The Department of Education (ED) on Friday released draft regulatory language to implement new provisions on short-term Pell Grants and how institutions should award Pell Grants when students receive non-federal grant aid, advancing the next phase of negotiated rulemaking under the One Big Beautiful Bill Act (OBBB). The release comes ahead of the rulemaking session on short-term Pell and the Pell Grant, scheduled for Dec. 8–12. The department plans to turn next to accountability issues beginning in January. According to Inside Higher Ed, the department’s agenda calls for taking an initial vote on short-term Pell at the end of this week, compressing what is typically a multi-week negotiation process.
How the Pell Grant Would be Restructured
The Pell Grant, the cornerstone of federal financial aid, is currently applied to a student’s aid package before other federal grant programs. After students complete the FAFSA, their Student Aid Index determines the Pell amount they receive, which is awarded first.
A provision in the OBBB will now force institutions to consider grant aid awarded to students from non-federal sources before considering Pell Grant award amounts. If students have non-federal grant aid equaling or exceeding the full cost of attendance, they would not have access to the Pell Grant at all. However, if students receive non-federal grant aid that does not equal the full cost of, they would still have access to the Pell Grant, and it would still operate as a first-dollar program.
How Short-Term Pell Would be Structured
The draft text defines a new category of “eligible workforce programs” and sets specific requirements for program length and delivery format. Programs would need to fall within narrow duration limits, consist of credit or clock hours, and meet a range of statutory conditions related to workforce relevance and student outcomes.
Institutions would also need separate federal approval even after state approval, and programs could be declared ineligible if performance standards are not met.
Consistent with OBBB, the proposal outlines annual performance benchmarks that programs must meet to maintain eligibility, including minimum completion rates and employment outcomes measured after program exit. Programs that do not meet those standards could lose eligibility and, in some cases, face a period before reapplying.
The draft also includes language implementing the statutory “value-added earnings” requirement, which limits published tuition and fees to a calculation based on median earnings several years after program completion. Institutions would need to document relevant outcomes and report tuition and fees annually.
Additional provisions would bar students from receiving concurrent Pell awards across short-term and traditional academic programs and prohibit institutions from offering Title IV loans to students in these short-duration programs.
OBBB Rulemaking
Short-term Pell is one of several rulemakings stemming from OBBB, which Jon Fansmith recently described on ACE’s dotEDU podcast as the most significant higher education law since the 2008 reauthorization of the Higher Education Act. The draft language follows a fall rulemaking round that addressed graduate loan limits, detailing changes in eligibility for high-need professional programs.
At that session, the most contentious issue negotiators considered was how to define “professional students.” Under OBBB, students in professional programs can borrow up to $50,000 per year and a total of $200,000, while those in other graduate programs are capped at $20,500 annually and $100,000 overall, if they are a first-time graduate student.
Ultimately, ED agreed to expand the list of eligible “professional” programs from the 10 programs cited as examples in the statutory text to add clinical psychology, falling well short of the broader interpretation ACE and others had urged ED to incorporate to account for other high-need, high-cost fields.
Nursing leaders, in particular, have been vocal about what this means for a workforce that is already stretched thin, noting that the department’s reclassification could limit how graduate nursing students access federal loans and loan forgiveness programs.
