By Jill Desjean, Director of Policy Analysis

The Department of Education (ED), on Tuesday, released its final rule covering the Pell Grant changes made in the One Big Beautiful Bill Act (OBBBA), which ED noted it will now refer to as the Working Families Tax Cuts Act (WFTCA).

Pell Grant eligibility for students enrolled in eligible workforce programs (known as Workforce Pell, or WFP) is effective July 20, 2026, per the final rule, with an option for early implementation beginning July 1, 2026.

Pell Grant ineligibility for students with non-federal grants or scholarships equal to or in excess of their cost of attendance (COA) is effective May 19, 2026. NASFAA has reached out to ED officials for clarification, as the law indicates this provision begins on July 1, 2026, and ED previously referred to an effective date of July 1, 2026, for the 2026-27 award year. NASFAA has also sought clarification on the interaction between the effective date and the award year, since the 2026-27 award year has already begun at some institutions, and it is not clear at what point schools must make adjustments for students whose non-federal grants and scholarships equal or exceed their COA.

Pell Grant Ineligibility for Receipt of Non-Federal Grants and Scholarships Equal to or Exceeding COA

ED made no changes from the proposed rule to the regulatory text governing the provisions that make students ineligible for a Pell Grant when they receive non-federal grants and scholarships that equal or exceed the COA.

ED clarified several issues that arose during the public comment period, including many shared by NASFAA members. On whether Pell Grants are still considered “first-dollar” aid, ED confirmed that this new eligibility restriction does not change how Pell Grant eligibility is determined. “Aid administrators will package students normally, Pell Grant first and then other aid, and as soon as it is clear that the non-Federal grants and scholarships will equal or exceed the COA, the Pell Grant is removed, or the other aid is adjusted…”

They also noted that “last-dollar” grant and scholarship programs, “...will continue to be packaged as they have been; the difference is that now once all non-Federal grant and scholarship aid equals or exceeds the COA, the student becomes ineligible for a Pell grant.”

In response to a question from NASFAA about what constitutes non-federal grants and scholarships, especially in cases where funding is provided by the federal government but administered by states, ED confirmed that, “[t]o the extent that any funds are directly traceable to the U.S. Government, those would also be Federal dollars that do not count toward the relevant total” for purposes of Pell Grant ineligibility for receipt of non-federal grants and scholarships equal to or in excess of the COA. One such example includes funding from the Workforce Innovation and Opportunity Act (WIOA), which can be used for postsecondary education expenses. ED confirmed that these funds would be considered federal funding for purposes of this provision.

NASFAA has confirmed separately with ED that students whose schools returned their Pell Grants due to receipt of non-federal grants or scholarships that equal or exceed the COA will have their lifetime eligibility used (LEU) restored for the portion of the returned Pell Grant funds. 

ED had asked during the public comment period for suggestions on how ED could prevent manipulation or “gaming” of this provision in light of the fact that institutions have the ability to adjust institutional aid or the COA by a very small amount to protect a student’s Pell Grant eligibility. While ED made no changes to the final rule, they indicated plans to establish an oversight process to identify instances of abuse of this provision.

NASFAA has reached out to ED officials for more information on its oversight plan, as ED has not yet provided any guidance on which practices it would consider noncompliant with this new provision.

Workforce Pell Grants (WFP)

ED provided several clarifications to the regulatory text in places where commenters posed questions or expressed confusion, and also made several changes to the final WFP regulations from those it initially proposed in its rule.

ED confirmed in the final rule that WFP participation is voluntary and that institutions can voluntarily withdraw from offering WFP programs at any point, and not just after failing any of the eligibility requirements. They also confirmed that WFP will use Pell Grant Formula 3 for term-based programs and Formula 4 for non-term-based and clock hour programs.

Regarding WFP eligibility requirements, ED clarified that an individual who was self-employed would be counted as having been placed in a job and would count toward the 70 percent job placement requirement. They also confirmed that an individual who worked continuously in the same job pre- and post-enrollment in a WFP program would be counted as a job placement.

ED also clarified that, in cases where an institution is required to return Pell funds because they were disbursed after the school failed the value-added earnings (VAE) metric, students’ LEU would be restored for the returned funds.

ED agreed with commenters who argued that programs that qualify as a related instruction component of a Registered Apprenticeship program should be eligible to offer between 25-50% of instruction via an ineligible institution or organization under a written arrangement between the two parties. All other programs offering WFP would continue to be subject to a 25% cap, as initially proposed. ED said it was persuaded by commenters who made “a strong case that certain arrangements and partnerships can greatly improve the likelihood that eligible workforce programs will lead to high-wage, high-skill, or in-demand jobs.”

ED was also persuaded to amend the regulations by commenters who argued against including currently enrolled students’ earnings in a WFP program’s value-added earnings (VAE) calculation. ED will still include currently enrolled students in the job placement rate since they believe that metric is easier for institutions to manipulate by encouraging students to enroll directly from WFP programs to another postsecondary education program, but will exclude them from the VAE calculation.

ED amended the regulations to clarify that schools cannot include noncredit, remedial, or reduced-credit remedial coursework in the student’s enrollment intensity for WFP purposes. The proposed regulations inadvertently implied that the remedial coursework restriction applied only to programs offered in credit hours; this change clarifies that the restriction applies to both credit and clock-hour programs.

ED asked for feedback on whether it should calculate an interim VAE, given that this calculation will not be available during the initial implementation years. Commenters were largely opposed to the interim VAE due to a lack of feasibility and concerns that it would not provide an appropriate measure of program outcomes. ED agreed with those commenters and will not introduce the interim VAE. ED did note, however, that states and other non-federal entities are not prohibited from creating their own interim metrics, and ED encouraged states to do so. Finally, ED is committed to publishing VAE calculations, including median earnings of WFP program completers, as soon as the data become available.

ED did not provide clarification to NASFAA’s questions about applying the Satisfactory Academic Progress (SAP) rules to WFP programs in light of the fact that the SAP rules were not created for such short programs and could be difficult to align with WFP programs. ED did, however, commit to ongoing collaboration with stakeholders and to additional guidance and resources.

ED declined to accept a recommendation from NASFAA to exclude from the WFP completion and job placement rate calculations for students who enrolled in WFP programs as part of Prison Education Programs (PEPs) and who experience involuntary transfer or whose release date is delayed. ED also did not accept a recommendation to measure WFP program earnings at a later time horizon for PEPs than for non-PEPs, given the unique employment challenges this population faces.

Now that final rules have been published, ED can publish official sub-regulatory guidance on these Pell Grant provisions of the WFTCA. However, final rules for the loan-related provisions of the law were published on May 1, and guidance on those rules has not yet been issued, so it could be several weeks before Pell Grant-related guidance is issued.

As a reminder, ED split WFTCA changes into three rule packages: student loans, Pell Grants, and accountability. NASFAA has shared a draft of its comments on the accountability provisions, which are due May 20. NASFAA will continue to update resources as new information becomes available. Read Today’s News for the latest updates.

Publication Date: 5/20/2026

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