Ed Trust policy director Roxanne Garza outlines federal student‑aid overhaul, warns of Pell shortfall and details workforce Pell rollout

Roxanne Garza, director of higher education policy at the Education Trust, told the Financial Advisory Committee that the reconciliation bill passed last summer significantly reshapes federal student aid, and she urged institutions and state agencies to prepare for reforms that take effect July 1.

Garza said the law "cuts about 300 billion from federal financial aid over the next 10 years," and she warned that the changes include the elimination of Grad PLUS loans for new borrowers: "Grad PLUS loans no longer exist. They will no longer be available to new students that will be borrowing after July 1." She outlined new caps: graduate unsubsidized loans capped at $20,500 per year (lifetime $100,000) for graduate students and up to $50,000 per year (lifetime $200,000) for professional programs, and a Parent PLUS cap of $20,000 per year with a $65,000 lifetime cap per dependent student.

Why it matters: the limits reduce federal borrowing options for graduate and parent borrowers, which Garza said may push some students to private loans or deter attendance in high‑cost programs. She advised institutions to assess which programs might be affected and to develop communications and state/institutional aid alternatives.

Garza summarized the Department of Education’s rulemaking timeline and one central controversy: how the department defines “professional programs,” which determines who qualifies for higher loan limits. The draft rule (public comment period closed March 2) lists roughly a dozen qualifying fields; Garza said stakeholders pressed the department to broaden the definition because some high‑demand health fields — for example, nursing and social work — may be omitted.

She also described a major overhaul of repayment options. The bill replaces several existing income‑driven plans with two new choices: a standard fixed repayment schedule tied to principal (terms lengthen with total borrowing) and a new Repayment Assistance Plan (RAP). Garza said the RAP increases the share of income used in payment calculations, imposes a $10 monthly minimum for borrowers with very low or no reported income, and extends the timeline to potential loan forgiveness toward 30 years for many borrowers. "Even for borrowers making no income, they will still have that $10 minimum monthly payment," she said, noting this and other changes could raise the risk of delinquency and default as payments resume after pandemic pauses.

On Pell Grants, Garza said Congress added a $10.5 billion FY26 infusion but cited Congressional Budget Office projections showing a $5.45 billion shortfall in FY26 and more than $11 billion for FY27. She attributed the fiscal strain in part to improved FAFSA completion and broader eligibility from prior simplification efforts, and she called for advocacy to address the gap.

A major new feature is Workforce Pell, a federal program for short‑term, state‑approved workforce training. Garza described the federal guardrails: eligible programs must be 150–599 clock hours (8–15 weeks), offered by accredited Title IV institutions, have been operating in the same form for at least 12 months, align to state‑defined high‑skill/high‑wage/demand sectors, lead to stackable/portable credentials (and articulate to credit), and meet accountability thresholds (70% completion, 70% job placement and a value‑added earnings test that limits tuition relative to graduates’ median earnings). She emphasized that states — led by governors in partnership with workforce boards and their coordinating boards — will approve programs, and that July 1 eligibility depends on whether states have approved programs.

Garza pointed to a March 12 announcement from the Higher Education Coordinating Board that Texas agencies are coordinating approvals; she encouraged campuses, financial‑aid officers and high‑school counselors to learn how Workforce Pell affects packaging decisions. She also warned students that short‑term Pell awards count against a student’s lifetime Pell eligibility.

Committee members asked clarifying questions. When asked whether divorced parents could each borrow up to the parent cap for the same student, Garza said the aggregate limit is per dependent student. Members raised concerns about rising cohort default rates, the Department of Education’s plan to transition defaulted portfolios to Treasury, and whether Workforce Pell will worsen Pell shortages; Garza said Workforce Pell is unlikely to be the main driver of the projected shortfall but that expanding eligibility and higher FAFSA completion together increase demand on a limited Pell pot.

Garza offered to share resources and current DOE guidance and urged institutions and state offices to prepare outreach, aid‑packaging plans and data collection to support program approvals and counseling.

The committee did not take formal action on the presentation; Garza closed by offering follow‑up materials and the session moved on.