Reconciliation Recommendations of the House Committee on Education and Workforce

Legislation Summary

H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025, instructed the House Committee on Education and Workforce to recommend legislative changes that would decrease deficits by not less than a specified amount over the 2025-2034 period. As part of the reconciliation process, the House Committee on Education and Workforce approved legislation on April 29, 2025, with provisions that would decrease deficits over that period.

The reconciliation recommendations of the House Committee on Education and Workforce would amend the federal student aid programs authorized by the Higher Education Act of 1965. Specifically, the legislation would modify the federal student loan program by changing repayment terms, loan limits, and requirements for institutional eligibility and alter eligibility for the Federal Pell Grant Program. The legislation also would limit the administrative authority of the Department of Education, repeal certain regulations, and create a new institutional grant program funded through payments from postsecondary institutions.

Estimated Federal Cost

The reconciliation recommendations of the House Committee on Education and Workforce would decrease deficits by $349.1 billion over the 2025-2034 period, CBO estimates. The estimated budgetary effect of the legislation is shown in Table 1. The costs of the legislation fall within budget functions 500 (education, training, employment, and social services) and 700 (veterans benefits and services).

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Basis of Estimate

For this estimate, CBO assumes that the legislation will be enacted in summer 2025. CBO’s estimates are relative to its January 2025 baseline and cover the period from 2025 through 2034.

Budgetary Treatment of Federal Student Loans and Pell Grants

CBO estimates that enacting the legislation would affect spending both for the federal student loan program and for the Federal Pell Grant Program. Those programs are treated differently in the federal budget than most other federal programs.

Federal Direct Student Loan Program. As required by the Federal Credit Reform Act of 1990 (FCRA), the costs of the federal student loan program are estimated on a net-present-value basis. A present value is a single number that expresses a flow of current and future payments or receipts in terms of an equivalent lump sum paid or received at a specific time. The value depends on the rates of interest, known as the discount rates, used to translate future cash flows into current dollars. FCRA specifies those discount rates as the rates on Treasury securities with similar terms to maturity. As required by FCRA, changes to the estimated costs of outstanding student loans are shown in the year of the enactment of legislation that modifies their terms. The administrative costs of the student loan program are estimated on a cash basis.

Federal Pell Grant Program. Pell grants provide need-based aid to undergraduate students; they are funded both through discretionary appropriations and through direct spending. For the 2024‑2025 academic year, which began on July 1, 2024, the maximum award funded by discretionary appropriations that a student can receive is $6,335. The discretionary maximum award amount, and the amount of discretionary funding, are set in the annual appropriation act. CBO’s estimate of the program’s cost is based on an assumption that the maximum award will stay the same through 2034.

The program also has direct spending authority to support a “mandatory add-on,” which increases the award amount by $1,060 above the discretionary maximum. As a result, for the 2024-2025 academic year, the total maximum award is $7,395.

The bulk of the Pell Grant Program is subject to the appropriation of federal funds. Although CBO anticipates that implementing the legislation would reduce spending subject to appropriation for the discretionary portion of the program, we have not reviewed the legislation for effects on spending subject to appropriation. Only changes to the cost of the mandatory add-on are included in the estimate.

Direct Spending

CBO estimates that enacting the legislation would decrease direct spending outlays, on net, by $349.1 billion over the 2025-2034 period (see Table 2).

Subtitle A. Student Eligibility

Subtitle A would amend eligibility for federal student aid based on immigration status and adjust the formula for determining the amount of federal aid for which students and their parents would be eligible.

CBO estimates that enacting subtitle A would decrease direct spending outlays by $518 million over the 2025-2034 period.

Changes to Aid Eligibility for Certain Immigrants. The legislation would prevent certain aliens (non-U.S. nationals) from receiving federal student aid, including asylees, refugees, Haitian entrants, certain Cuban parolees, T nonimmigrants (trafficking victims), and certain aliens who are victims of domestic violence.

Overall, CBO expects that enacting this provision would reduce the number of students receiving federal student aid by less than 1,000 each year. Most of the reduction in eligibility would come from Haitian entrants (roughly 70 percent). On that basis, CBO estimates that enacting this provision would reduce direct spending outlays by $15 million over the 2025‑2034 period: $7 million from reductions in the cost of federal student loans and $8 million from reductions in the mandatory add-on for Pell grants.

Amending Eligibility for Federal Aid. The legislation would cap the total amount of federal aid a student can receive annually at the median cost of college, defined as the median cost of attendance for students enrolled in similar programs. Because loan limits under current law for subsidized and unsubsidized loans are lower, on average, than the median cost of college for most programs, CBO expects that enacting this provision would mostly affect eligibility for parent PLUS and grad PLUS loans. Under current law, students and parents in those programs may borrow up to their institution’s cost of attendance. Using data from the National Postsecondary Student Aid Study (NPSAS) and the National Student Loan Data System (NSLDS), CBO expects enacting this section would reduce annual grad PLUS borrowing by 8 percent and parent PLUS borrowing by 13 percent, primarily for borrowers with the highest cost of attendance.

In CBO’s estimation, borrowers in the parent PLUS program pay more in principal and interest than they borrow (on a net-present-value basis). On that basis, CBO expects that reducing parent PLUS volume would increase costs to the government. Conversely, CBO estimates that borrowers of other student loans (including grad PLUS loans), on average, repay the government less than they borrowed (on a net-present-value basis). Thus, reducing lending in those programs decreases costs to the government. CBO expects that enacting the provision would reduce net outlays for student loans by $520 million over the 2025-2034 period.

The legislation also would exclude farm and small business assets from the Student Aid Index (SAI) calculation for Pell grants, generally increasing award levels for students with those assets. Data from a sample of Pell grant recipients indicates that only a small number of recipients or their families own farms or small businesses. CBO estimates that enacting the provision would increase direct spending outlays for Pell grants by $17 million over the 2025-2034 period.

Subtitle B. Loan Limits

Beginning July 1, 2026, subtitle B would convert subsidized loans into unsubsidized loans and eliminate the grad PLUS loan program, restrict lending under the parent PLUS program, and amend all annual and aggregate loan limits.

CBO estimates that enacting the provisions in subtitle B would reduce direct spending outlays by $51.2 billion over the 2025-2034 period. Those savings are estimated on a net-present-value basis and shown in the years in which the loans are originated.

Eliminate Subsidized Loans and Increase Unsubsidized Loans.The legislation would eliminate subsidized loans and expand borrowing in the unsubsidized loan program for new borrowers starting in academic year 2026-2027, and for all borrowers starting in the 2029‑2030 academic year.

Under current law, subsidized loans do not accrue interest while the borrower is enrolled in school or in the six months before entering repayment, during the first three years of enrollment in certain income-driven repayment (IDR) plans, and during certain deferment periods. CBO projects that under current law students will borrow roughly $20 billion annually in subsidized loans over the 2026-2034 period. Converting those loans to unsubsidized loans would reduce the cost to the federal government by increasing the interest that borrowers pay on their loans. CBO expects that most students who currently borrow in the subsidized loan program would continue to borrow the same amount in the unsubsidized program. Enacting this provision would reduce outlays by $20.2 billion over the 2025-2034 period, CBO estimates.

Eliminate Grad PLUS Loans and Amend Limits for Unsubsidized Graduate Loans. The legislation would eliminate grad PLUS loans for new graduate borrowers starting in academic year 2026-2027, and for all borrowers starting in the 2029-2030 academic year.

The legislation also would amend annual and aggregate loan limits for graduate students in the unsubsidized graduate loan program. Specifically, the legislation would allow graduate students to take out unsubsidized loans up to the median annual cost of their program, with an aggregate maximum of $100,000, or $150,000 if the borrower is enrolled in a graduate professional program. Under current law, graduate students may borrow up to $20,500 each year in unsubsidized loans (with a total aggregate cap for most borrowers of $138,500), and they can borrow up to the cost of attendance in grad PLUS loans, which do not have an aggregate cap.

Under current law, CBO estimates that borrowers will take out roughly $19 billion in grad PLUS loans annually over the 2026-2034 period. Based on an analysis of current borrowing patterns in NPSAS and NSLDS, CBO expects that students who would have borrowed in the grad PLUS program under current law would instead borrow in the graduate unsubsidized program, up to the new limits.

CBO expects that enacting both provisions would increase unsubsidized graduate borrowing by 25 percent. On that basis, CBO estimates that eliminating grad PLUS loans and amending unsubsidized loan limits for graduate borrowers would reduce outlays by $34.7 billion over the 2025‑2034 period.

Restrict Parent PLUS Borrowing and Amend Undergraduate Loan Limits. Beginning on July 1, 2026, the legislation would cap parent PLUS loans at the student’s cost of attendance, by program, minus the maximum in unsubsidized loans the student may borrow in a given year. Students would be required to take out that maximum amount before their parent could borrow under the parent PLUS program. The legislation would set an aggregate cap of $50,000 for parent PLUS loans. There is no aggregate cap on parent PLUS borrowing under current law.

Additionally, beginning on July 1, 2026, the legislation would allow undergraduate students regardless of dependency status, to take out unsubsidized loans up to the median cost of college for their program of study in a given year, minus any amount awarded in a Pell grant for that year. The aggregate borrowing limit for all undergraduate borrowers would be $50,000.

Under current law, dependent and independent undergraduate students are subject to different annual and aggregate loan limits based on their class level in school and dependency type. On average, the median cost of college exceeds the current annual loan limits for dependent and independent students. Those current aggregate limits are $31,000 for dependent students and $57,500 for independent students.

Under current law, CBO estimates that parent PLUS borrowers will take out an average of roughly $13 billion in loans annually over the 2026-2034 period. Under the loan limits specified in the legislation, CBO estimates that parent PLUS borrowing would total roughly $4 billion annually, on average, over the same period.

The legislation also would permit institutions to cap annual loan amounts according to a student’s program of study, as long as that limit is applied consistently to all students enrolled in a given program. Using information from financial aid associations and other sources, along with data from NPSAS, CBO expects that, under the new loan limits, this provision would limit some of the otherwise expected increase in lending.

Finally, the legislation would treat pilot-training programs as professional programs, allowing those undergraduate students to borrow up to $150,000. (Currently those students can borrow up to the amount set for their undergraduate aggregate cap, based on dependency).

CBO estimates that the increases in limits on undergraduate unsubsidized loans, in combination with the restrictions on parent PLUS loans and other provisions, would increase undergraduate borrowing in the unsubsidized program by roughly 15 percent.

In CBO’s estimation, borrowers in the parent PLUS program pay more in principal and interest than they borrow (on a net-present-value basis). Thus, CBO expects that reducing parent PLUS volume would increase costs to the government. Conversely, CBO estimates that borrowers of undergraduate loans, on average, repay the government less than they borrowed (on a net-present-value basis). Thus, increasing lending of undergraduate loans increases costs to the government. CBO estimates that enacting those provisions together would increase outlays for student loans by $19.1 billion over the 2025-2034 period.

Set Annual Loan Limits by Enrollment Intensity.The legislation would reduce annual loan limits for undergraduate and graduate loans for students who are not enrolled full time in proportion to their hours of enrollment. Under current law, students enrolled at least half time (for example, six credit hours per semester) are eligible for the full annual loan amounts. Using data from NPSAS and NSLDS, CBO expects that this provision would reduce the volume of loans made to students by about 5 percent and reduce outlays by $15.4 billion over the 2025‑2034 period, relative to current law.

Subtitle C. Loan Repayment

The legislation would amend repayment terms for current and new student loan borrowers by limiting income-driven repayment options and extending terms for standard plans based on the amount of debt a borrower holds.

CBO estimates that those changes would reduce direct spending outlays for student loans by $294.6 billion over the 2025-2034 period.

For this analysis, CBO used survey data from NPSAS and administrative data from NSLDS. The agency supplemented that information with other data as inputs to project borrowers’ lifetime earnings and repayment of loans.[1] CBO also consulted with a range of experts on postsecondary student aid and reviewed literature on postsecondary enrollment and borrowing.

Loan Repayment for New Loans.Under the legislation, the Department of Education would offer borrowers two repayment plans for loans originated after June 30, 2026: a standard repayment plan and a new IDR plan. The legislation would eliminate all other plans, including the Saving on a Valuable Education (SAVE) Plan, the IDR plan created administratively in 2023.[2]

Loans entering repayment would automatically be enrolled in a standard repayment plan, with the length of the repayment term determined by the amount borrowed:

• 10 years for borrowers with balances less than $25,000;
• 15 years for borrowers with balances between $25,000 and $50,000;
• 20 years for borrowers with balances between $50,000 and $100,000; and
• 25 years for borrowers with balances greater than $100,000.

Monthly payments would be fixed for the life of the loan. Borrowers with balances greater than $25,000 who fully repay their loans over the longer repayment period would pay more interest, but their monthly payments would be smaller than if they were in a 10-year standard plan.

Borrowers would be able to select a new IDR plan, called the Repayment Assistance Plan, which would:

• Set a minimum monthly payment of $10. All existing IDR plans generally allow for payments of zero for borrowers with low income.
• Set payments to between 1 percent and 10 percent of a borrower’s total adjusted gross income, depending on the borrower’s income, and reduce payments by $50 per month for every dependent child. Under the current SAVE Plan, borrowers pay between 5 percent and 10 percent of their income above 225 percent of the federal poverty guideline, after accounting for family size.
• Waive 100 percent of unpaid, accrued interest when a borrower’s calculated payment does not cover accrued interest; the same is true for the current SAVE Plan.
• Match the monthly amount paid by borrowers up to $50 and apply that match to the outstanding principal balance; the current SAVE Plan has no such match.
• Forgive any remaining balance after 30 years of repayment. The current SAVE Plan forgives balances after 10 to 25 years of repayment, depending on the loan type and amount borrowed.
• Require borrowers to remain on the plan until their balance is paid in full, or 30 years, whichever is sooner. Currently, borrowers can switch into other plans.

Under the legislation, CBO estimates that about 40 percent of the loan volume originated after June 30, 2026, would be repaid through the proposed IDR plan. In contrast, under current law, CBO estimates that roughly 70 percent of loan volume would be repaid under existing IDR plans. Borrowers repaying their loans would pay more, on average, under the IDR plan proposed in the legislation than under current law. For new loans, CBO estimates that implementing the new repayment plans would decrease outlays by $133.6 billion over the 2025-2034 period.

Borrowers in Repayment.Under subtitle C, borrowers who currently are in any IDR plan would be transferred to a newly proposed IDR plan. Under that plan, payments would be set at 15 percent of a borrower’s discretionary income, with no cap on payment amounts, and borrowers would receive forgiveness of any outstanding debt after 20 years in repayment if they have undergraduate loans only and 25 years if they also have graduate loans. Borrowers could also opt into the new Repayment Assistance Plan (described above) or into a standard repayment plan.

As required by FCRA, the savings from changes to the costs of existing loans would be recorded in fiscal year 2025. CBO estimates that changes to repayment terms for borrowers currently in repayment would reduce outlays by $162.0 billion in fiscal year 2025.

Other Changes. Enacting subtitle C also would have other effects:

• For loans disbursed on or after July 1, 2025, the subtitle would eliminate unemployment and economic hardship deferments and reduce the total period a borrower may be in forbearance. CBO expects borrowers who otherwise would have taken those types of deferments would, under the legislation, enroll in the new IDR plan, begin repaying sooner than under current law, or default. On average, CBO estimates that borrowers would pay less on their loans under the legislation than under current law. CBO estimates that enacting this provision would increase outlays by $340 million over the 2025-2034 period.
• Loan repayments by new graduate doctors and dentists during residency would not be counted toward the total number of payments needed to qualify for the Public Service Loan Forgiveness Program. The provision also would allow four years of interest-free forbearance for borrowers in medical or dental internships or residencies on loans disbursed on or after July 1, 2025. CBO estimates that implementing this provision would, on net, decrease outlays by $430 million over the 2025-2034 period.
• Borrowers would be permitted to rehabilitate defaulted loans twice. CBO estimates that implementing this provision would increase outlays by $130 million over the 2025-2034 period.
• The legislation would directly appropriate $500 million in fiscal year 2025 and in fiscal year 2026 for servicing student loans. CBO estimates that implementing this provision would increase outlays by $1.0 billion over the 2025-2034 period.

Subtitle D. Pell Grants

Subtitle D would change eligibility rules for the Federal Pell Grant Program. Although the effective date for most of the subtitle’s provisions is July 1, 2025, CBO expects that date would not provide sufficient time to implement the provisions for the 2025-2026 academic year, which begins on July 1, 2025. We assume for this estimate that those provisions will take effect on July 1, 2026, for the 2026-2027 academic year.

Pell grant eligibility is determined by the Student Aid Index, a formula that accounts for students’ income and assets and, for dependent students, family income and assets. An SAI is calculated for each student and used to determine their award amount; a higher SAI represents lower financial need. Awards are prorated relative to the definition of full-time enrollment for their school’s curriculum type. Students who qualify for an amount below the maximum, or who do not qualify on the basis of their SAI, may still qualify if their adjusted gross income meets thresholds that are based on the federal poverty guideline.

Most of the estimates below are based on analyzing a sample of aid applicants and Pell grant recipients that CBO received from the Department of Education. Additional sources of data are discussed with each estimate.

The costs discussed here are for direct spending outlays only; they involve changes to the mandatory add-on. CBO has not reviewed the legislation for changes in spending subject to appropriation, and estimates of the cost for the discretionary portion of the program are not included.

CBO estimates that enacting subtitle D would increase direct spending outlays by $2.8 billion over the 2025-2034 period.

Foreign Income and Federal Pell Grant Eligibility. Subtitle D would amend the eligibility calculation to include foreign income, most of which is excluded from the calculation under current law. That would reduce the award amounts for some recipients with foreign income. CBO estimates that less than 1 percent of Pell grant recipients earn foreign income. On that basis, CBO estimates that enacting this provision would reduce direct spending outlays by $66 million over the 2025-2034 period.

Change the Definition of Full-Time Enrollment. Subtitle D would increase the number of credits needed to qualify for full-time enrollment from 12 per semester to 30 per year. Under current law, students who are enrolled less than full time receive prorated grants. Raising the number of credits would decrease award amounts for students who currently are enrolled in fewer than 30 credits per year. CBO estimates that under this provision, more than half of students currently enrolled would receive smaller grants. Based on past award increases, National Student Clearinghouse data on time to completion, and existing financial incentives for early graduation, CBO estimates that about one-fifth of expected grant recipients would enroll in additional credits to increase their award amounts. On that basis, CBO estimates that enacting this provision would reduce direct spending outlays by $7.1 billion over the 2025‑2034 period.

Eliminate Eligibility for Students With a High SAI. Subtitle D would eliminate eligibility for students whose SAI is double the amount for the Pell grant maximum award. CBO estimates that less than 1 percent of Pell grant recipients meet or exceed that threshold, and those who do generally receive the minimum award. On that basis, CBO estimates that enacting this provision would reduce direct spending outlays by $78 million over the 2025‑2034 period.

Eliminate Eligibility for Students Enrolled Less Than Half Time. Subtitle D would require a student to be enrolled half time, that is, for at least six credits per semester, to receive a grant. Program data indicate that in recent academic years roughly 10 percent of recipients were enrolled for less than half time. Based on past increases under the program and data from the National Student Clearinghouse on time to completion, CBO expects that about one-third of the recipients who would lose their award under this provision would enroll in additional credits to avoid doing so. CBO estimates that enacting this provision would reduce direct spending outlays by $687 million over the 2025-2034 period.

Workforce Pell Grants. Subtitle D would extend eligibility for Pell grants to students enrolled in workforce programs that can be completed in 150 to 600 clock hours, or an equivalent number of credit hours, provided the program meets standards for certification, completion, and after-graduation earnings. Under current law, students enrolled in programs requiring fewer than 600 clock hours are ineligible for Pell grants.

Using data from the Department of Education, statistics from the American Association of Community Colleges, and published reports, CBO estimates that, under the legislation, by 2034 about 100,000 new recipients each year would receive Workforce Pell Grants of about $2,200 each (about 20 percent of that amount would come from mandatory funds). On that basis, CBO estimates that enacting the provision would increase the cost of the mandatory add-on by $298 million over the 2025-2034 period.

To be eligible for Pell grant funds, postsecondary programs would need to demonstrate job placement and completion rates of at least 70 percent. Their tuition and fees must not exceed the difference between the median earnings of students who complete the program and 150 percent of the federal poverty guideline.

CBO expects that fewer than half of the current short-term programs at institutions that already receive financial aid under title IV of the Higher Education Act would become newly eligible under the legislation. However, using information from community colleges and research on postsecondary education, CBO expects that many of the students already receive Pell grants because they are enrolled in short-term programs that are “stacked” within longer-term programs that are eligible for Pell grant funding. As a result, under current law, those students can receive Pell grants even if they do not complete the longer-term program.

In addition, many short-term programs that do not currently receive federal financial aid funding, particularly those in the proprietary sector, would not participate in the Pell Grant Program under the legislation. Those institutions would be excluded either because they could not meet the requirements in the legislation or because they would choose not to meet the additional requirements for participation in federal student aid programs.

Pell Shortfall. Subtitle D would directly appropriate additional mandatory funds to support the portion of Pell grants funded mostly through annual discretionary appropriations: $3.2 billion in 2026, $4.8 billion in 2027, and $2.5 billion in 2028. Enacting the provision would increase direct spending outlays by $10.5 billion over the 2025-2034 period, CBO estimates.

Subtitle E. Accountability

Under the legislation, postsecondary institutions could be required to make annual payments, called risk-sharing payments, in order to participate in the federal student loan program. Those payments would be the main source of funding for the Promoting Real Opportunities to Maximize Investments and Savings in Education (PROMISE) grants, which would be made to eligible postsecondary education institutions to help improve affordability and promote success for students.

CBO estimated the amounts in risk-sharing payments on a cash basis rather than using FCRA procedures because those annual payments are based on cohorts of loans and are not tied directly to, or made on behalf of, any individual loan. The legislation defines loan cohorts as groups of loans to borrowers who exit a program in the same year. CBO estimated the effects of those provisions as if all other provisions in the legislation were enacted simultaneously. For example, the estimate for the amount of risk-sharing payments incorporates the assumptions that borrowers would no longer be eligible for the current SAVE Plan, that grad PLUS loans would no longer be available, and that new loan limits would be in place.

CBO estimates that enacting subtitle E would reduce direct spending outlays by $6.2 billion over the 2025‑2034 period.

Risk-Sharing Payments. The legislation would require some institutions to make annual payments to the Department of Education as a condition for participating in the student loan program. Those payments would be recorded as offsetting receipts—that is, as reductions in direct spending. Payments would be based on a formula that considers the amount of loan payments in a cohort that are waived, matched, or forgiven in the new IDR plan or that borrowers fail to make in a timely manner; the total cost of a program for borrowers who complete that program; and borrowers’ expected future earnings.

CBO calculated risk-sharing payments based on our estimates of repayments under the legislation’s proposed Repayment Assistance Plan, information from the College Scorecard database (which gathers data on institutional costs, graduation and employment rates, and student loan borrowing), and the Integrated Postsecondary Education Data System. CBO also analyzed delinquency and default rates using data from NSLDS.

CBO anticipates that the first risk-sharing payments would be made by institutions late in fiscal year 2028, after the Department of Education issues new rules, and that the department would apply the requirements prospectively on loans made beginning in the 2027-2028 academic year. We expect that initially, risk-sharing payments would be small but would increase as more borrowers entered repayment on loans originated after June 30, 2027. CBO estimates that by 2034, risk-sharing payments would be $1.3 billion and would continue to increase after that year.

CBO estimates that enacting this provision would reduce outlays by $5.3 billion over the 2025-2034 period.

Reduction in Institutional Participation in Federal Student Aid Programs.Given the high cost of risk-sharing payments to institutions and the considerable uncertainty about that cost over the lifetime of any given loan, CBO expects that some institutions would take action to avoid making those payments: Some would choose not to participate in the federal student loan program, others would close certain institutional programs, and still others would close altogether. Based on CBO’s analysis of calculated risk-sharing payments, information from associations of schools and from people with knowledge of postsecondary financial aid programs, we estimate that enacting this provision would reduce projected loan volume, after all other policies in the legislation, by roughly 20 percent.

By 2028, CBO estimates that, after incorporating all of the provisions of the legislation, 1 dollar of student loan volume would cost the federal government, on average, about 3 cents. On that basis, CBO estimates that the reduction in loan volume would reduce outlays by $3.6 billion over the 2025‑2034 period.

CBO expects that decisions by institutions to avoid risk-sharing payments also would affect federal spending for the Pell grant mandatory add-on. In general, institutions that leave the federal student loan program would be expected to continue to participate in the Pell Grant Program. However, based on the literature included as part of the Department of Education’s rulemaking on gainful employment and financial transparency (see “Subtitle F, Regulatory Relief” below for more information), CBO expects that some students enrolled in programs or schools that close as a result of the legislation’s risk-sharing requirements would not reenroll in other programs. Thus, CBO estimates that enacting the risk-sharing provision would reduce direct spending outlays for the Pell grant mandatory add-on by $397 million over the 2025‑2034 period.

PROMISE Grants. The legislation would institute PROMISE grants, funded by institutional risk-sharing payments. Institutions would be required to meet certain requirements to be eligible for the grants, including guaranteeing a maximum total price charged to a student for a given program.

Under the grant formula, an eligible institution could receive up to $5,000 for each student receiving federal financial aid each year, depending on the availability of funds. Along with additional criteria, the formula compares students’ earnings after completion of a program with the cost of tuition.

CBO expects that PROMISE grants, which would be classified as direct spending, would be awarded as funds become available. Using information from the College Scorecard database and the Integrated Postsecondary Education Data System and considering estimated risk-sharing payments, CBO estimates that PROMISE grants would increase outlays by $3.0 billion over the 2025-2034 period.

Return of Title IV Funds for Student Loans and the Pell Grant Mandatory Add-On. The legislation would allow the Department of Education to reallocate federal student aid that is returned to the government under title IV of the Higher Education Act to fund PROMISE grants. CBO estimates that enacting this provision would increase direct spending for student loans because it would change the underlying cost of those loans. Funding PROMISE grants with returned funds from Pell grants also would increase direct spending because the mandatory add-on for Pell grants is not subject to appropriation. CBO estimates that using those returned funds for PROMISE grants would increase direct spending outlays by $111 million over the 2025-2034 period.[3]

Subtitle F. Regulatory Relief

The legislation would repeal several rules and regulations affecting institutional eligibility for federal student aid, and the terms under which a student loan borrower could receive forgiveness.

CBO estimates that enacting subtitle F would reduce direct spending outlays by $9.0 billion over the 2025‑2034 period.

Repeal the 90/10 Rule. The legislation would repeal the requirement that for-profit institutions receive no more than 90 percent of their revenue from federal financial aid, including veterans’ education benefits. CBO anticipates that repealing the rule would allow schools whose revenue comes primarily from federal sources to expand enrollment and that the schools closest to the 90 percent threshold would be the most likely to do so. CBO estimates that enacting this provision would increase direct spending outlays by about $1.6 billion over the 2025-2034 period: $1.3 billion for increased student loan volume, $297 million for the Pell grant mandatory add-on, and $25 million for veterans’ education benefits.

Repeal the Gainful Employment Rule. The legislation strikes all references to “gainful employment” from the Higher Education Act. CBO expects that the Department of Education would implement that change by repealing the regulations related to gainful employment. Those regulations establish a debt-to-earnings ratio and an earnings premium test that for-profit institutions, and certain non-degree-granting programs at two-year institutions, would need to meet for the programs to remain eligible for federal student aid. Based on a literature review, CBO estimates that repealing the rules would increase both student borrowing and the number of Pell grant recipients by about 2 percent. On that basis, CBO estimates that enacting the provision would increase direct spending outlays by about $6 billion over the 2025‑2034 period: $5.1 billion for student loans and $918 million for the Pell grant mandatory add-on.

Repeal the Closed-Schools Discharges Rule. The legislation would repeal a rule that established an automatic process for discharging loans made to borrowers who attended schools that closed, thus increasing the likelihood of loan discharge for those borrowers. Using information from the Department of Education, CBO estimates that repealing the rule would reduce outlays by $5.2 billion over the 2025-2034 period.

Repeal the Borrower Defense to Repayment Rule. The legislation would repeal a rule that made it easier for borrowers’ loans to be discharged as a result of a school’s misconduct, including, for example, misrepresentation of student outcomes. Based on an analysis of loan volume at schools that were or are under investigation for issues that could fall under that rule, and using data from the Department of Education, CBO estimates that enacting the change would reduce outlays by $11.5 billion over the 2025-2034 period.

Subtitle G. Limitation on Authority

Subtitle G would limit the authority of the Department of Education to issue regulations that would increase the cost of federal student loans or that would have economically significant effects (that is, that would have an annual effect on the economy of $100 million or more or that would adversely affect the economy in a material way). CBO’s baseline includes costs that reflect the possibility of future administrative actions that would increase the cost to the government of federal student loans.

CBO estimates that enacting subtitle G would decrease outlays for student loans by $31.8 billion over the 2025‑2034 period.

Interactions Among Provisions

Most provisions discussed in this document were estimated relative to current law. The effects on direct spending of simultaneously enacting all of the provisions in the legislation would differ from the sum of effects from enacting each provision separately relative to CBO’s baseline.

The estimates for provisions to which that does not apply concern the risk-sharing payments and PROMISE grants, which were estimated relative to CBO’s baseline as adjusted to include the effects of all other policies in the legislation. Those estimates contain some interactions not shown in the “Interactions” row in Table 2.

Student Loan Interactions. CBO estimates that the interactions among various student loan provisions, if combined, would increase outlays, relative to the total of the individual provisions separately, by about $44.3 billion over the 2025-2034 period.

For example, CBO estimates that several provisions in this legislation would reduce the cost of the grad PLUS program. The legislation would also eliminate the program altogether. The estimated savings from enacting those provisions simultaneously is less than the effect of the savings of enacting those provisions estimated independently, relative to current law. That and similar differences are included in CBO’s estimate of the legislation’s interactions.

Pell Grant Interactions. CBO estimates that the various interactions among the provisions concerning Pell grants, if combined, would decrease direct spending outlays by $3.0 billion over the 2025‑2034 period.

For example, changing the definition of full-time enrollment and requiring Pell grant recipients to be enrolled at least half time would require students to take additional courses to maintain eligibility. CBO expects that about one-third of recipients who would otherwise lose their grants would take additional credits to avoid doing so. Combining the effects of those two provisions would be expected to increase the number of students who lose grants under the legislation. That and other differences are included in CBO’s estimate of the legislation’s interactions within the Pell Grant Program. CBO also estimates that enacting risk-sharing provisions would prevent growth in the for-profit education sector that would be produced by repealing the 90/10 and gainful employment rules.

Uncertainty

CBO’s estimates of the provisions in the legislation are subject to considerable uncertainty in a variety of areas. In particular, the ways in which students, postsecondary institutions, and the Department of Education would respond to the provisions are difficult to predict. The new plans fundamentally change the expectations of repayment from borrowers and trade‑offs between fixed and income-driven repayment, and borrowers’ selections of repayment plans would affect the overall cost of loans. Furthermore, the logistics and timing of implementing the new Pell grant policies and repayment plans and the potential consequences of altering repayment terms for borrowers currently in repayment are uncertain. If the Department of Education implemented the policies in this legislation differently than CBO anticipates, total reductions in direct spending outlays could be larger or smaller than presented here.

Estimates of risk-sharing payments were especially difficult to project. That difficulty is attributable, in part, to information that is redacted or missing from the College Scorecard database. To the extent possible, CBO imputed data to fill in missing values and checked for consistency across different approaches to imputation. CBO generally aims to estimate effects that are in the middle of the distribution of potential outcomes.

CBO’s projections for current-law spending also are uncertain. For example, the SAVE Plan became available to borrowers only late in 2023, and it has been the subject of litigation in various courts. Participation data are limited and incomplete because, as a result of pending litigation, borrowers enrolled in that plan have been placed in administrative forbearance, and applications for most IDR plans have been closed. Actual participation in the SAVE Plan, if fully implemented in the future, or in the legislation’s proposed IDR plan may be higher or lower than CBO estimates.

Changes to the underlying economy also could significantly affect the costs of the legislation. Fluctuations in interest rates, for example, would change the cost of the student loan program. A sudden change in unemployment rates could affect postsecondary enrollment or the income of borrowers in IDR plans, which would change the cost of federal student aid.

Despite that uncertainty, in CBO’s assessment, the direction of the budgetary effects of most of the provisions are clear. In particular, the changes to the federal student loan and Pell Grant programs would, on net, decrease federal costs significantly.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays that are subject to those pay-as-you-go procedures are shown in Table 1.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting the legislation would not increase net direct spending or on‑budget deficits in any of the four consecutive 10-year periods beginning in 2035.

Mandates

The legislation contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

Federal Costs:

Joyce Bai (for federal student loans)
Margot Berman (for federal student loans) 
Paul B.A. Holland (for veterans’ education benefits) 
Jeremy Crimm (immigration)
Leah Koestner (for federal student loans)
Delaney Smith (immigration)
Garrett Quenneville (for the Federal Pell Grant Program)

Mandates: Erich Dvorak

Estimate Reviewed By

Justin Humphrey
Chief, Finance, Housing, and Education Cost Estimates Unit

Kathleen FitzGerald 
Chief, Public and Private Mandates Unit

Christina Hawley Anthony
Deputy Director of Budget Analysis

H. Samuel Papenfuss 
Deputy Director of Budget Analysis

Chad Chirico 
Director of Budget Analysis

[Table 2 begins on the next page.]

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