Catch up on the latest changes from Washington that higher ed risk managers need to have on their radar
Compliance Community Webinar Helps Cut Through the Messaging
The September 18th URMIA Compliance Community 2025 Washington Update, led by Jon Fansmith of the American Council on Education (ACE), examined how federal politics, appropriations, and regulatory trends are shaping the higher education landscape. The session emphasized that colleges and universities now operate in an environment of heightened political attention, fiscal uncertainty, and regulatory risk.
Political Context
Partisanship defines the current climate. Republicans hold narrow margins in both chambers, forcing constant negotiation and making bipartisan compromise rare. The Trump administration has become the central driver of higher education policy, setting a tone of skepticism and hostility toward institutional practices in areas ranging from diversity to federal funding oversight.
Federal Funding and Appropriations
Congress faces gridlock in passing FY26 appropriations. Proposed cuts total $163 billion in non-defense spending, including a 25% reduction to the US Department of Education. Programmatic impacts include:
- Pell Grant maximum awards reduced by $1,700 per student.
- Federal Work-Study cut by $1 billion.
- Elimination of Supplemental Educational Opportunity Grants, TRIO, and GEAR UP.
- Research agency cuts at NIH, NSF, and others.
Administrative practices amplify these risks. The Department of Education has withheld continuation grants (e.g., TRIO), redirected Minority-Serving Institution (MSI) funding toward HBCUs and Tribal Colleges and Universities (TCUs), and threatened “pocket rescissions” of unspent federal funds. The threat of a government shutdown further destabilizes institutional planning.
Reconciliation Legislation (“One Big Beautiful Bill Act”)
The reconciliation package enacted in July 2025 introduced sweeping reforms:
- Pell Grants: Expanded to short-term training programs under strict graduation, employment, and earnings tests. While this addresses workforce development needs, implementation challenges and long-term funding shortfalls (projected at $93 billion over the next decade) remain.
- Student Loans: Graduate PLUS eliminated; borrowing capped at $20K annually/$100K lifetime for graduate programs and $50K annually/$200K lifetime for professional programs (MD, JD, PhD). Parent PLUS capped as well. Colleges and universities now have the authority to set program-specific lending limits.
- Repayment: Multiple programs consolidated into two simplified options—standard repayment (10–30 years depending on loan volume) and income-based repayment at 10% of income.
- Accountability: Programs risk losing federal loan eligibility if graduate earnings four years post-completion fall below high school (for undergraduates) or bachelor’s degree (for graduate programs) comparators. Fields most at risk include social work, counseling, allied health, performing arts, culinary arts, and divinity.
Implementation timelines create acute risks: final regulations are unlikely before May 2026, but the law requires compliance by July 1, 2026, leaving institutions fewer than 60 days to reconfigure financial aid systems, advising, and compliance processes.
Research and Compliance Environment
The administration has repeatedly attempted to cap research facilities and administrative (F&A) cost recovery at 15%, despite court injunctions. It has also suspended research funding to institutions such as Columbia, Penn, Harvard, UCLA, and Duke, citing alleged civil rights violations. While some schools have settled, Harvard is actively litigating, raising broader questions about executive overreach and the circumvention of statutory processes.
Race, Diversity, and Civil Rights
Following Students for Fair Admissions (SFFA), the US Department of Education has launched more than 100 investigations into institutional diversity practices, with some cases leading to withheld funding. Additionally, IPEDS reporting requirements are expanding to include detailed applicant-level data (race, gender, GPA, test scores, geography), reflecting federal suspicion that institutions may be circumventing SFFA restrictions.
International Students
Visa revocations, heightened scrutiny, and political rhetoric toward China and India are producing measurable enrollment declines—estimated at 15%. Given international students’ role as full-pay enrollees and contributors to campus diversity and research, this trend threatens institutional finances and global engagement strategies.
ACE Advocacy and Institutional Response
Fansmith underscored ACE’s multi-pronged advocacy: litigation against unlawful federal actions (including F&A caps), lobbying to preserve aid and research funding, and opposition to problematic bills such as the Deterrent Act. Importantly, he emphasized that institutions must engage policymakers directly, illustrating their local economic, workforce, and community impacts to counteract negative rhetoric and policy initiatives.
Conclusion
The current federal environment presents unprecedented challenges for higher education. Funding instability, compressed implementation timelines, regulatory expansion, and declining international enrollment all converge to threaten institutional resilience. Colleges and universities must invest in compliance infrastructure, scenario-based financial planning, and active advocacy to navigate this volatile landscape. The urgency lies not only in defending institutional interests but also in articulating higher education’s public value at a moment of heightened political scrutiny.
Want to hear more? Listen to the recording of the full webinar presented to URMIA members.
By Elliot Young, Director of Institutional Compliance & Equal Opportunity | Kansas City University
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