Workforce Pell Rules Summary

Highlights from the AHEAD Committee: Workforce Pell Consensus Reached

By Catherine Brown, Senior Policy and Advocacy Director

Reading time: 4 mins

The AHEAD committee reached consensus on Friday, December 12th, after a week of negotiations on two policy issues from the budget reconciliation bill: Workforce Pell and the prohibition on students receiving Pell Grants when they have a full ride. This consensus means the Committee's agreed-upon language will largely be adopted, though some policy questions remain unresolved. The Committee will reconvene January 5th-9th to address the remaining higher education provisions in the budget reconciliation law. The U.S. Department of Education (ED) will then finalize the regulation, post it for public comment, and release final regulations by July 1, 2026. NCAN Midwest Policy Fellow Magnus Noble served as the student alternate on the Committee, enabling him to advocate for provisions impacting students. For a complete summary of the provisions in the negotiated rule, see here. Below is a summary of key issues and outcomes that NCAN focused on during the process.

PELL COST OF ATTENDANCE RESTRICTION

The budget reconciliation bill prohibits students from receiving Pell in excess of the cost of attendance, if they are receiving a full ride. This changes previous law that permitted Division I and II athletes to receive both a Pell Grant and a full ride from their university. Under the new law, all student aid packages, including those of DI and II athletes, will be capped at the cost of attendance (COA). The negotiated rulemaking committee’s final language states that if a student has received grants and scholarship aid exceeding the full cost of attendance, the school must reduce non-Federal aid such that the total financial aid package meets the cost of attendance or not award a Pell Grant to the student.

This interpretation of the statute means that when students receive a full ride, schools may not reduce Pell Grants. Instead, they must reduce non-Federal aid (e.g. private or state grants and scholarships) or remove the Pell grant from the student’s aid package in its entirety. By creating a strong financial incentive for schools to reduce non-Federal aid and retain Pell, this decision addresses concerns that Pell would no longer function as a first-dollar program in student aid awards.

WORKFORCE PELL

Program Approval Process

States will lead the effort to determine which programs are eligible for Workforce Pell. Governors or their designees must design a process assessing whether programs prepare students for in-demand, high-skill, or high-wage occupations, a list that must be reviewed at least every two years in conjunction with state’s WOIA process. Additionally, they must confirm that programs meet the quality guardrails and requirements for demonstrating that credentials are stackable and portable, as described below. Program approval duration is aligned with each institution’s Program Participation Agreement (PPA).

ED staff provided a list of program types they anticipate being likely participants, including nursing assistants, commercial drivers’ licenses, welding and child care providers.

Quality Guardrails

The statute includes several requirements ensuring programs lead to valuable credentials for students:

Value-added earnings – Tuition and fees must not exceed the "value-added earnings" of program completers who received a Pell grant. Value-added earnings is defined as the median earnings of program completers three years after completion, adjusted for regional cost of living, minus 150% of the poverty line. Programs with more than half of students living outside the state where the program is located would be compared with the national price parity.

For example, according to ED, if the median earnings of program completers three years after completion is $25,000 and the regional cost of living is slightly below the U.S. average (86.5% of the U.S. median), program earnings would be adjusted to $28,902 and compared to 150% of the federal poverty threshold ($21,780). $28,902 minus $21,780 equals $7,122. Therefore, the program's tuition and fees may not exceed $7,122. Put simply, the program must yield earnings that exceed 150% of the federal poverty limit plus the program cost.

Students who die, experience a medical condition preventing them from working, or become incarcerated are excluded from the calculation. Note that students enrolled in another postsecondary education program are not excluded. This issue is discussed further below.

ED is charged with calculating the value-added earnings of each program and providing it to the institution running the Workforce Pell program. According to the draft regulations, ED must receive from the college or university a list of students who received Pell and completed the program, and must receive from the "federal agency with earnings data" the median earnings of every student on each institution's list. At least 16 students with earnings data are required for ED to calculate value-added earnings.

70/70 requirement – Seventy percent of students must complete each program within 150% of the "normal time to completion," and each program must have a 70% job placement rate in the second quarter after students exit the program.

Starting in the 2028-2029 school year, students who exit the program must be "employed in the occupation(s) for which the program prepares students…or a comparable high-skill, high-wage, or in-demand occupation."

Prior to the 2028-2029 academic year, Governors can certify that programs meet these requirements using administrative data.

Governors are responsible for verifying that the job placement rate has been met, which may prove challenging. While state administrative data can usually reveal which sector someone works in, identifying their specific occupation is more difficult. Whether someone is an x-ray technician or a cardiologist, they still work in health care.

Stackability

The statute requires programs to allow students to "receive academic credit for the Workforce Pell program that will be accepted toward meeting such certificate or degree program requirements." In other words, Workforce Pell programs must allow students to accrue credit that leads to a higher degree or credential, even if the Workforce Pell program is not for credit at the time the student is enrolled.

Demonstrating that a program is stackable and portable can be difficult because most students don't build on short-term credentials to pursue higher degrees. As a result, NCAN recommended important changes to the draft regulations to ensure students understand their lifetime eligibility usage and can use Workforce Pell to advance their postsecondary education and career. The negotiated regulations now require states to develop:

• A written policy for determining if a credential is stackable and portable that establishes documented connections to additional credentials, considers, if available, data showing whether students have obtained additional credentials through career pathways, real-time labor market information, and includes a process for employer validation; and
• A written policy for institutions to establish that an eligible workforce program will ensure the award of academic credit towards a certificate or degree program upon a student’s successful completion of the eligible workforce program and enrollment in such certificate or degree program, and that such credit will be accepted at one or more eligible institutions through written agreements, including established articulation agreements, transfer-of-credit agreements, consortium or partnership agreements, or similar arrangements.

These requirements will help ensure that Workforce Pell programs can be a foothold in a postsecondary education that culminates in a degree.

Unfortunately, ED declined to exclude students enrolled in postsecondary education programs from the employment rate calculation, despite requests from multiple negotiators. As a result, if a student enrolls in a bachelor's degree program after completing the Workforce Pell program, they will count as unemployed in the job placement calculation. This decision creates a strong disincentive for colleges to develop or promote stackable credentials and seriously undermines the stackability requirement in statute.

Remaining Questions

While achieving consensus in the first week means much of the language won’t change, there are still some important questions that have not been addressed, including:

• Will states have to implement a process for checking job placement and program completion rates annually or will postsecondary institutions be responsible for certifying that they have met the requirements?
• How will states submit Governor certifications and in what (standardized?) format to ED? What will be the expected turnaround times for review, appeals, and recertification?
• How will online programs that span multiple states be considered for approval in light of the bilateral agreements that are permitted under the draft regulations?
• The draft regulations state that programs may lose and regain eligibility tied to the performance metrics, but will the final regulations add reporting burdens that would change how states structure their review?

Next Steps

The AHEAD Committee will reconvene in person and virtually the week of January 5-9^th to discuss postsecondary accountability, including the new earnings premium requirement that was included in the budget reconciliation bill, financial value transparency, and gainful employment. The second session will also address the exclusion of Pell grant eligibility for students with a Student Aid Index that is twice the maximum Pell or higher.

After that session concludes, ED will release a draft regulation for a 30-day public comment period, followed by a final regulation in late spring or early summer of 2026. Once final regulations are released, states will establish their processes for approving programs, and colleges and universities will submit programs for consideration. While some states and schools may move quickly, many programs likely won't be operational until spring 2027 at the earliest.

Questions? Please don't hesitate to reach out to me at brownc@ncan.org.