Private, Nonprofit Colleges Stand to Lose Hundreds of Millions of Dollars Annually Under CCRA

Last week, the House Committee on Education & the Workforce released its estimates for the financial impact that the accountability provisions in its bill, the College Cost Reduction Act (CCRA), would have on individual institutions.

The committee estimates that the overall net loss to the private, nonprofit sector in the fifth year of this bill would be nearly $900 million, a number that would only continue to grow in every year thereafter. This means the biggest negative impact will be on private colleges and is a fundamental redistribution of wealth from private, nonprofits (and to a lesser degree for-profits) to the public sector. (For more background on the bill, including our letter to the committee about our concerns, please see our February 2, 2024 Washington Update story)

The committee provides a brief explanation of the mechanisms and intent behind the bill’s risk-sharing payment and PROMISE grant framework, an interactive table to look up estimates by state, district, and institution, and the underlying data file for download. The committee also provides definitions for many of the variables shown in the table, but the technical nature of the definitions makes them difficult to understand.

Understanding the structure of payments in the CCRA. To understand the risk-sharing payment, it is important to keep in mind that the CCRA structures payments in such a way that in the first year the bill is in effect, a school’s payment would be for a single cohort of students – the most recent graduating class and non-completers that left and did not re-enroll elsewhere. In the second year, a school’s payment would consist of the second payment for cohort one, and the first payment for cohort two. The third year would include the third payment for cohort one, the second payment for cohort two, and the first payment for cohort three. This structure continues in this manner until a cohort completely repays its loans, which could be fifteen or more years, adding an escalating annual payment for well beyond the first decade the bill would be in effect.

For schools that qualify for PROMISE grants, the same structure applies, except instead of payments, schools would receive funding for performing well on certain criteria the bill rewards.

How to read the committee’s data table. The risk-sharing payment number provided by the committee is defined as the estimated average annual risk-sharing payment made by schools during the first ten years following the bill’s enactment, which is the timeframe the Congressional Budget Office uses to provide its cost estimates for the bill.

In other words, the number provided is not the typical payment a school would pay annually. The closest approximation is that the listed number is the total risk-sharing payment a school would pay in year five.

To help illustrate, let’s assume Institution A has a risk-sharing payment of $1,000,000.

• The risk-sharing payment would be for year five, and thus consist of five separate student cohorts. As explained above, every year following year five would include an additional cohort, so if we divide year five’s total by five, we get our average individual cohort payment: $200,000.
• Using this, we can estimate how much Institution A would pay in year six: $1,200,000; year seven: $1,400,000; year eight: $1,600,000, etc.

Note: PROMISE grants begin a couple years after risk-sharing, so the totals are averaged over eight years, not ten.

Early analysis of impacts. NAICU is still in the process of analyzing the data and will have more to share over the coming days and weeks, but some details are already apparent.

• The committee’s estimates encompass 3,752 schools and campuses, including
  • 1,201 private, nonprofit institutions.
  • Public 2-years or less: 763 institutions
  • Public 4-years: 682 institutions
  • For-profits: 1,106 institutions

Snapshot of Annual Risk-Sharing Payments at Partial Implementation

• Institutions with a risk-sharing payment: 3,681
• Institutions without a risk-sharing payment: 71
• Total risk-sharing payments: $2,859,893,453
• Average risk-sharing payment across affected schools: $766,934
• Risk-sharing payments by sector:
  • Private, nonprofits: 1,181 institutions pay $1,135,027,808
    • Average payment: $961,074
  • Public 2-years or less: 721 institutions pay $133,568,905
  • Public 4-years: 681 institutions pay $1,012,095,367
  • For-profits: 1,099 institutions pay $579,201,373

Snapshot of Annual PROMISE Grants at Partial Implementation

• Institutions with a PROMISE grant: 1,047
• Institutions without a PROMISE grant: 2,705
• Total PROMISE grants: $2,906,223,097
• Average PROMISE grant across receiving schools: $2,775,762
• PROMISE grants by sector:
  • Private, nonprofits: 96 institutions receive $242,759,922
    • Of that total, $190,749,178 goes to five schools
    • The remaining $52,010,744 goes to the other 91 institutions for an average PROMISE grant of $571,547
  • Public 2-years or less: 541 institutions receive $666,657,066
  • Public 4-years: 365 institutions receive $1,968,531,374
  • For-profits: 45 institutions receive $28,274,736

Snapshot of Annual Net totals at Partial Implementation

• Private, nonprofits: ($892,267,886)
• Public 2-years or less: $533,088,161
• Public 4-years: $956,436,007
• For-profits: ($550,926,637)

For more information, please contact:
Justin Monk