WASHINGTON UPDATE, MARCH 2026

Senators Warner and Kaine Press ED on Decision to Limit Student Loans to Health Care Workers

On March 2, 2026, Senators Mark R. Warner (D-VA) and Tim Kaine (D-VA) sent a letter, which was included in a press release, to Secretary of Education Linda McMahon pressing her on the Department of Education’s decision to propose student financial aid provisions that alter the definition of “professional degree” to only include doctorate-level degrees. “At a time when Virginia – like the rest of the country – is facing a health care workforce crisis and is in need of tens of thousands of health care workers, this cap on student loan borrowing does not reflect the needs of the health care system.” The letter concluded by urging the Department of Education to expand the definition of “professional degree” to include a more comprehensive list of post-baccalaureate health care degrees. “If health care professionals and trainees are blocked access to necessary financial support, Virginia and the nation’s health care workforce will only worsen.”

Congressman Lawler Provides Public Comment to Proposed Rule Urging the Department to Revise its Interpretation of a “Professional Degree”

On March 2, 2026, Congressman Mike Lawler provided a public comment on the Department of Education’s proposed rule titled “Reimagining and Improving Student Education,” urging the Department to revise its interpretation of “professional degree” to align with existing regulations. The full letter, which is included in the press release, includes the following statement: “The truth is that many of these professions need advanced degrees and licenses to begin and continue practice. Additionally, scope of practice varies from state to state for many of the covered professions as well. Further, there is nothing in current statute or prior regulation that supports the idea that professional degrees are only programs where those who obtain them, after licensure, can practice without supervision.”

Senate Democrats Release Report About OBBBA Impact on Private Student Loan Lenders

In February 2026, a group of Senate Democrats released a report titled, “Costly Consequences: How the Trump Administration Unleashed Private Student Loan Lenders,” which analyzed how new provisions in the One Big Beautiful Bill Act (OBBBA) will increase demand for private student loans and recommended greater oversight of the private lending market. OBBBA made changes to the federal student loan program, including eliminating the Graduate PLUS Loan program and placing new annual and aggregate loan limits on graduate, professional, and parent borrowing. Republicans have argued that these new loan limits are reasonable caps meant to protect students and lower costs. Democrats have argued that the changes could push students into the private loan market.

The report is based on information provided by six significant private student loan lenders, Navient, Sallie Mae, SoFi, Citizens, College Ave, and Nelnet, who lent over $14.7 billion in private loans in 2024. The information that was provided by these lenders reveals that:

1. Major private lenders have been expanding their lending activity each year, “despite persistent predatory behavior in the private student loan market.”
2. Private student loan lenders expect more students to turn to private loans due to OBBBA’s loan limits.
3. Most of the private lenders surveyed offer “minimal protections for borrowers who are defrauded by their schools or who face a school closure.”
4. Half of the private lenders either have sold student loans to private equity firms or plan to do so.
5. Most of the private lenders expressed a willingness to expand customer service capacity if they face increased private loan demand due to OBBBA.

House Education and Workforce Subcommittee Holds Hearing on College Costs

On February 4, 2026, the House Education and Workforce Subcommittee on Higher Education and Workforce Development held a hearing entitled, “Runaway College Spending Meets the Working Families Tax Cuts,” which focused on the rising costs of higher education and possible solutions that can be employed to reduce college costs. During the hearing, Members and witnesses discussed the rising costs of higher education in the United States, how the changes to Federal student loans included in the One Big Beautiful Bill Act (OBBBA) will impact college access and college affordability, and competing approaches to controlling costs. The press release from the Subcommittee Chairman Burgess Owens (R-UT) includes a link to the hearing.

Chairman Owens said in his opening statement: “I’m proud this committee has taken meaningful action to address the college affordability crisis, but there’s more to do. I’m confident that restoring market incentives to higher education will result in better pricing for students. Every student should feel empowered to pursue an education that fits their goal and know the degree they choose is going to be worth the cost.”

Congresswoman Alma Adams (D-NC), Ranking Member of the Subcommittee, said in her opening statement: “Republicans’ big ugly law makes this crisis worse – changes to Pell Grants, new borrowing limits, and a restructured repayment system narrow the pathways to higher education, particularly for underserved communities. These reforms risk turning college into an expensive privilege rather than a public good. This hearing is about one simple question, do we believe college should be accessible to everyone willing to work for it, or only to those who can afford it.”

FSA Provides OBBBA FAFSA Processing Updates

On March 9, 2026, Federal Student Aid (FSA) released an Electronic Announcement (APP-26-02), which describes updates to several FSA systems and the Free Application for Federal Student Aid (FAFSA) processing experience resulting from the One Big Beautiful Bill Act (OBBBA). The OBBBA established Federal Pell Grant eligibility for eligible workforce programs and modified loan limits. In anticipation of the program changes to Title IV programs under OBBBA that are required to be implemented on July 1, 2026, or later, these system changes will go live on April 26, 2026.

All student- and contributor-facing FAFSA form changes related to OBBBA were made in September 2025 in advance of the general availability of the 2026-2027 FAFSA form. The Electronic Announcement indicated that it is currently engaged in rulemaking on numerous OBBBA provisions. While final regulations are forthcoming, this Electronic Announcement provides the technical guidance to support institutions, states, and vendors in preparing their systems to implement these changes in April. Additional guidance will be provided if the forthcoming regulations result in changes to these technical updates.

ED Announces Release of NPRM to Establish New Workforce Pell Grant Program

On March 6, 2026, the Department of Education announced that it issued a Notice of Proposed Rulemaking (NPRM), which was published in the Federal Register on March 9, 2026, to establish the new Workforce Pell Grant program. The Workforce Pell Grant program will enable students to use Federal Pell Grant funds to enroll in “high-quality, short-term programs that offer education in high-skill, high-wage or in demand industry sectors or occupations.” The regulations were agreed upon through negotiated rulemaking that resulted in consensus of the regulations discussed during the Accountability in Higher Education and Access through Demand-driven (AHEAD) Workforce Pell Grant session. Comments are due on or before April 8, 2026.

Under Secretary of Education Nicholas Kent said: “With this proposed rule, we take an important step toward building a stronger postsecondary education system – one where the Federal government invests in short-term, high-quality programs aligned with a State’s workforce needs, creating new affordable pathways to upward mobility for America’s students and their families.”

The Secretary proposes to codify two changes made to the Higher Education Act by the One Big Beautiful Bill Act (OBBBA) through these regulations:

1. Pell Grant Ineligibility When Other Aid Covers Full Cost of Attendance (COA): The OBBBA does not allow students to receive Pell Grant funds during any period for which they also receive grant or scholarship aid from non-Federal sources, including States, eligible institutions, or private sources, that equals or exceeds their COA for such period.
2. Workforce Pell Grants: The OBBBA allows students to receive Pell Grants for eligible workforce programs that are:

• • 150-599 clock hours in length or an equivalent number of credit hours (four but less than 16 semester hours or trimester hours, or six but less than 24 quarter hours);
  • At least 8 weeks but less than 15 weeks of instruction to complete;
  • Not correspondence courses, coursework that takes place as part of a study abroad program, or credit or clock hour equivalencies that are part of a direct assessment program;
  • Approved by a Governor, after consultation with the State’s workforce board, to ensure that the programs are part of an in-demand, high-skill, or high-wage industry;
  • Meeting certain accountability benchmarks, including completion (70%) and job placement (70%) rates, as well as a value-added earnings measure; and
  • Offered by an institution that has not been subject to any suspension, emergency action, or termination of programs during the last five years preceding the date of determination.

The NPRM seeks public comment on several areas, such as how to prevent institutions from circumventing the new statutory limit on Pell Grant eligibility when non-federal grant or scholarship assistance exceeds a student’s COA by reducing aid by one dollar or by increasing the COA. ED is also seeking comments on its proposed framework for measuring Workforce Pell Grant program outcomes.

On March 6, 2026, Ranking Member of the Education and Workforce Committee Bobby Scott (D-VA) released a press release, which stated: “Expanding Pell Grant access to support students seeking short-term training programs, such as IT, health care, and welding courses, has long been a bipartisan priority. Although I did not support Congressional Republicans’ ‘Big, Ugly Bill’ when it was considered in the House, I do support expanding access to the Pell Grant for shorter-term training programs. My biggest concern has always been creating accountability measures to ensure students will have access to high-quality programs. Today’s proposed rule has some guardrails, but more needs to be done to ensure students receive adequate instruction and stackable credentials from programs to be successful in the job market.”

ED Releases Annual Notice of Interest Rates for Fixed-Rate Federal Student Loans Made Under the Direct Loan Program

On March 2, 2026, the Chief Operating Officer for Federal Student Aid (FSA) announced the interest rates for Federal Direct Stafford/Ford Loans (Direct Subsidized Loans), Federal Direct Unsubsidized Stafford/Ford Loans (Direct Unsubsidized Loans), and Federal Direct PLUS Loans (Direct PLUS Loans) made under the William D. Ford Federal Direct Loan (Direct Loan) Program, with first disbursement dates on or after July 1, 2025, and before July 1, 2026. A link to the Federal Register Notice is included in the announcement. The fixed interest rate is:

Direct Subsidized, and Direct Unsubsidized Loans	Undergraduate Students	6.39%
Direct Unsubsidized Loans Undergraduates	Graduate and Professional Students	7.94%
Direct PLUS Loans	Parents of Dependent Undergraduate Students, Graduate, and Professional Students	8.94%

ED Issues Interpretative Rule Aimed at Reducing Barriers for New Accrediting Agencies to Apply for Recognition from the Secretary

On February 27, 2026, the Department of Education published an Interpretative Rule in the Federal Register designed to reduce existing barriers to the recognition of accrediting agencies to promote competition among accreditors and provide opportunities for new institutional and programmatic accreditors. On February 26, 2026, a press release quoted Under Secretary of Education Nicholas Kent as saying: “The Trump Administration is reforming the broken accreditation system to prioritize students, not legacy accreditors. Americans do not trust accreditors because they have failed to ensure educational quality at colleges and universities. Too often accreditors have been focused on the wrong things, like promoting partisan ideologies, instead of ensuring quality outcomes for students.”

The interpretive rule clarifies the Department’s recognition process as outlined in 34 C.F.R. Part 602, which includes:

• Clarifying when accreditation activities begin for the purpose of satisfying the regulatory requirement that accreditors must conduct two years of accrediting activities before they can be recognized by the Secretary of Education. The two years begin after the date the new accrediting agency (1) filed articles of incorporation in the relevant jurisdiction and the governing entity of the corporation has adopted bylaws; and (2) conducted at least one type of accrediting agency activity; and
• Shortening the process of review by completing the staff analysis determining whether an accrediting agency meets the basic eligibility requirements within 60 calendar days from the submission of the of the agency’s application with the intent to complete the review of the written petition between six to 12 months.

The press release outlined the actions the Department has taken to date to improve the current accreditation system:

• Resumed recognizing new accreditors;
• Lifted the moratorium on switching accreditors;
• Requested stakeholder input on the Accreditation Handbook;
• Allocated the Fund for the Improvement of Postsecondary Education (FIPSE) to support accreditation reform;
• Announced the Accreditation, Innovation, and Modernization (AIM) Negotiated Rulemaking Committee; and
• Proposed an Interpretive Rule on the “regional” label.

The interpretative rule represents the Department’s current position on the issues discussed, “but nothing in this interpretative rule is binding upon the Department, recognized accrediting agencies, accrediting agencies seeking recognition, or any other parties.”

NACIQI Announces Agenda, Time, and Instructions to Access the Upcoming NACIQI Meeting

On February 24, 2026, the Department of Education published a Notice announcing the upcoming NACIQI meeting in the Federal Register to be held on March 24 and 25, 2026. The purpose of the NACIQI meeting is to elect a committee vice chairperson and conduct a review of applications for renewal of recognition submitted by six accrediting agencies, including the National League for Nursing, Commission for Nurse Education and Accreditation, and compliance reports submitted by four accrediting agencies, including the Northwest Commission on Colleges and Universities.

ED Seeks Comments on Extension Without Changes for Subpart J – Approval of Independently Administered Tests

On February 23, 2026, the Department of Education issued a Notice in the Federal Register that it was requesting comment for an extension without changes of the approval for the reporting and recordkeeping requirements for the independently administered tests (ATB tests) used to determine a student’s eligibility for Title IV assistance when a student does not have a high school diploma or its recognized equivalent. Comments are due on or before April 24, 2026.

ED Announces Additional Partnerships to Break Up the Federal Education Bureaucracy

On February 23, 2026, the Department of Education announced two new interagency agreements (IAAs) to further break up the federal education bureaucracy. These agreements follow seven agency partnerships signed last year, including a workforce development partnership with the Department of Labor, which has created an integrated federal education and workforce system. The new partnerships with the Departments of State (State) and Health and Human Services (HHS) leverage partner agencies’ administrative expertise and experience working with relevant stakeholders. State will partner with ED on the Section 117 foreign gift reporting, and HHS will partner with ED on family engagement and school support programs.

Secretary of Education Linda McMahon said: “As we continue to break up the federal education bureaucracy and return education to the states, our new partnerships with the State Department and HHS represent a practical step toward greater efficiency, stronger coordination, and meaningful improvement.”

FSA Releases Agenda and Additional Information for the 2026 Federal Student Aid Training Conference

On February 19, 2026, Federal Student Aid (FSA) released the 2026 Federal Student Aid Training Conference Agenda in an Electronic Announcement (GENERAL-26-13). The Agenda includes multiple remarks from ED leadership and sessions on Loan Changes, Student Eligibility Changes, Pell Eligibility for Workforce Programs, the Financial Cybersecurity and Liability Benefits of NIST SP 800-171, the Future of Federal Loan Repayment Servicing and System Impacts, Federal Update, and Potential Threats Facing Institutions of Higher Education.

On February 25, 2026, FSA released additional information on the 2026 Federal Student Aid Training Conference in an Electronic Announcement (GENERAL-26-14). The additional information includes the Session Descriptions, Presenter Bios, and Resource Center Information.

Participation in the 2026 Federal Student Aid Training Conference (FSATC) is limited to 2,000 attendees, and FSA used a lottery system to allocate seats to as many schools as possible. There was not a live stream or hybrid attendance option. Conference sessions were recorded and will be made available on the FSA Training Conference website shortly after the conclusion of the Conference.

FSA Announces 2026-2027 Federal Pell Grant Maximum and Minimum Award Amounts

On January 30, 2026, and updated on February 18, 2026, Federal Student Aid (FSA) issued a Dear Colleague Letter (DCL) (GEN-26-01), which announced the maximum Pell Grant award for the 2026-2027 award year of $7,395 and the minimum Pell Grant award for the 2026-2027 award year of $740. The updated DCL reflects the enactment of the Consolidated Appropriations Act, 2026, confirming the maximum and minimum Pell Grant awards for the 2026-2027 award year. The DCL reminded schools that the maximum and minimum Pell Grant award eligibility is determined based on tax filing requirements, family size and composition, federal poverty guidelines, and state of residence. If a student qualifies for a maximum Pell Grant award, the Student Aid Index (SAI) is not used to determine the amount of the grant. “An SAI-calculated Pell Grant award is determined by subtracting the student’s calculated SAI from the annual published maximum Pell Grant amount, then rounding to the nearest $5. If the SAI-calculated Pell Grant is less than the published minimum Pell Grant award, the student is ineligible for an SAI-calculated Pell Grant. However, the student may still be eligible for a minimum Pell Grant if they meet the minimum Pell Grant eligibility requirements.”

The DCL also reminded schools of the following:

• The One Big Beautiful Bill Act (OBBBA) prohibits an applicant whose SAI is equal to or greater than twice the maximum Pell Grant amount for the award year from receiving a Pell Grant. For the 2026-2027 award year, the SAI threshold is $14,790.
• Students may be eligible to receive Pell Grant funds for up to 150 percent of the student’s Pell Grant scheduled award for an award year.
• When determining a student’s scheduled award, the total cost of attendance is always based on the costs for a full-time student for a full academic year, regardless of the actual enrollment intensity or actual time the student will be enrolled during the award year.
• A student’s annual Pell Grant award reflects the Pell Grant award amount adjusted based on the student’s enrollment intensity.
• A student’s eligibility to receive a Pell Grant award may be limited by the statutory provision in the Higher Education Act, as amended, that sets a lifetime Pell Grant eligibility limit of 12 semesters or its equivalent.

FSA Releases Guidance Reminding Institutions to Update and Maintain Default Management and Prevention Plans

On February 18, 2026, Federal Student Aid (FSA) released an Electronic Announcement (GENERAL-26-12) reminding colleges and universities of their shared responsibility to improve loan repayment outcomes, especially as the number of delinquent and defaulted borrowers continue to rise. This Electronic Announcement builds on FSA’s Electronic Announcement (GENERAL-25-19) of May 5, 2025, which reiterated the key role that institutions play in improving loan repayment outcomes. FSA is requesting that institutions take proactive steps to reach out to their former students who are delinquent or in default on their federal student loans. The new guidance outlines best practices for strengthening institutional default management and prevention plans.

FSA also announced the release of updated data on borrowers who entered repayment between January 2020 and May 2025 and whose federal student loans were more than 90 days delinquent, which shows that over 1,800 institutions have nonrepayment rates at or exceeding 25 percent. “Though the nonrepayment rate differs from the official CDR calculation, such rates are indicative of both institutions’ success in counseling borrowers on the impact and potential consequences associated with their student loan debt, as well as the extent to which institutions may be at risk of losing access to federal student assistance due to high CDRs in the future.” Colleges and universities may lose access to Pell Grants and Direct Loans if their CDR reaches 30 percent or higher for three consecutive fiscal years, or 40 percent or higher in a single fiscal year.

ED Publishes Proposed Interpretive Rule Clarifying the Appropriate Use of Terms “National” and “Regional” by Recognized Accrediting Agencies

On February 17, 2026, the Department of Education published a Proposed Interpretive Rule in the Federal Register, to revise and clarify its prior interpretation of its position on the use of descriptive terms by the Department’s recognized accrediting agencies, specifically, the use of “regional” and “national” when describing an accrediting agency’s area of operation or recognition scope. On November 1, 2019, the Department published a Final Rule on the Secretary’s Recognition of Accrediting Agencies, and the Secretary’s Recognition Procedures for State Agencies, effective on July 1, 2020, which ended the Department’s recognition of accrediting agencies as “regional.” Since the Department does not recognize accrediting agencies as “regional” accreditors, “continued assertions that an institution is “regionally” accredited may send false signals to students and the public that an institution’s accreditation is of a higher quality than institutions that are accredited by accrediting agencies that are nationally recognized. Indeed, when institutions properly refer to their accreditation as being from a nationally recognized accrediting agency, while other institutions continue to use the “regional” nomenclature, it may send false signals to students or the public that the institution lost its accreditation from a “regional accreditor” or that it now has a lesser accreditation status.”

The Department proposes to “reinforce, reemphasize, and strengthen the Final Rule through this Interpretative Rule to clarify that “regional” is no longer a proper definitional term for accrediting agencies and that use of “national” or “institutional” (for non-programmatic accrediting agencies) are the sole descriptors allowed under the HEA.” ED acknowledged that this interpretation may cause some institutions, programs, and accrediting agencies to change the way they refer to accreditation. ED is also aware that some institutional transfer credit policies improperly rely upon “regional” accreditation, but these policies should have been updated following the effective date of the final rule that formally ended distinctions between “regional” and “national” accrediting agencies.

Finally, ED is also aware that some state laws continue to refer to “regional” accreditation, but these State laws are obsolete to the degree they reference a regional accrediting agency recognized by the Secretary. ED understands that it cannot compel action by states, but it strongly encourages them to remove any reference to a distinction between regional and national accreditors.

ED invites comments on the Proposed Interpretative Rule on or before March 19, 2026.

FSA Seeks Public Comment for the 2027-2028 FAFSA Materials

On February 13, 2026, Federal Student Aid (FSA) released an Electronic Announcement (GENERAL-26-10) announcing that the proposed 2027-2028 Free Application for Federal Student Aid (FAFSA) form and FAFSA Submission Summary are now available for public comment in the Federal Register. The 2027-2028 FAFSA has been updated to reflect ongoing feedback from students and families. The primary focus of the changes was on simplifying question and response options to be more easily readable and understandable. Also amended was the tax filing question to accommodate users who file income tax returns in both the United States and Puerto Rico or another U.S. territory. Comments are due on or before April 14, 2026.

Department of Labor Announces Availability of $65 Million in Grants to Help Community Colleges Increase Access to In-Demand, High Quality Training

On February 17, 2026, the Department of Labor announced the availability of $65 million in funding to support programs that help community colleges develop high quality, short-term training programs that meet employers’ and workers’ skill development needs. The Department’s Employment and Training Administration will focus on programs that seek eligibility for the newly authorized Workforce Pell Grants. The Strengthening Community College Training Grants will be awarded to projects nationally with individual awards up to about $11 million.

GAO Issues Report Examining the Costs of the RIF at ED’s Office of Civil Rights

On February 2, 2026, the Government Accountability Office (GAO) issued a report that examined the Department of Education’s Reduction-in-Force (RIF) in its Office of Civil Rights (OCR). In March 2025, the Department initiated layoffs for about half the staff in OCR. The report titled, “Department of Education: Full Costs and Savings Estimate Needed for Reduction-in-Force and Restructuring of the Office for Civil Rights (GAO-26-108320),” concluded that the RIF could have cost over $38 million to pay the salaries and benefits for Civil Rights staff who were not working from March to December 2025.

GAO examined the RIF at OCR between February 2025 through early January 2026, along with associated costs and savings of the RIF, and OCR’s workload. OCR is one of the 17 offices within ED, including Federal Student Aid (FSA), which were impacted by the RIF efforts. However, this GAO report solely focused on the impact of the RIF on OCR. GAO plans to examine similar issues regarding the RIF in other offices and will create separate reports for the other offices.

Beginning in March 2025, 299 OCR employees, out of 575 staff, were subject to a RIF and placed on administrative leave with pay. Seven of OCR’s 12 regional offices closed in March. Following legal challenges, including a Supreme Court order enabling the Trump Administration to carry out its RIF plans at ED, 247 OCR staff were placed on a paid administrative leave between March to December 2025.

Based on the Department’s court filings, GAO estimated that paying salaries and benefits to OCR staff who were subject to the RIF cost between $18 and $24 million from mid-March through September 5, 2025. GAO estimated it cost the Department an additional $10.5 to $14 million to pay the salaries and benefits for the staff remaining on administrative leave from September 8 through December 12, 2025. GAO concluded that from March 21, 2025, to December 12, 2025, ED’s RIF of OCR staff cost about $28.5 to $38 million.

GAO also found that from March to September 2025, OCR received over 9,000 complaints of alleged discrimination and resolved over 7,000 complaints. About 90 percent of these complaints were resolved by ED dismissing the complaints.

GAO recommended that the Department should estimate the full costs and savings associated with its RIF effort, and document its analysis, as required by Office of Management and Budget (OMB) and Office of Personnel Management (OPM) guidance.

Justice Department Sues Harvard University for Failing to Comply with a Federal Investigation Related to Race and its Admissions Practices

On February 14, 2026, The Wall Street Journal reported that the Justice Department sued Harvard University because it failed to comply with a federal investigation related to race and its admissions practices. According to the article, Harvard University has “slow-walked the release of some files and refused to provide some documents relating to applicant admissions decisions.” The Justice Department wants the files as part of its review, which began in April, to see whether Harvard was following civil rights laws and not using race as a factor in admissions. The Justice Department asked Harvard University to provide admissions data for the past five academic years. Harvard University contends that it has been following the law and has complied with the Supreme Court’s 2023 ruling that struck down Affirmative Action. Harvard University noted that it will continue to defend itself.

Court Denies ED’s Motion for Delay of Borrower Defense Settlement in Sweet v. McMahon Case

On February 24, 2026, Judge Haywood Gilliam denied the Department of Education’s attempt to delay relief for class members in the borrower defense lawsuit Sweet v. McMahon, rejecting the Department’s second request on January 22, 2026, for an 18-month extension of the deadline to decide post-class applications for borrower defense to repayment relief. On February 9, 2026, student loan borrowers, who applied for borrower defense to repayment relief in the interim period between the settlement agreement in Sweet v. McMahon in June 2022 and the approval by the court in November 2022 and were considered “post-class applicants,” filed an opposition brief urging the judge to reject the Department of Education’s latest request to delay student loan forgiveness relief. Previously, the court had ordered that these borrowers were entitled to a legitimate review of their borrower defense applications by January 28, 2026. If the Department failed to review their applications by that deadline, they would receive the same settlement relief as “regular” class members, including automatic student loan forgiveness and a refund of past payments made. The Department’s first request to delay adjudicating the borrower defense claims of post-class applicants was denied by the court last year.

CBO Projects that the Pell Grant Funding Shortfall will be $5.45 Billion in 2026

On February 13, 2026, the Congressional Budget Office (CBO) released baseline projections showing the program costs for the Pell Grant program for 2026-2036. The CBO estimates that the Pell Grant program will see an estimated funding shortfall of $5.45 billion in 2026. This shortfall is projected after taking into account the $10.5 billion provided for the Pell Grant program in the One Big Beautiful Bill Act.

Federal Court Dismisses Lawsuit Challenging the Legality of the SAVE Program; Appeals Court Reverses Dismissal

On February 27, 2026, Federal Judge John Ross of the U.S. District Court for the Eastern District of Missouri dismissed a lawsuit that challenged the legality of the Saving on a Valuable Education (SAVE) income-driven repayment plan for federal student loans. The lawsuit was originally filed by several state Attorneys General against the Department of Education in 2024 to block and overturn the SAVE plan. Since the lawsuit was filed, an injunction blocking the program was issued and expanded, resulting in millions of borrowers being placed in involuntary forbearance. In December, ED announced its settlement agreement with Missouri to end the SAVE plan. As part of the settlement, ED agreed not to enroll any new borrowers in the SAVE plan, to deny any pending applications, and to move all 7 million borrowers in the SAVE plan into other repayment plans.

Judge Ross dismissed the settlement since there is no longer a live case. The Judge also pointed out that due to the enactment of the One Big Beautiful Bill Act, the SAVE plan will be terminated on July 1, 2028. However, implications for borrowers remain unclear, with no indication of how ED will respond, which could involve initiating a rulemaking process to formally rescind the SAVE plan.

In response to this dismissal, Missouri, representing a group of Republican states, was reported to have filed a new motion requesting to temporarily halt Judge Ross’ dismissal order while they pursue an appeal. Judge Ross then dismissed the new motion stating that “there is no such remaining adversity” between the Department and Missouri. Further, Judge Ross argued that Missouri does not face irreparable injury if a stay is not issued.

However, on March 9, 2026, a three-judge panel for the Eighth Circuit Court of Appeals reversed Judge Ross’ dismissal, directing the District Court to enter a final judgment on ED and Missouri’s settlement. Many questions remain for the 7 million borrowers enrolled in the SAVE plan, including whether they are still in forbearance, how and when they will be transitioned to a new repayment plan, and whether they will receive debt relief benefits under the SAVE plan. NASFAA reported that the Department plans to issue guidance in the coming weeks on the next steps for borrowers enrolled in the SAVE plan.

GAO Concludes that Department of Education Needs to Address Gaps in Loan Servicer Oversight

On March 11, 2026, the Government Accountability Office (GAO) released a report, commissioned by Bobby Scott (D-VA), Ranking Member of the House Education and Workforce Committee, and Senator Bernie Sanders (I-VT), Senate Committee on Health, Education, Labor, and Pensions (HELP), titled, “Federal Student Loans: Education Needs to Address Gaps in Servicer Oversight” (GAO-26-108534) According to the GAO report, Federal Student Aid (FSA) stopped assessing student loan servicers on accuracy and call quality due to lack of staff capacity. The decision to stop assessing these performance metrics occurred shortly after the new Trump Administration began issuing directives and guidance on downsizing the federal workforce in January 2025. FSA continued to assess servicer performance on their other performance metrics, which is less labor intensive. In September 2025, FSA officials said it was working to implement more efficient oversight methods that leverage data analysis. However, as of December 2025, FSA was not using any replacement methods for overseeing accuracy and all quality and had not changed the performance standards.

GAO made one recommendation to the Department to assess servicer accuracy and call quality. The Department disagreed with the GAO recommendation, stating it used a variety of other methods to assess servicer performance. GAO concluded that these methods are not effective substitutes and that FSA should resume assessments of call quality and accuracy.

 

Sharon H. Bob, Ph.D.
Higher Education Specialist
Powers Pyles Sutter and Verville, PC
1250 Connecticut Avenue, NW, Eighth Floor
Washington, DC 20036
T: 202-872-6772
F: 202-792-6540
February 15, 2026

PLEASE UPDATE YOUR CONTACT RECORDS WITH OUR ADDRESS ABOVE.

This message from the law firm of POWERS PYLES SUTTER & VERVILLE PC may contain information which is privileged and confidential and is intended solely for the use of the intended recipient. If you are not the intended recipient, please be aware that any review, disclosure, copying, distribution, or use of the contents of this message is prohibited.
Please notify the sender of the error by replying to this message and destroy this email and any attachments.