Mushtaq Gunja: Welcome to dotEDU Live, the higher education public policy podcast from the American Council on Education. I am one of your co-hosts, Mushtaq Gunja. I’m joined with my other co-hosts, Jon Fansmith and Sarah Spreitzer. Jon and Sarah, I am very unused to doing this intro. Sarah, Jon, how are you two?
Sarah Spreitzer: Good job, Mushtaq.
Jon Fansmith: Yeah. Very nice.
Sarah Spreitzer: I nominate you as the new main host.
Jon Fansmith: I mean, it lacks a certain panache I think our audience is used to, but that’s fine. You’ll get it. It just takes time.
Mushtaq Gunja: I was practicing in the shower. I was trying to imitate your dulcet tones, and sad imitation. But hey, friends, thank you for joining. Thanks for all of you in the audience for joining this podcast. We received so many questions in advance and they were so helpful to us as we put together our outline of what we were going to talk about. And thank you for the 1,500 or so of you that are joined live already. Here’s the agenda for today. I think we’re going to spend a lot of time trying to unpack what is in this reconciliation bill, this, as President Trump calls it, this One Big Beautiful Bill. Then we want to talk a little bit about the next set of fights, which are around appropriations. Wanted to dig in a little bit on some recent work that’s happened around accreditation or recent announcements around accreditation. Then if we have time, we might spend a couple minutes at the end around international students. That’s our agenda.
Really, again, thank you so much for your questions. If you have questions that you want to put in the Q&A or in the chat, better in the Q&A, that would be great. I’ll try to monitor all of those. Sarah, we’re going to start by talking about reconciliation and appropriations. I wonder if you might just remind everybody what is reconciliation? What is the appropriations process and what are the types of things that were tackled in the reconciliation bill? What are the sorts of things that are going to be coming as fights in the upcoming appropriations bill?
Sarah Spreitzer: Mushtaq, you said that the president calls it the Big Beautiful Bill, but that’s actually the official name. It’s H.R. 1, the Big Beautiful Bill Act, I guess, and it is very big. Many, many, many pages. But as we’ve talked about before, reconciliation bills are used by administrations, especially when they have very slight majorities in Congress, to try to get some policy priorities through because it only requires 50 votes in the Senate and those 50 votes are... They don’t need 60 votes to get cloture. But the trick is that it has to impact the mandatory side of the budget, and when we say mandatory, those are all the things that the government is obligated to spend money on. Think Social Security, Medicaid, veterans benefits, and then the money that they’re taking in from taxes or, say, repayments on student loans.
It doesn’t touch those programs that are funded through the annual appropriations process, which we think of the discretionary side of the budget, and those are things like the National Endowment for Humanities, the TRIO, the GEAR UP programs, the National Science Foundation. And the thing is in the Senate, even though you can pass it with only 50 votes, it has to go through something called a Byrd Bath, where the Senate parliamentarian actually reviews the bill to make sure that the policy included in the legislation actually has enough of a budgetary impact to be considered as part of a reconciliation bill. So it’s a very big bill. It has a lot of stuff in there, but it’s not President Trump’s full legislative agenda, I would say. And the things that are included in there, really they’re included because they have that impact on the mandatory side of the budget sheet.
Mushtaq Gunja: Really helpful as sort of an explainer, and we’ll come back to some of President Trump’s priorities as we maybe tackle what might be another reconciliation bill at some point, but let’s put that off for the second.
Sarah Spreitzer: Okay.
Mushtaq Gunja: Let’s talk about what just passed. Again, thank you for the questions. We bucketed the topics for us to discuss within reconciliation under all things Pell, borrowing, the new proposals around accountability—I guess not proposals. The new provisions around accountability—Medicaid, endowment tax, and some repayment provisions. Jon, maybe just start with Pell. What happened in reconciliation vis-a-vis Pell?
Jon Fansmith: Yeah, so a few things happened around Pell. Probably the biggest thing that happened was that the workforce Pell program, basically along the lines of... Was a bill that was passed out of committee, passed off the floor in the House in the last Congress, the Bipartisan Workforce Pell Act. Amended slightly, was included in both the House and Senate versions of the bill. That will be... It was in the final bill. It will be passed into law. This extends Pell Grant eligibility to short-term programs. One change from what was in the legislation, and Sarah talked about the Byrd Bath and the changes in rules, the parliamentarian, the original version of the bill that was in both the House and Senate allowed for Pell eligibility at short-term programs, including at non-accredited providers. And the parliamentarian essentially ruled that that was out of order and that it would be restricted to accredited only providers for those programs. But fundamentally the same provisions as were in the House bill from last Congress and in the House and Senate versions.
The other two things around Pell, there was some money provided for the Pell shortfall. Congress estimates that essentially there’s going to be about a $97 billion shortfall in Pell funding, the difference between what Congress has provided for the program and what the program will need to meet its obligations. They did not fill that hole. We were hoping that Congress would fully fund the program. Instead what they did was gave $10.5 billion in new funding for Pell. That should basically cover the gap through the end of this fiscal year and through the end of next fiscal year. It basically just buys Congress a little bit of time to essentially not have to make cuts through appropriations to Pell and have that fight down the road.
The final thing, and this one’s a little bit trickier, is there was a provision included that says that students for whom they can cover their full cost of attendance through institutional aid or other forms of non-federal grant aid are no longer eligible for the Pell Grant. And it’s hard to unpack this a little bit. The motivation appears to be an idea that there are students who get all of their costs of attendance covered by institutional aid, a free ride scholarship, and that there would be savings generated by cutting those students out of Pell eligibility. Probably a really small amount of savings generated from doing that.
The bigger problem is that institutions always package Pell as a first-dollar program. You start with Pell eligibility, and then you layer other forms of federal and state and institutional aid on top until you’ve covered the need of the student. Changing, at least for some students, how you make that calculation, especially given a lot of the ties between Pell eligibility and state aid programs and other things, is introducing a source of complexity and uncertainty in how we package aid. How significant that will be, whether financial aid administrators will be able to maneuver around that, what the regulations the Department of Education will put out around that will look like when they implement the law, still to be determined, but certainly something we’re concerned about.
Sarah Spreitzer: Hey, Jon, can I ask a question about the workforce Pell, because that was one of the really big things, and I know the House has been proposing this, the Senate has been proposing this in other freestanding legislation. There was a lot of discussion about guardrails that would go into the program, and you mentioned accreditation. Does the program have to be accredited for the workforce Pell or does the institution have to be accredited?
Jon Fansmith: The way the bill is written, it has to be through an accredited provider that, as we would interpret it, is the institution has to be accredited. Part of the parliamentarian’s, and there’s never a public statement from the parliamentarian, so some of this is essentially a secondhand account of what the parliamentarian’s justification is, but what the parliamentarian said is currently you need to be an accredited degree-granting institution to be Title IV eligible. Expanding eligibility beyond what already exists in law as part of the reconciliation process is a non-funding aspect. That’s why that provision was struck. They’re essentially saying, if you weren’t eligible to award Pell Grants before, you can’t make that change in reconciliation. That would require a 60-vote threshold. That’s why; it would be an accredited institution.
Mushtaq Gunja: Microcredentials, certificate programs eligible for workforce Pell?
Jon Fansmith: Short-term programs have a definition in law, and I’m not even going to say because I can’t pull it to mind, there’s a number of hours involved in that. Microcredentials, probably not. Certificate programs, definitely. Certificate programs are generally what’s thought of when you’re talking about the expansion of short-term programs.
Mushtaq Gunja: Officially in putting together the Carnegie Classifications, I know that there’s a lot of differentiation in how institutions count their certificate programs, and I’m looking forward to a little bit more consistency. So maybe one nice thing that will come out of this bill. I’m guessing, Jon, that this workforce Pell counts towards students’ lifetime Pell limits. Is that right?
Jon Fansmith: It does, and it’s awarded, if you look at the language, it is awarded on a proportional level to both the program length and the intensity of the program. You are not getting the equivalent of what a full-time degree program Pell recipient would get towards these programs; it is a reduced award.
And it’s also worth mentioning, Sarah, we talked about the guardrails around this. It’s not just the accredited providers. In fact, there are pretty stringent guardrails around which programs are eligible, things that are actually much stricter than what we have around degree programs in place. You, to have a eligible short-term program, need to have a completion percentage of 70% or above from the program. You need to have 70% or more of the students enrolled in the program after they complete find workforce placement within six months of the program ending. These are pretty tight requirements. There’s a number of criteria around certification by local workforce boards and other things. It is a somewhat more stringent set of requirements than actually we put around a lot of other programs that have access to federal financial aid.
Mushtaq Gunja: Can you talk a little bit about some of the changes to borrowing, Parent PLUS, Grad PLUS, that sort of thing?
Jon Fansmith: Right, and we’ve talked a little bit about the differences between the House and the Senate version. This was pretty important because the House had a comprehensive overhaul of student loans, both in terms of how they’re offered, repayment programs, things like that. The Senate basically left undergraduate borrowing untouched. Some things that come off of borrowing, but they did not change borrowing limits for undergraduate students.
They did make significant changes to what students can borrow for graduate education, and they did that in a couple of different ways. One is they created a new distinction between some types of graduate programs, which they call “graduate programs,” which are intended to be programs of three years of class time or less. And then another category they call “professional programs,” which would be essentially what we think of as terminal degrees, PhDs, MDs, JDs, MBAs, things like that, which are now “professional graduate programs.”
There are different borrowing levels annually and cumulatively. For graduate programs, students can now, the most they can borrow is $20,500 a year up to a maximum cumulative borrowing amount of $100,000. For professional programs, that’s $50,000 a year up to a maximum of $200,000 aggregate over time. The Grad PLUS program, which is currently in law, which allowed students to borrow up to the cost of attendance for graduate programs, was wholly eliminated. That program no longer exists. The Parent PLUS program, which allowed parents to borrow on behalf of their children, that has new limits. The most a parent can borrow is $25,000 in a year and $65,000 cumulatively on behalf of that student. New lower limits in all these areas.
We’re still working through what the impacts will be, but the one that’s the most immediate, the most obvious one is around the health professions. If you look at what averages are for an MD program, a dental program, veterinary program, all of those both on the annual and aggregate level on average tend to exceed the $50,000, $200,000 level. So a lot of concern there about what that might mean, especially for students in those fields, especially in those fields where we don’t have nearly as many people entering and completing and entering the workforce in those fields as we frankly need in this country.
Mushtaq Gunja: So students will just have to go to the private loan market, I suppose, once they hit the 200,000?
Jon Fansmith: There will absolutely be a growth in graduate private student loan borrowing because there’ll have to be, unless something else is done before implementation of this bill.
Sarah Spreitzer: Jon, one of the things I don’t think we said at the top is these are changes that will take effect July 2026 to Pell and to the loans. And so it won’t impact 2025-2026, but rather packaging for 2026 to 2027, correct?
Jon Fansmith: Right. All of these student aid provisions are pegged to the student financial aid year, which begins on July 1st. Because Congress passed this law on, it was signed into law on July 4th, the changes, and it states in law, the effective date, all of the student aid provisions will take effect as of July 1st, 2026.
Mushtaq Gunja: Does that mean that current students aren’t grandfathered in?
Jon Fansmith: Some of the lending programs and repayment programs, you’re grandfathered into existing repayment programs for I believe through 2029. If you are currently borrowing within Grad PLUS or other programs, you’re allowed to continue within those programs. The changes will impact students who are borrowing for the first time as graduate students beginning for what would be, we would consider academic year ‘26-’27.
Mushtaq Gunja: A little bit of a reprieve, but the changes are coming.
Jon Fansmith: Right. I mean, at least it allows some time for institutions to plan. The bigger thing I think that we’re concerned about is the Department of Education has a really enormous task in front of them, especially, we’ll go through some of the other parts of the reconciliation bill, but even on the lending side, they have to implement new regulations that explain to colleges and universities how to implement these provisions, what that means, all of those, frankly, thousands of areas in which individual student circumstances were not anticipated in the law that will have to be reconciled. So there will be challenges to that.
Sarah Spreitzer: And Jon, what was your quote this morning in
Inside Higher Ed about the goal for the department to implement this?
Jon Fansmith: I said that smooth implementation may be too much to hope for, but our guiding star is to avoid an implosion, and I think that’s a pretty fair assessment.
Sarah Spreitzer: That’s our goal.
Jon Fansmith: Yeah.
Mushtaq Gunja: Maybe it would be helpful not to lay off everybody at the Department of Education if they are trying to implement these regulations.
Jon Fansmith: It’s a radical idea, Mushtaq, I don’t know.
Sarah Spreitzer: So radical.
Jon Fansmith: You should let somebody hear that, maybe send them an email.
Sarah Spreitzer: Should we talk about what happened to the income-driven repayments? Because that’s another thing that’s going to take effect, but students are going to be grandfathered in. I tried reading the language last, and I don’t think I can actually figure out, and then the department actually announced today another change to the SAVE program, although the SAVE program will be going away under this bill, right?
Jon Fansmith: This is a very complicated area, and I don’t... We can spend more time if people really want to talk about repayment. What the Senate does is the Senate essentially, or sorry, the final reconciliation bill does. I’m so used to talking about the differences between the chambers, and since the Senate bill was the final bill. But what the final bill does is it creates two new repayment programs that are intended to consolidate the existing loan repayment programs into just two. And this is a approach that has been sort of popular among both Democrats and Republicans on Capitol Hill for a long time, the idea of simplifying the repayment programs into essentially a standard and an income-based repayment plan.
There are numerous existing income-contingent and income-based repayment plans, including the SAVE plan. SAVE is in a somewhat unique position in that its legality has been challenged in court and probably will be ruled illegal, unable to continue by a court when it finally goes to a decision. What changed there, separate from reconciliation, this has nothing to do with reconciliation, but the Department of Education ruled that previously the Biden administration had put all borrowers who are in SAVE as their repayment program into forbearance. Interest was not accumulating on their loans while the courts resolved the fate of that repayment plan. The department has now said borrowers in that plan, interest will begin to accumulate, and they urge borrowers in that plan to begin to transfer to other repayment programs in the near future because they believe SAVE will be going away.
The other part is all those other ones will then be consolidated by 2029 into the two primary repayment plans. There’s a repayment assistance program that is created under the Senate bill, which takes a different approach to repayment from what we’ve generally tended to see, which is that you’ll have a forgiveness provision that comes into effect after 20 or 25 years through most of these programs. This will be staggered in large part based on your borrowing amount. There’ll be other terms in terms of what you have to repay under the income-based amount. I will be completely candid too. I need to dig more into the repayment plans because we were very focused on the changes to loan limits, the accountability provisions, but we’re going to have that analysis up. We have the summary up on our website, which I think our producers have linked to, which contains more details on that. I might just stop at that point at the limits of my knowledge around the repayment programs and the shifts there.
Mushtaq Gunja: Well, let me ask you something that I think might not be super difficult. How about Public Service Loan Forgiveness? What’s the fate of PSLF?
Jon Fansmith: Public Service Loan Forgiveness remains. There were rollbacks to a lot of the changes that were implemented by the Biden administration that made it more widely available and easy to access. People probably remember that before the expansion of eligibility, the changes were made, both the short-term pandemic-based exemptions and then the regulatory-based changes expanded it, that very, very few borrowers ever qualified for PSLF. Given how complicated to comply with the terms, the original actual statutory bill for PSLF is it’s going to be much harder for borrowers going forward to qualify. And there was nothing in this bill that maintained the exemptions or made it easier for borrowers. PSLF remains, but it is going to be a far more difficult to access program.
Mushtaq Gunja: Jon, there seems like a few questions in the chat about programs that may be professional may not be professional. Where would one go to try to dig a little bit deeper? Okay, so law schools, med schools, dental schools, sure. Where would one go to be able to find out whether a particular program is considered professional and has the higher borrowing limit?
Jon Fansmith: I would say you need to wait because the problem will be there is not a definition in the law itself. And if you look at the code of federal regulations, there’s a lot of ambiguity around trying to identify what different programs are. There has not been a legislative approach to delineate between grad programs, between a professional program and a graduate program, other than in certain areas. The Department of Education needs to do a rulemaking in which they identify programs and the criteria for saying this is a graduate program, this is a professional program.
The intent of the Senate drafters, the staff and the members, is relatively clear. They’ve stated this publicly. They think it is essentially the difference between master’s programs and terminal or professional programs. Actually codifying that and, as I think the questions are showing, the huge variety of programs that could be considered across both areas is going to make that a lot more complicated than I think they envisioned. And this is, again, part of the problem with doing this kind of stuff and reconciliation, which moves fast and doesn’t allow time for consideration and for putting things forward like a comprehensive definition of what graduate versus professional graduate level education means.
Sarah Spreitzer: Or hearings. That’s the other thing about reconciliation is it’s not like you have a hearing; you hear people considering different policy ideas. It just kind of happens under this budget umbrella. But Mushtaq, the other thing that’s included in the loan section of reconciliation is the new accountability provisions, which I think are also pretty big.
Mushtaq Gunja: Sarah, Jon, which one of you wants to dive into accountability?
Sarah Spreitzer: I’m going to throw that to Jon.
Jon Fansmith: I was going to see if you’re going to take it.
Sarah Spreitzer: No, I was just teeing you up there.
Jon Fansmith: Yeah, well, and I’ll say I’m on more solid ground, certainly with the accountability provisions because we were pretty deeply engaged around this, and it’s both simple and complicated. The Senate’s approach on accountability basically starts with the premise that if you go to postsecondary education, there should be an earnings premium to the program you’re in. And the way they are attempting to define that is to say if you have a bachelor’s, or a B.A. or an A.A. degree, and you leave that program, you complete that program, four years out, the graduates of that program should be earning more money than the average high school graduate who is 25 to 34 years old within that state. For every program, and it’s at the program level, not the institutional level, the graduates of that program will be assessed as to their earnings four years after graduation versus the average earnings of a high school graduate 25 to 34 in the state. If most of your students, more than 50%, are from outside the state, then you use a national average.
The same thing applies at the graduate level, although slightly different comparison group for M.A. or PhD or whatever graduate level programs you have taken. The comparison group, rather than high school graduates, is bachelor’s degree recipients within the state or national average, again, four years after graduating. The pool for comparison are people who have completed the program. It’s not all participants in a program, only people have completed the program.
If within three years you have failed that earnings test two out of those three years—and it can be any two of the three years, doesn’t need to be consecutive years—then that program—again, the program, not the institution—loses eligibility for the students in that program going forward to access federal student loans. They can still receive Pell Grants. They can still receive other forms of federal aid. They cannot apply or receive student loans to be in that program. And that bar on access to federal lending lasts for at least two years before the program can reapply for access to federal student lending.
Sarah Spreitzer: Jon, this might be a stupid question, so don’t make fun of me, but how is this different than gainful employment, which the Biden administration was trying to implement?
Jon Fansmith: There’s a really big overlap in terms of both of these are saying, “We’re going to look at programs and say that earnings is a key component of determining the quality of a program.” The difference was the gainful employment rule looked at earnings, but earnings relative to debt, and essentially said, “If you enter a program and you have to borrow to attend this program, you should be earning enough to repay your loans.” This is a different sort of philosophical idea, similar, but what they’re saying is, “If you simply go to this program, you should be earning more than somebody who lacks the credential you’ve gained. You should be able to out-earn somebody who doesn’t have your credential or doesn’t have a credential at your level.”
And that’s really the goal. And there are some areas where, and we’ve talked about this with this group and I think it’s popping up in the chat too, there are legitimate concerns about programs, especially programs that require some level of graduate education for licensure requirements, for entry into the profession, where those professions are low-salary professions. And I’ve kind of run through the list, and what the data shows is it is social work; it is counseling; it is teacher’s aides; it is librarians; it is people in culinary arts; it is people, maybe not requirements for entering a field, but people in performing arts, those programs, especially at the graduate level, tend to be the ones where we worry most about looking at an earnings test as a threshold for quality because we know that those are fields that are not high-earnings fields.
Sarah Spreitzer: Did the bill do anything? Are we going to have to do GE as well as this new accountability provision or did reconciliation address those regulations?
Jon Fansmith: No. The gainful employment/financial value transparency regulations, which are the most updated version of GE put in place by the Biden administration, delayed implementation by the Trump administration. But all indications are they intend to go forward with them. There may be regulatory changes; we would expect there will be regulatory changes to that. But the first Trump administration, for instance, removed the financial penalties from the Obama-era gainful employment rule but actually kept the data reporting and other elements on the books as part of accountability in terms of at least transparency in information.
And I should say there’s one other thing I left out in terms of the graduate accountability piece. There are two other tests, whereas for the undergraduate piece it is just based on earnings. For graduate-level there are comparisons to individuals within the same profession that, as defined by the CIP code, the classification of an industry or profession. I forget what CIP stands for. I’m sure people in the chat will correct me, or Mushtaq if you know, go right ahead.
Mushtaq Gunja: Program, but I could be wrong.
Jon Fansmith: As well as another comparison to people working in the same area. A little bit more ability to differentiate those earnings into a test, a little bit more leeway to cover some of these concerns we talked about within those fields. But again, still does not address overall the concerns we have.
Mushtaq Gunja: Yeah, I mean goodness knows, and I can see this in the Q&A and the chat, stuff is complicated. At the Carnegie Classification project, just spent three years trying to make sure that we had the right comparison group. Really tried to account for regionality, which matters a lot, right? I mean, salaries in Denver are different than they are in the plains of Colorado. Yeah, there are some complexities here.
Jon, just a couple of quick questions. Transfer students, how do they get accounted for? Who gets credit for those students?
Jon Fansmith: It’s a great question the Department of Educational will have to answer. I mean the law as written is four years from completion of the program. Theoretically, if you transfer and receive your credential from the institution to which you transfer, you would, I would think unless the Department of Education implements in a different direction, you would be counted as part of the cohort from the institution from which you graduated, not from the institution at which you initially enrolled.
Mushtaq Gunja: How do they deal with students that are still in school? You graduate with your English degree and now you’re in law school. You graduate from your associate’s, you have your associate’s degree, you’re now earning your bachelor’s. How do they deal with that?
Jon Fansmith: Current students are exempted. You have to be working to have your earnings part of the measurement.
And it’s worth also talking... We talked about the complexity and the implementation challenges. It’s worth just recognizing, I saw somebody in the chat asking about how are institutions going to track salary data? Well, they’re not, nor can the Department of Education. The people who can do that are the IRS. And so to implement this accountability system, you’re going to need data reported by institutions to ED; you’re going to use information institutions or the department has from individuals from their participation in Title IV and other areas; and then you’re going to have to have matching to IRS data about earnings to make these comparisons. It will be a very complicated provision just process-wise for the government to implement. They do have three years. It begins as of July 1st next year. So it’ll be three years before any program falls out of eligibility. That will be the earliest it can happen, but still they need to start implementing by July 1st of next year.
Mushtaq Gunja: And for institutions that are curious about earnings, earnings by program, where would they find that information, other than the Carnegie Classification website? Carnegieclassifications.acenet.edu, if you’re interested, but where else might you find it, Jon?
Jon Fansmith: The federal government currently on the College Scorecard website posts information on programmatic earnings. Or not on the website itself, but you can access the Scorecard data, which does have program-level data for each institution. There’s some slight differences between what the bill is looking at and what is available on Scorecard, including that four-year window from graduation. I don’t believe that’s the window the Scorecard uses. I think the Scorecard now is seven years out. I could be wrong about that. The window of time is a little bit different, but certainly in terms of a gauge of how your institution’s programs are performing, that’s the best source.
Mushtaq Gunja: There’s a lot more to come here as we see guidance from the department on how they are planning on implementing this. Luckily we have a few years before we exactly see how this plays out.
Let me move us to Medicaid, which was a flashpoint in these negotiations between the House and the Senate. Ultimately, the Senate proposal was adopted here. Is that right, Jon and Sarah? And how do the Medicaid provisions affect higher ed?
Sarah Spreitzer: The interesting thing about Medicaid is that I think there’s a lot of concern about how it’s going to impact state budgets. I don’t think it’s going to be evenly applied. The other thing is thinking of the overall bill and the messaging around it, this was a bill that passed by the skin of its teeth. There’s a lot of concern about what’s going to happen in the midterms, but I believe the Medicaid provisions actually don’t take effect for a few years. But there are cuts to the Medicaid programs.
Jon Fansmith: There’s a few things on Medicaid which are really concerning, and probably we haven’t given enough time and attention to Medicaid because it was one of the few areas, in fact, where the Senate implemented cuts at a far higher level than the House did. The final bill actually had larger Medicaid cuts than what came out of the House, which was unusual. In almost every other area, the House had bigger cuts and less spending.
Medicaid is hugely important for higher education, in part first and foremost, like Sarah said, because Medicaid funding—and the bill cuts over $1 trillion in spending on Medicaid—overwhelmingly that is money that went from the federal government to states. States will then be left with a very difficult decision of looking at with this reduced federal funding, do they simply move people off the Medicaid rolls? Do they change what’s covered to try to keep people on but at a lower level of coverage? And what do they do with the gaps that, any additional spending they’ll have to put forward, which increases the hole from the federal government, means?
And what we see again and again and again is when state budgets get cut, the first place they go to try to generate more savings is higher ed. Because colleges and universities have a tuition mechanism that lots of other parts of the state budget don’t to pretty easily raise revenue within a budget year. I think all but one state are required by law to balance their budgets on an annual basis so they don’t have the option of deficit spending into future years to smooth out these cuts. And I saw the governor of Maine, for instance, I believe said in the press that they’re going to lose $4.5 billion in federal funding over the next 10 years. For a state the size of Maine, the impact of that on their overall state budget is going to be enormous. You should absolutely expect large cuts coming across the states, both in terms of direct institutional support, but cuts to things like state financial aid programs and other things that will impact students.
Add to that, and I saw a couple people mention this, there’s 3.4 million postsecondary students in this country right now who get healthcare through Medicaid. It’s not just that some of these changes are going to make that less available to them. There’s requirements around greater work requirements on Medicaid recipients, other things that were put into place that will heavily overlap with the population of postsecondary students who are accessing Medicaid. These are low income, by their nature, students, often working students already balancing a lot of requirements. More demands on them are going to make it harder and harder for them to meet those requirements and maintain their health care coverage. Lots of reasons to be concerned.
And then I guess the final thing, and somebody mentioned health care and working at a health care institution, especially in rural areas, university hospitals, university health centers tend to be the providers of care in those areas. Often the only providers of care because of the cost of serving those areas. And overwhelmingly those are a disproportionately large portion of Medicaid recipients they are serving in those areas. Cuts to the benefits, cuts to the reimbursements that are available to those health centers makes doing the work that they do far more expensive, is going to put additional strain on the budgets of those institutions. Kind of a triple whammy hitting higher ed here in ways that, again, Medicaid is just not often thought of as a higher ed program, but really has huge and enormous overlap with how colleges and universities’ finances are going to operate.
Mushtaq Gunja: To piggyback on Sarah’s question, I know these are now law; how likely is this to stick? I mean, I can imagine that Medicaid cuts are... And I know they’re coming in the future. I mean probably politically smart in some ways for the Republicans to push off Medicaid cuts as far in the future as you can. Well, that way you get to claim some of the savings but don’t feel the political pain right away. I mean, is it going to stick? Is there another chance that we have to fight on Medicaid?
Sarah Spreitzer: I would say probably not. I mean, look, reconciliation bills, they’re talking about doing another one, but I think what they’re actually looking at is making even further cuts. It seems like the move is to take more money from these programs rather than trying to find the funding for them. And remember, all of this is being balanced with the tax cuts that they’re seeking to extend from the 2017 package. And so they had to find enough money to extend those tax cuts, and that’s what’s coming from the Medicaid cuts. But I think seeing how the bill played out in the Senate and some of the senators trying to cut deals where their state would somehow be exempt from some of these cuts shows, I think, how individuals are very concerned. They may not be concerned about the impact of the cuts nationally, but they’re concerned about the impact of the cuts on their states.
Jon Fansmith: And if I can, I want to just hit the timing piece because there’s a number of things in this bill that, like Sarah pointed out, I think really great point by Sarah. The SALT tax level expires after three years. There are a number of things that were essentially laid in with the idea that if Republicans lose one or both chambers in the midterm elections, that at least the political motivation is to put off the pain individuals may experience until the next Congress. That may help them retain those chambers in the midterm elections because people won’t be experiencing the Medicaid cuts immediately, or other things. It also means that the tax provisions, when they come due, again, you’re handing to Democrats the requirement to either say we’re going to extend Republican policies or we’re going to have people experiencing an increase in taxes, cut in benefits under our watch.
It is very intentional. It makes it hard, to Sarah’s point, I think it makes it really hard to revisit these things. And if you’re revisiting cuts, you have to find money to pay for it too. Every time a cut is made, to backfill it means finding new resources to do just that.
Sarah Spreitzer: And perhaps raising taxes, which is never what a politician wants to do.
Jon Fansmith: Doesn’t help you get elected in the next cycle, yeah.
Sarah Spreitzer: Yeah.
Mushtaq Gunja: I’m going to do a time check. We have a few more items to get to. We’ve got about 20 minutes. I have one, well, 1.5 more, topics on the One Big Beautiful Bill, and the last full one is endowment tax. Do you want to quickly talk us through what ended up landing on the endowment tax?
Jon Fansmith: Yeah, so the 2017 endowment tax was a 1.4% tax on endowment earnings for institutions that, when you divided the size of their overall endowment by their student population, had an average of $500,000 per student or more. The House had introduced a four-tiered approach to different tax rates. The Senate did a three-tier approach at much lower levels. Essentially what they said was, if you are an institution at the $500,000-750,000 level, the tax rate remains 1.4%. If you’re an institution that is $750,000 to I believe $1.5 million, then the tax rate is 4% on endowment earnings. And if you are an institution that, or sorry, up to $750,000 to $2 million. Above $2 million is now an 8% tax rate. Certainly an 8% tax rate is six times roughly the 1.4 rate that’s currently. For institutions falling into that category, that is a massive increase in the tax they will be paying.
The one other big provision in the Senate’s bill, sort of a quirky thing. There’s a college, Hillsdale College. It takes no direct federal funding. It is strongly supported by a lot of particularly Republican senators through this process. There was an effort underway to exempt Hillsdale from the endowment tax. The parliamentarian essentially said that the provision they had put in place that would’ve exempted Hillsdale failed the Byrd Bath. And so instead, the Senate instituted a requirement essentially saying that any institution with 3,000 or fewer, and they defined it as tuition-paying students without defining what a tuition-paying student was, those institutions are exempted from the tax. The net effect of this is that actually about half the institutions that were paying the endowment tax or will pay it for this current year won’t have to pay it going forward. It’s a smaller pool of institutions, but those institutions are paying, in most cases, significantly more than they were paying before. And also this tuition-paying students piece is going to require a whole lot of, again, regulation to implement this, to define what a tuition-paying student. It’s not an FTE; it’s not a headcount. We don’t really have a way of thinking about that in current law.
Mushtaq Gunja: I was going to say, I don’t think IPEDS, I don’t think they... Well, anyway, yes, strange.
Jon Fansmith: And is borrowing student loans through the federal government, does that make you tuition-paying because you’re on the hook for those loans? Reasonably so, but maybe because it’s federal aid it’s not. We just don’t know the answers to these questions yet. And what they determine will actually determine the eligibility. Some institutions will be right around that 3,000 threshold depending on how they count it.
Sarah Spreitzer: And we had a question whether the IRS or ED would do the regulations. and that would be IRS, but I was going to say, Jon, I don’t know if you noted this at the top, but this is just for private institutions. And then-
Jon Fansmith: Yeah, the existing endowment tax, and it continues to be just for private institutions.
Sarah Spreitzer: Just for private institutions. And then that money that they’re paying does not go to the student aid programs or to supporting students in any way; it just goes to the U.S. Treasury.
Jon Fansmith: Right. It’s like an individual’s income tax. It is money collected that goes to the United States Treasury. So it’s essentially a transfer of money that in most cases was given for charitable purposes to institutions to the federal-
Sarah Spreitzer: The U.S. government.
Jon Fansmith: Yeah, it is money out of the pockets of student financial aid and support for the research enterprise. Bad policy at any level, at 1.4%, certainly at 8%.
Mushtaq Gunja: Here are my 0.75 questions left. The 0.25 one is I forgot to ask way back when. We talked a lot about the Pell 15-credit policy in the last couple of sessions. Were we going to increase the Pell number? What happened to the increase in the Pell credit proposal?
Jon Fansmith: That was the Senate had very little appetite for doing that. They stripped that out, and thankfully so, but I’ll also say in large part, they did that because there was a tremendous outreach from higher ed, from the public about what these kind of changes would do. And they really would’ve been very incredibly harmful to low-income students, and they heard that and there was not an appetite to do those kind of punitive changes to low-income students. That was avoided in the Senate bill and ultimately the final bill.
Sarah Spreitzer: And Jon, I don’t know if I would say there wasn’t an appetite because I think it was being considered by the Senate until advocates raised how much this was going to impact Pell students at their institution, at their states. I think during this very busy time when we have all of these policy issues going on, all of these attacks against higher education, we don’t think about places where we’re actually successful. And I really do think that was one of the places we were successful in really pushing back on that.
Jon Fansmith: Yeah, I think that’s right. And I know we’re running tight for time and we haven’t even gotten to any of the other topics, but this is not a bill that we were happy about. This is not a bill that ACE supported. We were opposed to its passage. I want to be really clear, though, that there was incredible advocacy from the higher ed community as a whole, not just the associations, not just institutional leaders, but people across campuses. And that made an enormous difference. If you line up the House bill that was proposed and the Senate bill, it is significantly better than what we were facing and that was very much due to a public response about concerns here.
Mushtaq Gunja: My 0.5 question is one I think we’ve tried to answer throughout this, but what’s the timing of all of these provisions? I know they vary. Is there a place that one can go to be able to see when the accountability provisions kick in, when the Medicaid provisions kick in, all of that?
Jon Fansmith: Outside of reading the law, I don’t know across the bill if all those... We have summaries that note them up for the higher education provisions. I would say generally for student financial aid, things under Title IV, July 1st is the effective date, July 1st of next year. For tax policy it follows a calendar year, so the endowment tax changes go into effect January 1st, 2026. There are those things. And then when you get into Medicaid, when you get into some of these other things that were intentionally staggered implementation, it starts, those timeframes shift a little bit.
Mushtaq Gunja: We’ve got 10-ish minutes to cover at least appropriations and accreditation. Sarah, tee us up. Reconciliation, done. Talk to me about-
Sarah Spreitzer: And now I want to take a nap. But unfortunately, they’re actually starting the appropriations process, which is funding for the discretionary programs in 2026. Remember the fiscal year starts October 1st. If they don’t pass appropriations bills by midnight on September 30th or whatever, we go into a government shutdown because they haven’t funded the government.
This year is completely different than I think anyone has ever seen in Washington, DC because we had a continuing resolution for FY 2025 that was passed in March. That bill basically says that the agencies should be spending out funds at the same rate that they were spending in 2024. But as we’ve discussed on this podcast with the grant terminations, the slowdown in grant funding, the complete destruction of USAID, which was funded in the FY24 bill, the White House is clearly not following the congressional appropriations. And so as a result, I think FY26 is in a really odd place.
The president sent up an FY26 budget request, which really I think reflected some of the cuts that have already been made. Congress is starting there to mark up their appropriations bills, but at the same time, in order to not run into the Impoundment Control Act and not be on the hook for not spending the dollars from FY25, the White House has sent up a rescissions package, which would allow them to claw back some of this money. And the first rescissions package includes the funding for USAID, NPR, and PBS and basically says, “Even though we passed it in the FY25 continuing resolution, we’re going to claw that money back.” That rescissions package passed the House. The Senate this week is starting to consider it. There’s already been some discussion about amendments. Again, just like with the reconciliation bill where we support cuts to Medicaid nationally but perhaps not within our state, there’s concerns about cutting NPR and perhaps a carveout for certain states or for rural radio stations.
And I think whatever happens with the rescission bill is likely going to be reflected in whatever happens with FY26 approps. But because Congress has to actually act like they’re doing something before October 1st, they’re going through the exercise of actually marking up their bills.
Mushtaq Gunja: What are the higher ed provisions that are issue at risk? Where do we need to dig in and where do we need to start contacting our senators? Or what do we need to start contacting our representatives about?
Sarah Spreitzer: I mean, the education provisions are included in an appropriations bill that’s Labor, Health and Human Services, and Education. It’s one of the largest appropriations bills, and it’s one of the hardest to pass, usually because there’s a lot of policy riders. That’s usually the last one that we see marked up. The House has already marked up their Department of Defense funding bill. I believe the Senate was marking up their Commerce-Justice-Science funding bill this week. But with those Labor-H-Education programs, which also includes the National Institutes of Health, we probably won’t know until closer to August what may be in those Senate and House bills.
Now the president called for very deep funding cuts to the education programs, to the National Institutes of Health, to the National Science Foundation. As much as people are advocating, I think talking to their members about rejecting those deep cuts, but also talking about the importance and even what’s happening now with the grant terminations, like to TRIO, like to the SEED grants, like to TQP, and how that’s being reflected not just at their institution but among the wider community.
Mushtaq Gunja: Sarah, just one thing. What’s the timing of all this? When do they start? When will this get passed? When, when, when?
Sarah Spreitzer: Do you see Jon laughing at me in the little screen there?
Jon Fansmith: I’m waiting to hear what you say.
Sarah Spreitzer: Are you waiting for my prediction? Are we going to start betting on whether or not there’s going to be a shutdown? I don’t think... The rescission package, we actually have a time because I think it has to pass within 45 days of being sent by the White House. I think it’s next week is the deadline that they actually have to act on it, so we should know something. And of course, Congress is getting ready to go out of town for August, and so usually they like to at least have marker bills in place or have gone through the markups for each individual appropriations bills before the August recess. So we’ll see.
Jon Fansmith: Yeah, there’s 21 legislative days left in the House before the end of the fiscal year, so if we’re going to bet on shutdowns-
Sarah Spreitzer: Plenty of time.
Jon Fansmith: ... Worth thinking about, yeah.
Sarah Spreitzer: Plenty of time.
Mushtaq Gunja: Speaking of plenty of time, we have five minutes and I’d love to just do four of those minutes on accreditation. Jon, seemingly tons of news around accreditation. NACIQI getting delayed, some news around Harvard, some money in Florida to stand up a different accreditor. Tell us what we should know.
Jon Fansmith: And there’s a lot to know, and it is, I feel like with these, whenever we do these, we never have enough time, and this is one that let’s hopefully maybe return to in a future episode because there’s more to unpack here. But we’ve had a number of pieces of news around accreditation here in DC. The one that’s gotten a lot of attention is the delay in the next NACIQI hearing until later in the fall. For those who don’t follow this, NACIQI is the advisory committee that essentially recommends to the Department of Education that accreditors be recognized, which is the term, it’s essentially the seal of approval from the Department of Education to the accreditors, meaning that the institutions they accredit are eligible for Title IV financial aid, access to Title IV financial aid.
The reason for doing it, the department hasn’t publicly stated. What the suspicion is is that the terms of people who were appointed to NACIQI under the Biden administration will expire in September, and therefore by delaying the administration is able to appoint a substantial percentage of the NACIQI committee people who are aligned with their viewpoints. That’s... Generally, okay, you would think about that the administrations want people with their viewpoints represented.
The bigger issue around accreditation, of course, is what we saw at Columbia and what we saw again this week at Harvard, where the Department of Justice and the Department of Education sent notices to the accreditors of Columbia, in Columbia’s case the Middle States Commission on Higher Education and in Harvard’s case the New England Commission of Higher Education, basically saying that they believe those institutions are in violation of Title VI and that their accreditation, their status as accredited institutions should be reviewed by their accreditors. I will say I am encouraged by the responses we saw from the accreditors that they are following their standards and will apply the process as appropriate to those institutions based on this.
Violating federal law absolutely would violate the standards of an accreditor. I think it’s also abundantly clear that the administration’s assertions that those schools have violated the law are not the same thing as having an actual finding from a judge through the legal process for doing that. A lot of this is just more trying to intimidate and pressure the institutions leveraging other things like the accreditation process. Again, somewhat ominous though when you think about this delay in NACIQI.
At the same time all of this is going on, we are seeing in Florida and a number of southeastern states in the United States an attempt to stand up a new accreditor driven by the state government of Florida, driven by a few other state governments and institutions within those states. You can interpret this a lot of different ways. There is nothing that prevents new accreditors from entering the system currently. You don’t need a change in law to do that, but there has been a lot of particularly Republican criticism of the accreditor historically for that region that’s been going on for years. And this very much can be seen as a response that, especially when you think about the fact that Governor DeSantis attempted to sue the Biden-era Department of Education over accreditation determination.
Trying to provide a different pathway to accreditation for institutions, one that may be more receptive to their interpretation of what appropriate standards would be, but lots in the accreditation space, and we’re barely unpacking that.
Sarah Spreitzer: Hey Jon, I like the question in the Q&A where somebody asked what is the deal with those states creating their own accreditation process? You answered that very well, but I liked how that was phrased. What is the deal? Why? Why is it happening?
Jon Fansmith: I liked the person who said, “I’m going to go hide under my desk.”
Sarah Spreitzer: No, don’t do that. Don’t hide. It’s okay.
Mushtaq Gunja: Friends, we are at time, and I think we are obviously going to need another session in a couple of weeks. As much as we would like to hide under our desks and maybe go on vacation, I think we’re going to need to do another one of these sometime soon. We’ve been kicking around the idea of just doing an all-Q&A session.
Sarah Spreitzer: Yeah.
Mushtaq Gunja: Maybe we’ll do that or maybe we can do five minutes on a couple of topics and then do all that. Would love to do all this, but Sarah, Jon, thank you for hanging in there with us. Producers, thank you for making this all happen. And most of all, thank all of you who are listening, and for those of you who attended this, it’s really helpful. Thanks for the questions in advance and let’s keep doing it. Thanks-
Jon Fansmith: Don’t hide under your desk. Advocate, advocate, advocate.
Mushtaq Gunja: Thanks, all.
Sarah Spreitzer: Thanks, guys.
Jon Fansmith: Thank you for joining us on dotEDU. If you enjoyed the show, please consider subscribing, rating, and leaving a review on your favorite podcast platform. Your feedback is important to us, and it helps other policy wonks discover our show. Don’t forget to follow ACE on social media to stay updated on upcoming episodes and other higher education content. You can find us on X, LinkedIn, and Instagram. And of course, if you have any questions, comments, or suggestions for future episodes, please feel free to reach out to us at podcast@acenet.edu. We love hearing from our listeners and, who knows, your input might inspire a future episode.