Reconciliation Package Moves Forward with Senate Approval
By Hugh T. Ferguson, NASFAA Managing Editor
The Senate passed its version of the reconciliation bill on Tuesday, containing sweeping tax changes and higher education-related provisions that could impact higher education programs if the legislation is ultimately enacted.
The bill, advanced by a vote of 51-50 with Vice President JD Vance acting as the tie-breaker in his role as President of the Senate, now heads back to the House, where the chamber can send it to the White House if it agrees to the Senate’s revisions and passes the legislation without making any changes. However, if the House has further revisions to the bill and is able to pass it, then the package must go back to the Senate. Both chambers must pass the same version of the bill before it can be sent to the president to be signed.
Only three Republicans, Sens. Thom Tillis (R-N.C.), Rand Paul (R-Ky.), and Susan Collins (R-Maine.), voted against the Senate bill.
While Congress is trying to meet its self-imposed July 4 enactment deadline, that deadline could easily slip if the House decides to further amend the Senate’s version of the text. The House plans to reconvene on Wednesday, but it is currently unclear how quickly it can move the text to the floor.
Prior to Senate approval, the chamber spent much of the weekend and the beginning of the week finalizing its text and examining amendments.
Provisions that specifically touch on higher education policy were drafted by the Senate Health, Education, Labor, and Pensions (HELP) and Finance Committees.
With the parliamentarian reviewing the provisions included in the Senate bill to ensure they abided by the“Byrd Rule”, significant revisions were made to earlier drafts of the bill to abide by the Senate parliamentarian’s rulings and accommodate input from Senators who sought to change the House-passed bill.
One provision that needed to be changed concerned short-term Pell Grants, which the parliamentarian determined violated budget rules. In the updated bill, unaccredited providers would be excluded from work-force Pell eligibility.
The amended text keeps the provision that states students who receive grants or scholarships covering their entire cost of attendance (COA) would be ineligible to receive a Pell Grant, even if otherwise eligible for the program. However, the amended text does not include the piece where students would see their Pell Lifetime Eligibility Usage (LEU) reduced as if they had been awarded Pell.
The Senate’s original bill excluded time spent in a medical or dental internship or residency program from counting towards Public Service Loan Forgiveness (PSLF). The amended version of the bill revised the language and would allow payments made during those internships or residency programs to count towards PSLF.
In terms of the endowment tax, institutions that serve less than 3,000 students would be exempt from the proposed tax.
Senators also made changes to a proposed institutional accountability metric by only using the earnings of undergraduate students who completed their program, rather than using the earnings of undergraduate students who exited the program, even non-completers. . Also, for graduate students, the original bill text stated their earnings would be compared either six or 10 years post-enrollment, depending on the length of their program. The amended text states their earnings would be compared four years out, regardless of the program length.
The updated bill also reversed some adjustments previously made to the student aid index formula as a result of the FAFSA Simplification Act. Currently, the value of family farms and small businesses are reported as assets, for those applicants required to include assets on their FAFSA. The Senate’s original text reinstated the asset exemption for family farms and small business owners, so their assets are not used when determining a student’s aid eligibility. The amended text expands this asset exemption to family-owned commercial fisheries as well.
Finally, the amended text delays – rather than repeals – the 2022 closed school discharge and borrower defense to repayment rules promulgated under the Biden administration. As such, these rules would not be in effect "for loans that first originate before July 1, 2035."
Stay tuned to Today’s News for coverage of the reconciliation bill and its implications for higher education.
Publication Date: 7/2/2025
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