Amendments to the Higher Education Act in FY2025 Budget Reconciliation Legislation

The Concurrent Resolution on the Budget for FY2025 (H.Con.Res. 14) includes reconciliation instructions for the House Committee on Education and the Workforce (EDW) and the Senate Committee on Health, Education, Labor, and Pensions (HELP) to reduce spending within their jurisdictions by at least $330 billion and at least $1 billion, respectively, for FY2025-FY2034. Title III of H.R. 1, the One Big Beautiful Bill Act, comprises EDW’s proposal to comply with its budget reconciliation instructions. On May 22, 2025, the House voted to pass H.R. 1. Senate HELP has not yet introduced legislation to comply with its budget reconciliation instructions. Title III of H.R. 1 would amend a variety of provisions in Title IV of the Higher Education Act (HEA), which authorizes the primary federal student aid programs. The Congressional Budget Office (CBO) estimates that H.R. 1’s Title III provisions would decrease direct spending outlays (i.e., result in budgetary savings) by $349.1 billion over the FY2025-FY2034 period. The majority of these budgetary savings ($348.7 billion) would result from amendments to the Direct Loan student loan program. H.R. 1 would do the following: It would establish a new “median cost of college” measure upon which eligibility for most HEA Title IV student aid would be based, making a student’s calculated need equal across institutions of higher education (IHEs) for a given program of study. It would eliminate the availability of Unsubsidized Direct Loans and of Grad PLUS Loans, while also adjusting loan limits on the other remaining types of Direct Loans. The bill would also authorize the availability of only two loan repayment plans for borrowers of new Direct Loans: a new standard repayment plan and a new income-driven repayment (IDR) plan known as the Repayment Assistance Plan. Borrowers currently enrolled in any IDR plan would be transitioned to an amended version of the income-based repayment plan. In addition, H.R. 1 would make some smaller scale amendments to the Direct Loan program, such as eliminating the availability of economic hardship and unemployment deferments and repealing regulations promulgated by the Biden Administration relating to borrower defense to repayment and closed school discharge. Pell Grant eligibility award rules would be tightened by, among other changes, requiring that students be enrolled on at least a half-time basis to qualify for a Pell Grant and requiring Pell Grant recipients to be enrolled in a larger number of hours to be considered enrolled full-time. The bill would also establish Workforce Pell Grants for otherwise Pell-eligible students enrolled in short-term undergraduate workforce programs and attempt to address the estimated Pell Grant shortfall. It would authorize Promoting Real Opportunities to Maximize Investments and Savings in Education (PROMISE) Grants for IHEs that offered a maximum total price guarantee for their undergraduate students. IHEs’ PROMISE Grant amounts would be determined based on factors including educational program completion, completers’ earnings, the maximum total price, and the dollar amount of Pell Grants awarded. Some noncitizens who are currently eligible for HEA Title IV student aid (e.g., refugees and asylees) would be ineligible for such aid. The 90/10 rule and “gainful employment” requirements would be repealed. Instead, H.R. 1 would institute a new institutional risk-sharing model applicable to IHEs participating in the Direct Loan program in which IHEs would be required to make reimbursement payments to the Secretary of Education (the Secretary) based on the performance of the loans borrowed by or on behalf of their students, the prices charged to students, and a new median value-added earnings measure. Institutional reimbursement payments would fund the newly authorized PROMISE Grants. The Secretary’s authority to issue regulations and take other executive actions would be newly limited, including the Secretary being prohibited from promulgating regulations or taking other executive actions that would increase the cost of the federal student loan programs and would be “economically significant.”