Workforce Pell Grants: Moving Forward with Accountability

Updated February 27, 2024: In December 2023, the House Committee on Education & the Workforce advanced with bipartisan support the Bipartisan Workforce Pell Act, sponsored by Reps. Virginia Foxx (R-NC), Bobby Scott (D-VA), Elise Stefanik (R-NY), and Mark DeSaulnier (D-CA). This bill combines accountability elements from the Jobs to Compete and the Pell Acts. It would require programs to meet both the Pell Act’s value-added earnings test and the Jobs to Compete Act’s high school earnings threshold. It would also allow both online and for-profit programs to qualify for Pell Grants. The Bipartisan Workforce Pell Act shows that tying eligibility for short-term Pell to program-level outcome metrics represents a bipartisan pathway to expanding access to programs that provide value for students.

Although the bill is a significant step forward, work remains.To pay for the expansion of Pell Grants to short-term programs, the legislation would require institutions subject to the endowment tax to reimburse the government for any non-repayment on federal student loans. Unfortunately, this approach may prevent institutions from enrolling low- and moderate-income students who need to take out loans for graduate and professional programs and thus restrict the ability of these students to access institutions that generally deliver strong outcomes. It would also put these institutions on the hook when their graduates choose to participate in the Public Service Loan Forgiveness program.

The Bipartisan Workforce Pell Act resolves disagreement about what kinds of programs should qualify for short-term Pell Grants by linking eligibility to strong accountability metrics. It would make sense to approach the bill’s offset in the same spirit, ensuring that federal aid continues to support programs that perform well and instead targeting programs that produce especially poor outcomes for students and taxpayers, rather than a class of institutions.]

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Original Post

For years, policymakers have wrestled with the question of expanding Pell Grants to include short-term workforce programs. Under current law, only students enrolled in programs that run at least 16 weeks (600 clock hours) are eligible. Workforce Pell proposals would expand Pell eligibility to workforce programs between eight and 15 weeks (between 150 and 600 hours) in length.

Despite significant bipartisan interest in expanding Pell eligibility, two key questions have stalled legislation: First, how should policymakers ensure Pell expansion only funds programs that provide value for students? Second, should short-term programs at for-profit institutions and fully online programs be eligible?

Recent legislative proposals thread the needle by requiring short-term programs to demonstrate their value to qualify for Pell Grants, which could expand Pell eligibility while protecting students and taxpayers.

The Question of Workforce Pell Grants

The past two decades have seen notable growth in shorter-term credentials—certificates below associate degrees. Proponents of expanding Pell eligibility argue that short-term credentials provide a path to quality jobs and higher earnings for individuals who want to move quickly into in-demand occupations or who could benefit from upskilling or retraining, while addressing skills mismatches between the existing workforce and job openings. Critics warn, however, that short-term Pell could subsidize low-value programs that do not demonstrate positive returns for students.

Although comprehensive data on short-term certificate programs is lacking, studies suggest that the benefits to students vary significantly by program and region and across demographic groups. Short-term credentials appear, on average, to produce modest increases in earnings—smaller than those of longer-term certificates and degree programs—that may disappear over time. Many holders of short-term certificates earn poverty-level wages; moreover, short-term certificates in some occupational fields often produce negative returns. Yet, in other fields, certificates regularly show positive returns and lead to significant increases in earnings.

Value Metrics for Workforce Pell

Recent legislative proposals offer three approaches to a short-term Pell accountability framework:

• The JOBS Act (S.161), sponsored by Sens. Tim Kaine (D-VA) and Mike Braun (R-IN), would require that eligible programs align with recognized high-skill, high-wage, or in-demand occupations or industry sectors; provide students with a recognized postsecondary credential upon completion; and meet various standards (including reporting requirements) under the Workforce Innovation and Opportunity Act (WIOA). It would also require programs to demonstrate that graduates receive a median earnings increase of 20% within one year of completion and would establish a five-year sunset for the expansion of Pell funding to short-term programs.
• The Jobs to Compete Act (H.R.1655), sponsored by Rep. Bobby Scott (D-VA), would require programs to align with recognized high-skill, high-wage, or in-demand occupations or industry sectors; provide students with a recognized postsecondary credential; meet WIOA standards and reporting requirements; and also demonstrate that median program graduates: 1) earn more than a high school graduate aged 25-to-34 in their state; and 2) have an earnings gain of at least 20% within 18 months of completion.
• The PELL Act (H.R.496), sponsored by Reps. Elise Stefanik (R-NY) and Virginia Foxx (R-NC), would require that programs align with in-demand occupations or industry sectors (but would not require that they meet WIOA reporting rules) and demonstrate a positive return on investment for students and taxpayers. Specifically, it would require that a student’s value-added earnings (the difference between median earnings for students receiving financial aid and 150% of the federal poverty line) exceed program tuition and fees three years after completion.

Although the JOBS Act, Jobs to Compete Act, and PELL Act focus on different measures of value, they align closely in tying expansion of Pell eligibility to robust outcome requirements.

The JOBS Act and Jobs to Compete Act would both require programs to demonstrate that graduates receive substantial earnings gains.

The Pell Act and Jobs to Compete Act, meanwhile, would further create strong guardrails against Pell funds going to programs that do not provide positive return on investment or meet earnings standards. Based on data from longer-term certificate programs that already qualify for Pell Grants, an Urban Institute analysis estimates that nearly 80% of short-term vocational programs would fail the PELL Act’s expected return test. Among for-profit institutions, which constituted most of the programs studied, 92% of programs would fail, compared to 20% of programs at public institutions. The Jobs to Compete Act’s high school earnings benchmark would probably create a similarly high bar for accessing Pell funding. A Brookings Institution review of short-term programs accessing federal student loans found that more than 80% of programs in the sample failed to meet a variation of the high school earnings benchmark based on estimated average earnings for high school graduates. Within the sample, more than 90% of for-profit programs failed to meet the earnings threshold, compared to about 40% of programs at public institutions.

Requiring programs to demonstrate their benefit to students makes sense given that returns on short-term certificates can vary dramatically. Cautious implementation and reporting on disaggregated data may be needed to ensure that institutions do not attempt to game metrics by limiting access—and to address concerns that accountability standards could disproportionately impact the ability of women and students of color to receive Pell funding. Nevertheless, with careful regulation, providing Pell Grants for high-value programs could help direct students toward programs that produce strongly positive returns while incentivizing institutions to improve value for students. Requiring programs to demonstrate value would also ensure taxpayer dollars are being well-spent and mitigate the risk that institutions would respond to Pell expansion with a profusion of low-value programs.

Additionally, strong accountability metrics help address concerns over Pell eligibility for short-term certificates at for-profit institutions and online programs. Credentials from for-profit institutions provide on average less value than those from public and private nonprofit institutions; critics contend that for-profit programs generally do not pay off for students. Still, studies showing that for-profit programs on average provide less value also indicate that some do provide worthwhile credentials. For some students, a for-profit program may also be the most accessible option for obtaining training in a particular in-demand occupation, especially since for-profit institutions can be more responsive to changes in labor market demand. Online programs, meanwhile, generally show lower rates of retention and completion than in-person programs, especially for lower-income and underrepresented students, yet can provide critical accessibility for working students and those who may be unable to attend in-person programs. Tying program eligibility to accountability metrics rewards high-value programs, regardless of institutional type or modality.

Both the PELL Act and the Jobs to Compete Act would allow for-profit programs to receive Pell funding, suggesting that program-level accountability measures can help establish a bipartisan consensus on eligibility. Although the Jobs to Compete Act (unlike the PELL Act and the JOBS Act) would not allow exclusively distance education programs to receive Pell funding, it seems reasonable that a focus on program-level outcomes could also help address disagreement over online programs’ eligibility. Focusing on whether a particular program provides value makes the question of how that program is delivered significantly less consequential.

Potential for a Bipartisan Approach

Workforce Pell accountability measurements require careful balance and consideration of the tradeoffs. For instance, focusing on earnings impact could help ensure Pell funds lead to wage growth for recipients but may qualify programs with graduates earning poverty-level wages. Addressing that concern with an earnings floor may in turn limit access of students from disadvantaged backgrounds to programs that could substantially increase their earnings.

Alignment between the JOBS Act, PELL Act, and Jobs to Compete Act on tying eligibility to program-level outcome metrics is promising. If policymakers work together to find balance among varying accountability measures, workforce Pell Grants present a promising opportunity to provide more Americans with the vocational education and training they need and better match the workforce to open jobs that offer greater prosperity.