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July 22, 2025 ·


Episode 269






Washington Update: Higher Ed Overhauled Under Budget Reconciliation—Loan Limits, Pell Expansion, Earnings Accountability, and Accreditation Upended








37 Min
·
By The Change Leader, Inc.

















Sweeping federal law rewrites loans, Pell, accountability, and accreditation. What higher ed leaders must know now—and what’s coming next.
























 



In this episode of Changing Higher Ed: Washington Update, Dr. Drumm McNaughton welcomes back Tom Netting, president of TEN Government Strategies and a frequent guest known for his decades of strategic policy work in higher education advocacy. Together, they unpack the far-reaching implications of the July 2025 federal budget reconciliation package (https://www.congress.gov/bill/119th-c...) —nicknamed the “One Big Beautiful Bill”—and how it is reshaping nearly every facet of higher education regulation, finance, and oversight.



Though not officially branded as a reauthorization of the Higher Education Act of 1965, the legislation includes more substantive structural changes than the 1992, 1998, and 2008 reauthorizations. Passed under fiscal pressure and a tight deadline, the bill ties accountability to graduate earnings, reinstates Pell access for short-term programs, restructures loan limits, and opens the door to a fragmented accreditation system. For higher ed leaders, this moment marks the beginning of a volatile multi-year period filled with negotiation, reinterpretation, and implementation challenges.





The “One Big Beautiful Bill”= Massive HEA Revisions Without Formal Reauthorization



The bill originated as a budget reconciliation measure intended to meet fiscal targets and extend tax-related provisions. Yet embedded within it are the most consequential higher education provisions in nearly two decades. As with the 1989 reconciliation bill that introduced cohort default rates, this legislation bypasses typical policy debate and instead imposes dramatic shifts through financial levers.



As Netting points out, these changes were not the result of policy consensus but of revenue-offset negotiations. Despite that, the practical effect is the near-complete overhaul of institutional accountability, student loan programs, and access mechanisms for postsecondary education.





A New Federal Accountability Regime: Low Earnings Outcomes Assessment



One of the most impactful provisions introduces a statutory low earnings outcomes assessment that will apply to all degree-granting programs—from associate to professional degrees. It does not apply to undergraduate certificate or diploma programs, which were explicitly excluded in the statute.



This new accountability measure replaces the existing gainful employment-style regulatory framework with a statutory construct. Institutions will be required to assess median earnings for program completers against a national cohort of working adults aged 24 to 35. The comparison benchmark varies based on degree level:




• For associate and bachelor’s programs: compared to high school graduates in the same age cohort


• For graduate and professional programs: compared to bachelor’s degree holders






Unlike past Department of Education regulations that relied on IRS data, the new system will source earnings data from the U.S. Census Bureau—a first in federal higher ed accountability. This raises significant concerns about data integrity, methodology alignment, and operational feasibility. Institutions will need to adapt quickly to new definitions, timelines, and compliance requirements once rulemaking is complete.



Implementation is scheduled for July 1, 2026. However, under the HEA master calendar, final regulations must be published by November 1, 2025. With negotiated rulemaking yet to begin, a delay or transitional rule phase-in is likely.





Pell Grants for Short-Term Workforce Programs Return—with Guardrails



The legislation revives Pell eligibility for short-term programs—those between 150 and 599.999 clock hours or equivalent. Known as the Workforce Pell program, this provision includes multiple safeguards:




• Programs must meet 70% completion and 70% placement thresholds


• Eligible programs must be tied to high-wage, high-demand occupations as determined by state workforce boards


• Institutional eligibility requires Title IV participation and accreditation


• Programs must be reviewed and approved by state oversight entities






Notably, this provision encompasses for-profit institutions and distance education programs, but excludes correspondence education. These inclusions and exclusions reflect negotiated compromises in Cong...