Federal Update - April 8

April 8, 2026

GOVERNMENT RELATIONS HIGHLIGHTS

DHS Shutdown Drags On: Republicans Look to Reconciliation for ICE Funding  

Trump Budget Released: Education Cuts Proposed as Pell Remains Flat 

ED Resumes Borrower Defense Reviews: Institutions Receive New Claims 

Draft Default Rates Released: FY 2023 CDRs Signal Rising Risk 

Deeper Dive: AIM Rulemaking Begins Next Week: ED Targets Accreditation Overhaul 

RECONCILIATION 2.0 TO REOPEN HOMELAND SECURITY?

What You Need to Know 

Congress returns next week from spring break facing a growing backlog of unresolved issues. At the top of the House’s agenda is a Senate‑passed bill that would restore funding for most of the US Department of Homeland Security (DHS), which has now been partially shut down for more than fifty days. The bill funds most DHS operations but excludes portions of ICE and Customs and Border Protection (CBP), for which Democrats have opposed funding without reforms. Last week, Senate Majority Leader John Thune (R‑SD) and Speaker Mike Johnson (R‑LA) announced that the House intends to take up and pass the Senate package, despite earlier resistance from House Republicans. 

Why This Is Important 

In exchange for House passage, Leader Thune stated that Senate Republicans will pursue funding for ICE and CBP through the partisan budget reconciliation process, allowing them to bypass Democratic opposition. While Republican leaders have suggested a narrow reconciliation package, tight margins increase the risk that additional policy or funding provisions could be added to secure certain votes. AACS will closely monitor reconciliation developments for any provisions that could affect our community. 

PRESIDENT TRUMP RELEASES BUDGET

What You Need to Know 

On Friday, President Trump released his proposed FY2027 budget. While the President’s budget serves primarily as a policy blueprint rather than a binding plan, it outlines the Administration’s priorities. The proposal includes $2.2 trillion in discretionary spending, highlighted by a $600 billion increase in defense funding. For ED, the budget proposes a 2.9% funding reduction. 

Why This Is Important 

The budget would keep the maximum Pell Grant award at $7,395 for a fourth consecutive year, despite rising costs for students. It does request $10.5 billion to address the expected Pell shortfall of $11.5 billion by the end of FY2027. At the same time, the budget would cut funding for programs such as TRIO, GEAR UP, and several initiatives supporting Minority‑Serving Institutions. Secretary McMahon is expected to testify before Congress on the budget proposal in the coming weeks. Negotiations on FY2027 that will likely conclude into the post-election the lame duck session. 

ED RESUMES BDR APPLICATION ADJUDICATION

What You Need to Know 

On March 30, ED announced that it had resumed adjudicating borrower defense to repayment (BDR) applications that are not impacted by the Sweet settlement. As a result, institutions have begun receiving notice of BDR claims submitted to ED that fall under the 1994 or 2016 BDR regulations, depending on the date on which the loan in question was first disbursed. Institutions have the right – but not the obligation – to respond to these claims. ED states that “there is no negative inference against a school that does not respond.” If, through adjudication, ED determines the claim meets the standards set forth in the respective BDR regulation, ED will grant a discharge. In a separate proceeding, ED will determine whether to recoup the borrower defense costs from the institution. The March 30 announcement indicates that in this event, the institution will have another opportunity to challenge the borrower’s claims.   

Why This Is Important 

As of March 30, ED has already issued 70% of the notices associated with the 1994 and 2016 BDR regulations. Prior to issuing notices under the 2019 BDR regulation, ED indicated that it will publish additional guidance on the 2019-specific process.  

ED DISTRIBUTES THE FY 2023 DRAFT COHORT DEFAULT RATES

What You Need to Know 

On March 23, ED distributed the draft cohort default rates (CDR) for fiscal year 2023. The appeal period began on March 31. The Department published a guide on how institutions can access the 2023 CDR notification packages, available here. 

Why This Is Important 

For several years, CDR rates have been at zero as a result of the COVID-19 pandemic pause on student loan repayment, interest, and collections from March 2020 to September 2023. With payment obligations having resumed in October 2023, it is anticipated that the rate of default will rise across all of higher education, perhaps significantly. The increase will begin with the fiscal year 2023 CDR rates, which take into account data for borrowers who entered repayment in 2023. As soon as next year, an institution’s Title IV eligibility or access could be constrained or at risk due to CDR rates. 

DEEPER DIVE: ED RULEMAKING ON ACCREDITATION

The Trump Administration has repeatedly made clear its dissatisfaction with the current state of accreditation. In its January announcement revealing its intent to establish the Accreditation, Innovation, and Modernization (AIM) rulemaking committee, ED described the current accreditation system as “broken” and “unhealthy.” Under Secretary Nicholas Kent asserted that the current accreditation regime “shields existing players, fuels rising costs, drives credential inflation, adds administrative bloat, allows undue influence from related trade associations, and promotes ideologically driven initiatives.” 

To address these supposed shortcomings, ED indicated its intent to streamline the process for approving new accreditors, make it easier to institutions to change accreditors, and update the rules regarding how accreditors perform their functions. ED’s goal is to eliminate unnecessary or duplicative requirements, focus on data-driven student outcomes rather than applying standards allegedly driven by DEI, and reinforce integrity expectations in the system. 

The AIM rulemaking sessions are scheduled to begin on April 13 for one week, with a second one-week session set for May 18-22. Earlier this week, ED released the names of negotiators for the AIM committee, along with an initial set of proposed regulations to drive the discussion that build on the goals it outlined in January. The draft materials outline a host of proposals, some of the most significant of which ED claims would: 

1. reduce regulatory burdens for both existing and new accreditors and for accredited institutions and programs, 
2. streamline the recognition process for current and new accreditors, 
3. require accreditors to update their processes to reduce costs and eliminate unnecessary, duplicative and excessive requirements, 
4. improve the integrity of the accreditation process by further distancing accreditors from affiliated trade or membership associations and addressing issues such as credential inflation and transfer of credit, 
5. require accreditation standards and procedures to comply, and to insure that accredited institutions and programs comply, with federal and state laws, including prohibitions on preferential treatment based on protected characteristics and respect for the First Amendment, 
6. promote intellectual diversity among faculty, 
7. require accreditors to develop program-level student outcomes requirements, including return on tuition investment and completion and employment rates, and 
8. update regulations to promote institutional flexibility to achieve cost controls and reductions. 

To the surprise of many observers, ED under the Trump Administration has achieved consensus in each of its earlier negotiated rulemaking efforts. The AIM rulemaking, however, is expected to be contentious, with various and competing social and political points of view driving the negotiations. In fact, despite the request of several members at the most recent NACIQI meeting, ED did not include a definition of “diversity” in the draft regulations. Given the anticipated negotiating climate, consensus may be more difficult to achieve in the AIM rulemaking. Failure to reach consensus would give ED a free hand to develop proposed regulations that would accomplish its goals.