Debt-Free College Act of 2026
- Sponsor
- Sen. Schatz, Brian [D-HI]
- Committees
- Health, Education, Labor, and Pensions Committee (primary)
- Last action
- Sep 15, 2026
Bottom line
The Debt-Free College Act of 2026 seeks to eliminate college debt for eligible students at public institutions, HBCUs, and MSIs through federal-state partnerships and direct grants, while also extending Pell Grant eligibility to Dreamer students.
What it actually does
This bill establishes two new federal grant programs aimed at making college debt-free: one for states to partner with the federal government to cover unmet financial need at in-state public institutions, and another directly for Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs) for the same purpose. It also expands eligibility for Federal Pell Grants to include 'Dreamer students,' defined as certain individuals who entered the U.S. as minors and meet specific educational or military service criteria.
Proponents argue
Proponents argue that this bill addresses the escalating crisis of student loan debt, making higher education accessible and affordable for all students, particularly low-income and underserved populations. They contend that by increasing federal and state investment, it will boost college completion rates, reduce economic inequality, and strengthen the nation's workforce. Expanding Pell Grant eligibility to Dreamer students is seen as a matter of fairness and an investment in individuals who are already contributing to American society.
Opponents contend
Opponents might argue that the bill represents a significant expansion of federal spending and intervention in higher education, potentially leading to increased taxes or national debt. Concerns could be raised about the effectiveness of tuition caps in controlling costs long-term, the potential for states to reduce their own higher education spending despite maintenance of effort provisions, and the administrative burden on states and institutions. Some may also object to extending federal benefits to undocumented immigrants, citing concerns about immigration policy and resource allocation.
The bill is moderately detailed, requiring a focused read to understand its various mechanisms and conditions, which is achievable within a reasonable timeframe for an engaged reader.
Section 2, Part J, Section 499A-3
Establishment of State-Federal Partnership Grant Program
This provision authorizes the Secretary of Education to award grants to states that commit to providing debt-free college for all eligible students at in-state public institutions. The grant amount for a state is equal to its net State operating support, with provisions for ratable reduction if appropriations are insufficient. Unexpended funds can be carried over or returned to the federal government.
Supporters argue
Supporters argue this program incentivizes states to increase their investment in public higher education, directly addressing the affordability crisis and ensuring that financial barriers do not prevent students from pursuing a degree.
Critics contend
Critics may contend that this program could lead to federal overreach into state education policy and that the matching grant structure might not sufficiently compel states to maintain or increase their own funding levels in the long run.
Tradeoffs
The provision balances federal investment with state autonomy, aiming to leverage federal funds to encourage state action on college affordability while respecting state-level control over public higher education systems.
Section 2, Part J, Section 499A-4(b)
State Responsibilities for Partnership Participation
States receiving grants must agree to several conditions: distributing funds to achieve debt-free college, maintaining access for low-income students, capping tuition and fees at public institutions (with CPI-based increases), committing to reduce tuition as state support increases, maintaining or increasing state need-based aid and net State operating support, developing a statewide cost of attendance formula, establishing credit transfer policies, and clearly communicating the partnership benefits to students and families. States must also submit a 5-year plan and describe institutional reforms for student success.
Section 2, Part J, Section 499A-5
Allowable Uses of State-Federal Partnership Funds
States must prioritize grant funds to cover the unmet financial need for eligible students who receive Federal Pell Grants. Remaining funds are then used for other eligible students based on financial need, without considering private aid or loans. Additionally, 4% of grant funds must be used for student success programs at public institutions, and up to 5% can be used for broader higher education activities like increasing capacity, improving student outcomes, or developing workforce programs. Up to 1% is allowed for administration and data tools. Funds cannot be used for endowments or athletic/commercial venues.
Section 3, Section 372
Debt-Free College Grant Program for HBCUs and MSIs
This section establishes a separate 5-year grant program for eligible private, nonprofit HBCUs and MSIs (including Tribal Colleges and Universities, Hispanic-serving institutions, etc., with at least 35% Pell-eligible students). Grants are awarded in an amount equal to the institution's expenditures on student undergraduate instruction and academic support. Institutions must use 95% of funds for need-based aid to cover unmet need for undergraduates and 5% for capacity building, faculty hiring, and student support services. Grantees must cap tuition, maintain expenditures on instruction, low-income enrollment, and institutional aid, and clearly communicate debt-free options.
Section 4, Section 484(a)(5) and (u)
Federal Pell Grant Eligibility for Dreamer Students
This section amends the Higher Education Act to make 'Dreamer students' eligible for Federal Pell Grants. A Dreamer student is defined as an individual who entered the U.S. before age 16, attended secondary school in the U.S., and meets one of several educational or military service criteria (e.g., earned a high school diploma, completed 2 years of higher education, was eligible for DACA, or served 4 years in the uniformed services). The Secretary of Education is also authorized to waive the age and secondary school requirements under compelling circumstances.
Section 2, Part J, Section 499A-6
Maintaining Net State Operating Support for Higher Education
States participating in the State-Federal partnership must maintain their net State operating support for higher education at a level not less than the average of such support per full-time equivalent student for the three most recent consecutive state fiscal years preceding the current fiscal year. This is a maintenance of effort (MOE) provision designed to prevent states from reducing their own funding in response to federal grants.
The definition of 'net State operating support' explicitly excludes funds for student aid programs for out-of-state, proprietary, or unaccredited institutions; capital outlays; deferred maintenance; merit-based financial aid; hospitals, athletics, or auxiliary enterprises; and research and development.
Section 2, Part J, Section 499A-2(5)(B)
Why it matters:This level of detail is standard legislative practice for defining financial terms precisely, ensuring that only specific types of state spending are counted towards the federal matching requirement.
Case for: Supporters would argue that these exclusions ensure federal funds are matched by state spending directly on core academic operations and need-based aid for in-state public institutions, preventing states from counting unrelated or non-academic expenditures.
Case against: Critics might argue that excluding categories like capital outlays or research and development could disincentivize states from investing in these crucial areas, or that the definition is too narrow and doesn't reflect the full scope of state support for higher education.
Estimated impact: This provision significantly narrows the scope of state spending that qualifies for federal matching funds, potentially reducing the federal grant amount for some states or requiring them to reallocate their budgets.
Allows for waivers of the 35% Pell-eligible student requirement for HBCUs and MSIs receiving grants if the percentage drops below 35% after the first year. Waivers are granted only if the decrease is small relative to student body size or due to unexpected/uncontrollable circumstances, and can be granted not more than twice during the 5-year grant period.
Section 3, Section 372(d)(2)
Why it matters:This is a standard legislative practice to provide flexibility for institutions that might temporarily fall out of compliance due to unforeseen circumstances, rather than being an attempt to hide a provision.
Case for: Proponents would argue that this waiver provides necessary flexibility, preventing institutions from losing critical funding due to minor fluctuations in enrollment demographics or external events beyond their control, thus ensuring stability for these vital institutions.
Case against: Critics might argue that such waivers could weaken the program's focus on institutions primarily serving low-income students, potentially allowing institutions that no longer meet the core mission to continue receiving funds.
Estimated impact: This provision ensures continued funding stability for HBCUs and MSIs that experience temporary shifts in their Pell-eligible student population, preventing abrupt loss of support.
The definition of 'Dreamer student' includes specific pathways to eligibility (e.g., high school diploma, 2 years of higher education, DACA eligibility, or military service). Furthermore, it includes a 'hardship exception' allowing the Secretary to waive the age (younger than 16 upon entry) or secondary school attendance requirements for individuals demonstrating compelling circumstances, provided they meet the educational or military service criteria.
Section 4, Section 484(u)(1)(C) and (u)(2)
Why it matters:The detailed criteria are necessary for precise legal definition, and the hardship exception is a common legislative tool to provide administrative flexibility. It's not necessarily evasive but requires careful reading.
Case for: Supporters would argue that the multiple pathways to eligibility ensure that a broad range of deserving Dreamer students can access Pell Grants, and the hardship exception provides crucial flexibility for individuals who faced barriers beyond their control.
Case against: Opponents might argue that the broad definition and the hardship exception could expand eligibility beyond what was initially intended, potentially increasing costs or including individuals who do not fully meet the spirit of the Dreamer designation.
Estimated impact: This provision significantly broadens the pool of students eligible for Federal Pell Grants, potentially impacting thousands of individuals and increasing federal outlays for student aid.