Ep. 190: What to do About the Pell Grant Running out of Money with Kristin Hultquist

[MUSIC] Hello and welcome to the key. Inside HiReds News and Analysis podcast, I'm your host Sarah Custer, Editor in Chief at Inside HiReds. In today's episode, we're discussing the news out of the Congressional Budget Office that projects an $11.5 billion shortfall in Pell Funding by fiscal year 2027. And that's after Congress injected an emergency $10.5 billion into the program through the One Big Beautiful Bill Act. My guest today is Kristen Holtkwist, the founder and CEO of HCM Strategies, an nationally renowned expert in higher education policy and strategy development. She served at the U.S. Department of Education as Senior Advisor to the Undersecretary of Education during the Second Bush Administration and she helped implement Secretary Margaret Spelling's Commission on the Future of Higher Education. She also serves on the board of Metropolitan State University of Denver through which she was appointed to the Ahead Committee for Negotiated Rulemaking on Workforce Pell. In our conversation, we discuss the Pell shortfall, why she thinks the situation calls for an entirely new set of solutions, and what gives her pause about the new workforce Pell thresholds. Enjoy! And thanks to our partners at the Gates Foundation for sponsoring this episode. This episode of the key is brought to you by the Gates Foundation, working to ensure that every student can succeed and earn credentials of value that lead to a meaningful return on investment. Learn more about the foundation's work to improve digital teaching and learning and help colleges and universities better serve students at usprogram.gatesfoundation.org. Kristen, welcome to the key. Thank you so much for joining us today. Thank you for having me. It's wonderful to see you. This is actually the first time we are meeting, even though I know we've been in the same room several times, but we just haven't had a chance to have a conversation. So I'm really glad to see you today. It's exciting to have this opportunity to be together. Before we dive into the wonderful and complex world of Pell grants, I would first like to hear about a time when you lost your keys for opening segment. Where are my keys? Dude, where are my keys? Oh my goodness. So I am the mother of a 23-year-old daughter. She has the key to my heart. She made me apparent. When Catherine and I were shopping down in Old Town, Alexandria, we were in a store that was multi-level. There was lots of these great multi-level townhouses down there. And I was, I inadvertently left her upstairs and went downstairs to check out the sale rack. And realized I had lost her. And so, and I'm going to not tear up when I say this, but I frantically looked about, went back to the place where I had left her, which was the top floor. And she is standing on her stroller. She has found a way to get out of her harness. And she says, "You left me!" And so, I have to say, it was a pivotal moment of child neglect that I am proud, but I was proud of my daughter's resourcefulness. And so that is my lost key, she might be. How old was she? She was about 25 months. Oh my goodness. Very articulate. And what, neglected. I had, I had sales to search for. Priorities in the moment. Oh dear. Oh dear. Who among us? Who among us, I say, Chris would not be under the spell of a sell rack? Yes, as someone who got lost as a child, especially in shopping malls, I remember when I was, I really like to hide under like the clothes racks and like big department stores, those like circular clothes racks, because it felt like like a circus tent or something. So I was, I can at least remember twice whenever I was the kid that had their name called out on the speaker and the mall saying, "Come to the checkout. Your mother is looking for you." Yes, indeed. That laughter you hear in me is just pure remorse when we walk by that particular townhouse. She says, "Remember, and I have to be led through my lost key story." Just to make sure she knows she has one on me. Right. Right. Still now she's giving you grief about that. Well, it's fair. Yeah. Good. Good daughter. Good daughter, I would say. Well, thank you so much for sharing that. Where are my keys? I would now like to get into Pell funding and we heard a couple of weeks ago with there's a Pell shortfall, predicted Pell shortfall of over $11 billion. But I want it before we get into that specifically. I would love to hear from you, Kristen, because you've got years and years of working in public policy and you're a specialist in Pell funding, you're a Pell recipient yourself. Would love to hear about how did we get here with this Pell shortfall? Sure. So I would characterize our Pell shortfall is a predictable response to students having access to a simplified federal financial aid form to policy that has embedded in it all boats will rise. So as we increase our maximum award, we actually bring more students in to eligibility at the lower levels of awards. So by policy design, we have been successful in qualifying more learners for federal financial aid and that success hasn't ever increasing price tag. So we expanded access through FAFSA and the eligible who becomes eligible for this aid. But at the same time, Congress has not allocated more funding to match this expansion and access. And was that so the design is there for the policy, but maybe the funding is still kind of playing ketchup because there's also it's also difficult to really predict what the take up is going to be, right? Sure. You know, Sarah, what I would say is what we have in Pell, like many of our federal entitlement programs that provide a social safety net behind our elderly, behind our food insecure, this is an entitlement program that has a structural deficit. And that means by design, Congress is doing a lot in fact to try and keep up with the cost of this program. I think that they've prioritized Pell for many, many years above many other priorities. And so this is not a bash Congress problem. This is a structural problem that is due to a growth in the number of eligible students that, as you said, far outpaces modeling. And we can look really into our classrooms. We have the largest number of students on free and reduced lunch in our classrooms today than ever. And so really this is about we've kind of taken the lid off of the rationing that FAFSA used to be, which is it's so complicated that a lot of students either didn't try or gave up. And that's across the age spectrum, both in middle and high schools, kind of hearing bad things about it and staying away from it. And or even working, working learners, taking a look at this and being, whoa. And so we've taken the lid off of that rationing device. And now we are living in the reality of a more expensive program. Okay. Can we also dig into a little bit of how this program, the funding works? And I'm wondering how important that is to this discussion because there's a stream of Pell funding that's mandatory. And then there's a stream of it that is discretionary. Can you unpack that for us a little bit? Absolutely. So the Pell Grant Program is as old as our Higher Education Act. It is a kind of fundamental historic commitment to opportunity. And when the Higher Education Act was first financed, we'd had discretionary programs like Pell. And then we had mandatory programs that funded the servicing of loans in a bank-based program. And what happened is over time, we saw at the federal level as policymakers. And I think, frankly, the Bush administration in which I serve started this is that where might there be subsidies in this bank-based program that we can recapture and put into Pell? So in fact, when the Spelling's Commission released its report in 2006, so 20 years ago, and I say that because Margaret Spelling's is back at it in two weeks, she'll release another commission on the future of a kind of competitive American workforce. But 20 years ago, she found, and she made a commitment with the president, that we would put more money into the Pell Grant Program. And so at that time, President Bush put the most money, new money in the Pell in history. But he paid for that, and we call the mandatory side of the budget. It was savings from federal loan subsidies that went into the Pell Program. So then over time, and again, that's about 20 years old, it became a hybrid funded program. So some part of that maximum award that students, like mine at MSU Denver, get comes on autopilot. And there is no scrutiny by Congress. It's just a straight straight check that's written. And that's the mandatory side. And the discretionary side really is subject to congressional deliberation. And candidly, the congressional deliberation has been less and less transparent of the last couple of years as we mostly fund the government through continuing resolutions. But nonetheless, the discretionary side is where it is significantly easier to cut the program. And there haven't really been cuts to Pell. That's why I'm saying Congress has been on a continuous two-decade long commitment to this program. And so what they've done is found additional savings in other parts of the loan program over time to keep funding Pell and not just expansion in the number of students, but in the expansion of the value of the award. Mm-hmm. So it sounds like it's kind of been ticking along until now and it's been going well. But because of that expansion with the simplified FAFSA and we'll get into workforce Pell as well, which could even further complicate this, that's where we're seeing more people get access to this and maybe how it's been funded until now might not be -- might not be able to have that similar kind of keeping up with things service. Yeah. Yeah, you know, Sarah, I think it's important for folks to know that Congress last year in HB1, which was the one triple B or one being beautiful bill, again, found money in the loan program to shore what was a significant structural deficit just last year, $225 billion, I think, and that was considered at the time by the Senate sponsors. This is not a long-term solution. Again, a long-term solution is how do we design the program or find as you're intimating real long-term savers in the mandatory side of our federal budget? Right. So in an absence of street structuring the program on the discretionary side or long-term reallocation from another part of mandatory spending at the federal level, we have this structural deficit. I think what we were all surprised by is that we thought we'd have a couple of years before we had to grapple with this problem and it opened up really fast and now we're sitting with again an $11 billion. So it's -- I think I've heard how staffers call it a band-aid. That band-aid has been pulled off much faster than we anticipated. And that is fundamentally about the success of fast simplification. You've got 50% more students applying as of December. You've got a 27% increase in students' eligible for the maximum awards. So to me, this is not a math problem. This is a public policy success story. And behind that are all kinds of first-generation largely learners who want access to economic sustainability and are using PIL to do it. So we have to figure -- put them in their experience at the center of how we solve for this going forward. Okay. So you've talked a little bit more into kind of why this shortfall was bigger than we expected. And I just want to be clear that it was -- it was because the take-up of the FAFSA was bigger than everyone expected. That's basically it. Because we had Congress in the one big beautiful bill, a lot in $10 billion or $22 billion to try to plug this deficit -- structural deficit. But now, oh my gosh, it's actually bigger than we all thought because so many students are taking advantage of getting access to this through what you call sound public policy. I think it is. I think that what we found -- and there was beautiful data analyses done, folks at Harvard and folks with the College Board -- but basically we were able to -- we kind of -- we in the policy, we were able to work with scholars to say, you know, we have all these questions we're asking the FAFSA about financial need. And 98% of the variability or the predictability of what those variables do can be answered by four. And so we found a way to really rationalize the Pell Grant -- or excuse me, all federal financial aid -- on little questions that don't really make a difference in knowing whether someone is low-income or not. And so that was a -- and issue of you. There were some pay force in the FAFSA simplification that moved in 20. We'll finally was signed into law in 2020. There were some pay force. The FAFSA simplification included not only pre-population from the IRS, so simple to have that data come over. A simplification also in that eligibility formula. And what that meant was, is that people -- and I count myself as one -- people who have multiple children in college no longer received the same kind of eligibility. That was a pay for. It just proved to be insufficient to cover the full cost of this program. And so again, I look at it as we've got to go find long-term, ways to cover this commitment, and we probably need to reexamine structurally how can we modernize this program to serve working learners. And in those can we find some savings. Yeah. Do you think -- just turning back really quickly and looking at how we are funding this? Does it make sense, either from a public policy perspective or even just to maybe mitigate some volatility in the funding of this? Does it make sense to try to find a way to make this just all mandatory funding and take some of the appropriations out of it? Oh, yes. I mean, that's -- that's -- I, on the prize, that would be the goal. But I don't believe, after living in this town for 30 years and sitting squarely politically in the middle of the aisle, that I do not believe that we will get there. Unless we find we put the program on a sustainable path so that every year we're not opening up an expense that is far more than we've anticipated. So we've really got to get a handle on predictable costs and then pay for those costs on the mandatory set. Is it too crazy to think that some of the savings that the federal government is making and changing student loans and student financial aid with graduate loan caps and some of those savings? I have no idea if that's the same pot of money or if that could even flow into some sort of mandatory funding for Pell Grant. But is -- are things like that even like real world possibilities for this? I think so. And I think one of the beauties, as I mentioned earlier, that the bipartisan policy center under Margaret Spelling's leadership is coming out with a new commission on the American Workforce Report on a couple days. And if you look in this country at workforce competitors broadly and you look at human capital broadly, maybe we don't have to borrow from one higher ed program to pay for another higher program. Maybe we can look broadly at what is the safety around workers so that they can be resilient through this AI transitioning world for first-generation students to have opportunities like I had. And so we can look more broadly across the federal budget on how to make those investments and not just within the federal loan program. Yeah. Okay. You've talked about constructive engagement. And that, to me, kind of sounds like bipartisan conversations, but you'll tell me. But very interested to hear what you think constructive engagement on the issue looks like. Absolutely. So I give so much kudos to the village that brought about not only fastest simplification, but consolidation of loan the loan program so that repayment is simpler for learners and for borrowers. There's really been kind of since over the last 15 years a steady march and improvement of federal financial aid to be simpler and more transparent. And so that really came about, as excuse me, as I mentioned, a village of people working together. That was scholars, as I mentioned, university-based scholars, scholars at think tanks, both sides of the aisle, modeling what options look like. There was advocacy organizations on behalf of learners and on behalf of institutions. NASA was absolutely leading in this village is how can we do better and willing to look at all options. But with evidence of who wins, who loses, what's the redistribution, what's the cost. We can have a very well informed community opinion. And that really was a process instigated during the time back in 2012 when we only be forecasted earlier a structural deficit in the Pell program. And Bill Gates and his team at the Gates Foundation said, "Maybe we shouldn't waste this crisis. Maybe we should look at what we can do to put out student outcomes at the center of federal financial aid." They invest, they create a whole portfolio of grants that they call reimagining aid design delivery. And those grants rolled out over like a five-year period. HCM strategist was one of the recipients of an early award. That's the organization I lead. And it really was this kind of intentionally inclusive evidence-based process of generating solutions, modeling them. And then talking about, okay, which ones can we live with if we share the same guiding principles. And so there was a principle-based kind of a line. We had a set of principles we agreed to. And that really held together for 15 years. I like in where we are today around federal financial aid in this Pell shortfall, as we've got the same bag of chips that we had back in 2013 with those rad recommendations. But all the chips have been eaten and everything has been implemented. And all that's left are the crumbs. And if you've ever had a bag of chips that you really just love the flavor in you, kind of look, you're tongueing, you put your finger on the bottom, I'm a Doritos girl. And you try to like get the last bit. That's what's left. The only thing that's left is a recommendation that has been distorted in its application. And it was a recommendation that the Pell grant should be increased in its award level, a bonus if you will, for students who are taking the equivalency of 30 credit hours a year. That they are through their structured pathways and their intentionality of course taking a completion. on track to complete on time in four years, 100% time, not a hundred feet of percent time. So we said, you get a bigger award because you're going to be paying more tuition, because there's more expenses associated with your on-time progress. And so that was one of the options we modeled. Today, and you saw this in the one triple B, it was in the house provisions that have fallen out, it was 30 credit hours becomes the expectation for the maximum award. And so that's a rationing device. That's not a bonus award. That's a rationing device. And that's why I feel like, well, we have leftists the crumbs. So let's revitalize this because we're going to have to balance sustainability and a should said predictability with opportunity. And we can't lose opportunity because I will say that some of the provisions on the workforce that we will make and the my seat at the negotiating table for ahead makes me nervous, that we will use ceilings for outcomes instead of floors to rationalize spending and Pell. And that will be devastating for first generation students. Right. I will get into that. It also sounds like the crumbs. The crumbs are left from a bag of chips that were baked, fried, created for a totally different world. If we're thinking about solutions from 2012, totally different world, totally different workforce, totally different group of students that we're looking at right now. Absolutely. Sarah, I mean, I think that Insaharah has done a great job sharing with your reporters, your readers, the so what of a growing population of Americans who have some college and no degree. It is increasing every single year. Those are people who tried to get access to this economic security through post-aggregation and fell out before earning that credential that would provide it. And so how does federal financial aid serve them? I bet a lot of them. In fact, I know a lot of them are not trying to be cute. I know a lot of them have used all of their federal loan eligibility, all of their federal grant eligibility. So if we are to recognize this is an incredible part of the American workforce, we need to bring back in and make sure they have the skills they need and that those are resilient skills for our workforce. Federal financial aid is not set up to serve them. And so that's a specific example of how what worked, what made sense and brought people together in 2012, 2013, in 2026, it should not, it is not sufficient to meet the, again, needs of the workforce and of people. So just to dig into a little bit more of what solutions you think are possible. You've talked about rationing, which it sounds like rationing is not something you would want. And by rationing, that's either increasing out the grant for students who are on 30 credit hours a year. Or is it maybe lowering the cost of the Pell grant entirely to try to make up savings? That way, is it Congress just continuing to fully fund this thing all the time, which we've discussed will be difficult to constantly be finding savings every budget year? What other solutions do you think there are for this problem? So, I want to be clear, it's not that I'm opposed to rationing. You have to have some guardrails around where do federal, where do public dollars flow? And that, so that is going to have to be part of any conversation about Pell is for whom should this program serve to what ends and how to pay for it. And I'm just saying that when you take an $11 billion problem and you attach a 2013 solution to it, fundamentally what you're doing is closing that budget gap, but not accomplishing public policy ends. And so you really do have to open the whole thing back up in my opinion. And that is going to require new solution generation. So what does that solution generation look like? Think about three legs of a stool. We have to find strategies for designing the program and allocating the dollars that result in some savings to the program long term. And we will find places to fund what over long term will be an increased cost in the program. And we will have to have a very transparent conversation of who wins and who loses and be okay with that. So there might be certain types of providers that are not eligible for the program. There might be certain types of programs. There are not eligible. There might be caps that we don't see now. And so there will still need to be guardrails, but it needs to be a fresh conversation about what's the fundamental federal role in promoting opportunity to a credential of value. Okay. Let's get into your experience on the ahead committee and negotiated rulemaking. Do you want to just tell us a little bit about why you were chosen to serve on that who you representing in those conversations? Sure. Sure. So negotiating rulemaking is something I've always known about in my career. In fact, we started it in 2007 as part of the process of Spelling's Commission implementation. And I thankfully avoided it for my entire career. I came in November, congratulations, you've been nominated. I didn't know what it was and it felt like this hot potato like I don't want this. What is this? But I talked to some people and they said, no, this is a really important, you know, table to sit at. And what I was nominated. I learned from Metropolitan State University Denver. And that's the one where you're on the board. Yes, Governor Paul has put me on the board. Well, this nominated me in the Senate confer me. And we have about 44% of our students that receive a program. And so it's fantastic to be able to be at the table as representing public college and universities, two years and four years. And just to kind of bring that perspective to to rulemaking around basically the workforce, hell provisions of one triple B. So the first week we met. And before the year ended, we were in the business of program creation within the guard rails of what Congress put in legislation. And then we came back in the new year. And we worked on what would be the terms of a holistic harmonized accountability framework where all institutions experience the same floor and all learners experience the same kind of basic consumer protections. And so there we were, I think going about the important work of trying to stabilize accountability and federal financial aid after 15 years of one attempt after another being put forward and then being caught up in the courts so that nothing was implemented. Yeah, yeah. Workforce, Pell is something that's been a bipartisan issue for a long time. So I think a lot of people are happy to see this finally come out through the one big beautiful bill. And I see the first week of negotiations talking about figuring out really which programs are going to be eligible for this. Just remind us where we landed on that it was a certain number of weeks for those courses courses that have got to have credentials that build towards a degree program. What else did we decide? Sure. And then the first Pell, if I can explain it simply is a short term training voucher that people can access when they have Pell eligibility at accredited approve post secondary institutions. And we will upon receipt of a workforce Pell that learner will experience kind of the clock starting to tick on their future federal financial aid. So they may never pursue another degree or credential beyond their short term certificate. But if they chose to. And in fact, they will have the opportunity because these programs must demonstrate stackability or transfer ability. So in less time than they otherwise would have if they started scratch. And so the guard rails for workforce Pell and that's what they're really referred to as. The Department of Education, I think correctly describes it as Congress's guard rails are intended to to slowly begin a new way of allocating federal financial aid. And slowly is because not a lot of programs currently in existence will be eligible and not a lot of dollars will flow. Everyone got really excited that Congress adopted workforce Pell and I look at that as a collective response to again a 10 year old debate that was finally settled and in those 10 years. The states went and built their own short term post secondary credential ecosystems. So today if I am a working learner and I want to go get. I need financial resources support my short term credential. The odds are that I'm going to get that aid from my state before I'm going to get it from the fence is here at the federal guard rails. It must be less than 15 hours 15 weeks. Excuse me. Seven in order to be eligible back program has to have 70% of the students completing the program within 150% of the time. I'll put that in perspective a second 70% of those completers must place into a job within 180 days or six months. So most of the completers must be in a job, not necessarily transferring to another post secondary pathway. As the Department of Education said, this is not an on-ramp to the regular Pell program. This is workforce training embedded in Title 4. Then within three years of implementation of the bill. States are going to have to only recommend programs where that 70% placement is in field. Right now we can't do that many states because we don't have the state data systems to do it. Even if we built the state data systems, that's a huge difference. huge public policy argument that frankly, AI disruption has barely touched or resolved. So I don't think that this is a, gonna be an easy thing to prove that students have placed in field, or necessarily a good public policy end because there are these transferable skills. So how are we gonna define them? Then there's all of these qualitative measures that the state has to certify, and the secretary has to either decide to use his or her authority to pick at the state and the governor, in particular, at, and I've been at NCLB, and that's a bloodbath, or you can just sign it and say, "Sure, good job." That is, my lawyers have been involved in the creation of this program. It means that the program is stackable and transferred to other programs. It has all these other requirements. And so it's unlike any other part of Title IV, because we have these, these ceilings of outcomes and these expectations of program development that frankly feel a little witty. And the last thing I'll say about workforce panel, this is where I turned to someone, I said, "This is price controls." How do we get price controls into federal financial aid? But we do in workforce panel, because you have to earn, not only be placed in the field, you have to earn at least 150% of the poverty line after we subtract out the costs of you earning your credential. And those costs are going to be certified by the federal government, and they cannot change. Once you have submitted that to the Secretary of Education, you can't change it for the period of that Black academic year. And so it's like, "Whoa, there's a lot of federal control over tuition and fees." - Mm-hmm. - You're better in the eligibility requirements of workforce panel. And so that's where I feel like this experiment of what's it like to put some real guardrails around workforce education training in Title IV, have a whole lot of consequences for regular Title IV, we've not begun to examine. And that's why I propose that this PEL shortfall is a chance for the community to step back and say, "Whoa, whoa, whoa." We have to re-examine all these things, 'cause left unexamined, there's a lot of pernicious rationing that will happen. - So is the 70/70 rule and the 150% salary requirement for graduates of workforce PEL programs? Are those the ceilings that you were talking about that give you pause about where we landed on this? They get, yes, those are the ceilings that I'm referring to. And they give me pause because I'm very concerned that those ceilings would be applied to other parts of federal financial aid, particularly the PEL program, the broader PEL program. When we put access and opportunity at the center of our outcomes centered, financing scheme, et cetera, we see institutions like Georgia State, celebrated nationally, celebrated on 60 minutes because they have been able to close completion gaps for underrepresented students and populations, because they have seen remarkable increases in student success defined as on-time graduation for a diverse PEL-L population. What is Georgia State's on-time completion rate? 54%. So an on-time completion rate for the workforce is 16 percentage points higher than our best in class. And that's what a ceiling is, best case scenario. So I'm concerned that applied to all PEL grant programs, this is not feasible to reach. And I say that the lived experience of trying to improve and seeing, reading and math literacy improvement this nation under no child up behind, but the ceilings we set of 100% proficiency were its demise. So I'm concerned not that there are ceilings in place for workforce PEL, but the level at which they set applied to broader PEL is a non-starter. And that's why a group of us at the Lagoche and Table at a head said that we could not support the position of the taxpayers and the legal advocate around making sure that some of the provisions that were much lower but nonetheless, in the, they called it the do-no-harm or the accountability provisions that relate, not to PEL but to loans, that that should reach into PEL. We said, nope, don't start that conversation. I don't think we've stopped it. I think it will continue on because of the PEL shortfall. I'm begging all of us to step back and try to hold opportunity and outcomes in balance. - Yeah, okay, that makes sense. So you're seeing these guardrails starting to spread out in workforce PEL and you're concerned that it could even go further into classic PEL, regular PEL, let's call it. - I am, I am. - And you know, one of the things that I would say is public policy should always be informed by evidence of what works and the lived experiences who will benefit from that policy. And if you look at outcome centered financing from what states are doing, we don't see any other state with performance ceilings or thresholds that look like this. So the Congress has stepped way out on what I would call a skinny to ledge on these. And so we just have to all pause before taking the current shortfall. And that solution and saying, I found a saver. - Okay, okay. You've mentioned the compliance part of this that states are gonna have to get up to speed with, which we all know the state of state data reporting and how it's all over the map. You've mentioned that these programs will have to be in existence for three years and the 7070 rule. Any other concerns that you've got, I mean, this is supposed to be coming out July 1. Any other concerns that you've got about that deadline? Or if perhaps you think where it's gonna be out for public comments soon, if it's not already, any thoughts about how it might change? The rules might change because of public comments before that July 1 deadline. - You know, I appreciate the privilege that was sitting at the table because you could listen to some very transparent legal interpretations by the General Counsel's Office as a Department of Education. And I don't expect that the consensus we reached on Workforce Pell will be changed through public comments. We were able to at the table garner one more year of implementation. And that's important because states will probably have to put in place to enhance UI wage record data in order to comply. And that's a cost put on the states that the feds aren't right now willing to pay for. Pardon me. So I think I don't have concerns that it will, the season will open and states will apply and we'll see which programs are on the list and we'll see which types of students are benefiting in terms of Pell students. And I just think we need more information to have a robust conversation. So I'm not concerned that any of this would roll out. What I'm looking forward to doing is like I said, stopping and pausing any ensuing conversation about the related issues of the broader Pell program until we step back and have first principles about what it needs to be for a modern American workforce. - 8CM3, the organization that you lead did some work in 2023 looking at some of those state led initiatives that you've mentioned. Mostly around funding micro credentials. 28 states are providing some level of financial aid for these programs. Let's talk a little bit more about, and you said that this is kind of already happening at the state level and there aren't these ceilings. Is there a world where maybe workforce Pell will, the regulations around that will kind of meet in the middle and maybe coalesce around what some of those state requirements are or could state funding continue to thrive here and workforce Pell just kind of stays as this higher level thing that maybe only is available to degree granting programs. I mean, how do these two worlds exist for you? - I am excited about what post July 1 looks like where there is a recognition that states are driving the design and financing of their sub-associate or short term post-secondary credentialing ecosystem. That makes sense. These are jobs that are in states. They have responsibility for that workforce. So do I expect the federal policies to move, federal workers to move to where states are which are much less prescriptive about which programs in demand is sufficient in most states? I think because of the structural deficit in Pell, it's far more likely that it will stay narrow and may over time include other narrow national priorities. For instance, I hope they'll consider expanding workforce Pell to fit the unique needs of rural communities because every state has one. And there is a, in my opinion, a federal imperative to try and support these under-resources in communities. So I think if governors continue to look at, I am in charge of this ecosystem and I put the quality parameters around it, I put the financing around it and the institutions that are part of that ecosystem, but not the sole providers, they realize they have this additional stream of funding. And they marry up with other providers and they get their transfer right and they shorten their time to degree. I can see reform really happening at the institutional level with workforce staying just where it is. And similar if governors recognize, you know what the fans are asking is an unfunny and demanding, but it is where we need to go. We do need better education, employment data. We do need what an unemployment wage record data enhanced allows. So I'm gonna make that case to my business to be in my legislature, and I'm gonna get that done for all kinds of reasons the states need it. I'm gonna make it a lot easier to put together my list in the future years. And it's gonna make it a lot easier for me to identify where can the federal financing, the federal work or sell never touch areas I need. Like I said, for instance, nursing pathways and rural communities, it's the state's imperative to finance those pathways. And so there'll be a very data driven case. So I'm optimistic about a harmonized ecosystem with states as lead. And I just think that we have to be careful conversations about where might workforce Pell need to be modified over time, where the evidence coming in from the field. And if there are communities are systematically excluded, that we see a national imperative to address through federal policy. - Is it sound policy? What you just described of state governors seeing the requirements of the national workforce Pell and perhaps seeing the gaps that are there between the state financial aid program and the federal one and then maybe stepping up their game a little bit to reach those requirements? Is that sound policy to make federal policy like that, to kind of change behavior or encourage a higher standard of implementation? - Sure, I think there's a give and take always between the feds and states, that's the beauty of federalism. What I like is we have a history of requiring states to do things they can't do without improved data systems. We have excellent longitudinal data systems in K-12 schools for our superintendents, for our teachers. Because NCLB said, I wanna know how all students are doing a math and reading every year. And the only way you got it was to build a data system. The feds came in and put some subsidy behind it, but they didn't have a declaration and NCLB you shall have a unit record system. It was the only way to provide this information. And so I think that kind of give and take always happens. I think the feds have introduced through one trip will be all kinds of new ways there thinking of using outcomes. States are gonna play with that. We're gonna have to understand the pros and cons of that. So I think this is really what's happened and I think I've heard a number of people say, one trip will be was a pretty significant change in federal policy that's going to in live in states, depending on where you sit. You know, you mentioned the HCM report. We updated our report on short current credentials just last December. And in fact, we have 35 states with active programs. 111 active programs, $8 billion. So when you think about the estimated CBO costs to workforce, PEL is in the first year. I think it's like 230 million. So it's like less than 0.03% of the state investment. So I think that this is a rapidly, dynamically changing field and the feds aren't driving this. And I think that's appropriate. - Okay. And just to kind of merge these two conversations then about national PEL shortfall and the wonderful work that's happening on a state level for state financial aid for work focused programs. Is there ever a world where states might step up and provide some of the funding for this national PEL shortfall? And should they? - I appreciate your question. I was speaking with the wonderful SHIO in Texas recently who helped me appreciate what I'd seen as chair of the board. When an institution enrolls a PEL recipient, all costs of supporting that student through to a credential are not covered by the federal government. There are costs born by the state and the subsidy of the institution. There are costs born by the state in additional aid that layers on top of that federal aid to cover the full costs of attendance or some part of the cost of attendance. And then there's the investment of the students. They're either borrowing or they're working but they're paying the difference. And the reality is is that I think it's important to appreciate that the federal government is not solely responsible for promoting opportunity. And the states are already coming in behind the feds to cover that pathway for that low income student. And so no, I don't think states should come in and cover the PEL shortfall. I think states need to continue to hone their public subsidy around those from whom opportunity is furthest and what are the workforce needs in their state. And you marry those two principles with sound public's investment at the state level but you have that predictable federal need-based grant. And we have to restore predictability or maintain predictability in the PEL program by fixing this shortfall. - Mm-hmm. - That way that states can plan accordingly and also be able to be flexible and nimble to their individual state needs. - That's exactly right. And of course, then that applies to the institutions that enroll students. The growth of promise programs around this country and all the impressive results around the increased enrollment and increased degree completion, it's because whether you're an institution or state, you were building on that PEL grant program. And so I think there is a, the conversation at federal levels, how do we maintain that we're the base investment? - Okay. So let's just in our final moments together, let's cast our eye to the future of financial aid and access and student opportunity, which you have said multiple times should be at the exact center of these conversations. What does a balanced outcome conversation look like? - Mm-hmm. A balanced conversation puts pragmatic principles around the options to model. And a balanced conversation uses data to model what are the consequences? On the size of the word, where in who which institutions benefit, which students benefit? So we are making informed decisions. And I can just tell you, we don't have that menu today. So we have to go get it. And so it's a set of guiding principles, set of options, some modeling, and then some just good community discernment by partisan multi-stakeholder. But like you and I have been talking about today, we can't have that whole conversation if we're not putting working adults at the center of it. Because we have a shrinking population of high school age students. It's particularly cute for a number of regions in this country. It is the education and training of our working adults that is the future of federal financial improvement. - Wonderful. Kristen, thank you so much. I've learned loads as I expected to and I certainly have a deeper understanding of how we got here and what exactly workforce Pell means. I think there's been a lot of excitement around the program and we've seen a lot of institutions starting to develop workforce Pell programs. They've got federal funding in order to develop these things. But I've certainly learned from you that it's actually not gonna be that easy for road for institutions to develop these programs and then for states to be able to authorize them and put them forward to the secretary to be eligible. - Well, thank you and I appreciate you starting out this conversation. I think it's an apt way to conclude it in that. I hope people remember like, keep your eye on what matters for me, it should have been my child upstairs in the town. (laughing) And not on the momentary attraction of a solution like a Sailor Act. So don't lose your kids. - I'm so proud of you. Well done for bringing that all full circle. That's the perfect point to end on. Thank you so much, Kristen. I really appreciate your time today. - Well, thank you for getting it to me. (upbeat music) (upbeat music)