, see NASFAA’s earlier coverage.
Institutional Accountability
The proposal creates an institutional risk-sharing model for schools participating in the federal Direct Loan program. Beginning in 2028-29, schools would be required to remit annual payments to ED for a share of the unpaid balance of Direct Loans disbursed on or after July 1, 2027.
The model is almost identical to the risk-sharing agreement included in the 2024 College Cost Reduction Act (CCRA). One notable difference between the proposed reconciliation bill text and the CCRA is the terminology used for the annual payments. The CCRA used the term “annual risk-sharing payments,” whereas this proposal uses the term “annual reimbursements.”
See NASFAA’s previous coverage of the CCRA including a deep dive into the risk-sharing agreement details.
Among the similarities of the CCRA, there would be three student cohorts established: completing students, undergraduate non-completing students, and graduate non-completing students. For each cohort of students, the annual payment reimbursement amount for the cohort would be the reimbursement percentage for the cohort, multiplied by the non-repayment balance for the cohort for the award year (payments due for the year less payments made; plus waived, forgiven, and canceled interest and/or principal). Exceptions are made for students in certain types of deferment or forbearance and for PSLF that would exclude such loans that qualify for these exceptions from being included in the non-repayment balance.
The reimbursement percentage amount would vary based on the type of cohort. For completers, the risk-sharing percentage would be calculated based on median value-added earnings after graduation – this would be a measure of return on investment and defined as annual earnings exceeding 150% or 300% of the federal poverty guidelines for undergraduate and graduate programs, respectively – divided by median total price charged to students in the cohort exclusive of federal aid. The value-added earnings includes a geographical adjustment to account for variance in living costs in different parts of the country. For non-completing student cohorts, the reimbursement percentage would be based on the completion rate of students who received Title IV aid in that program.
Also like the CCRA, starting with the 2028-29 award year, the department would be required to notify the institution of the amounts and due dates of the reimbursement payments for each student cohort within 30 days of calculating the amounts. Schools would then be required to make the necessary payments within 90 days of the notification. If not paid within 90 days, the institution will be charged interest on the payments. If the payments (including any interest accrued) are not paid within 12 months of the notification, the institution loses eligibility to disburse Direct Loans to students enrolled in the program of study for which the institution has failed to make the annual reimbursement. If payments are still not made 18 months after the notification, the institution loses the ability to award Direct Loans or Pell Grants to all students enrolled at the institution, not just that program of study. Finally, if payments are not made within two years of the notification, the institution becomes ineligible to participate in the Title IV aid programs for at least 10 years.
The bill provides an option for schools to request the risk-sharing payment amount be reduced by 50% if the institution voluntarily ceases disbursing Direct Loans for that program (and any similar program, as determined by ED) for 10 years.
Funds from the reimbursement payments made to the department would be used to fund a new campus-based aid grant program, the Promoting Real Opportunities to Maximize Investments and Savings in Education, or PROMISE Grant. Detailed coverage of the bill’s proposed PROMISE grant program was included in the first article in this series.
Regulatory Relief
The proposal eliminates the 90/10 rule entirely from the statute, and repeals the 2022 closed school discharge and borrower defense to repayment rules promulgated under the Biden administration. Both rules will revert to the regulations that were effective before the 2022 rules.
Additionally, the proposal removes the phrase “gainful employment” from several definitions throughout the Higher Education Act (HEA), notably in the definitions of “eligible program,” “proprietary institution,” “postsecondary vocational institution,” and the general definition of “institution of higher education.” This presumably paves the way for ED to rescind the gainful employment (GE) regulations since these statutory references have historically been the basis for ED’s legal authority to regulate on GE. It would also prevent future administrations from creating a gainful employment framework or regulations. The proposal does not address the financial value transparency (FVT) regulations.
Lastly, the proposal prohibits ED from issuing any rule, regulation, policy, or executive action regarding the regulations in the regulatory relief section of the bill unless Congress passes a law explicitly giving ED the authority to do so. This includes a prohibition on implementing a “substantially similar rule, regulation, policy, or executive action.”
Stay tuned to Today’s News for the latest on the budget reconciliation process.
Publication Date: 5/7/2025
Peter G | 5/9/2025 11:51:47 AM
90 day notice, for what could be 7 figure sums at some institutions, is going to be a real pinch.
And this isn't like Perkins, where you could look at your cash on hand and collections through the year and model out what a federal share of cash on hand is likely to be - unless they release some modeling/projections, the first one is likely to be an unpleasant surprise.
James C | 5/7/2025 8:27:14 AM
If Congress wants risk sharing why not have the schools pay the loan fees so the students get their full loan amounts? Then when students pay back their loans, schools get the money back with interest. If the school's borrowers re-pay at a lower than average rate, that is your risk. If loans are forgiven the school get back the interest. Title III schools could be exempt.
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