Allocation formula

Section 442 of the Higher Education Act of 1965 (20 U.S.C. 1087–52) is amended to read as follows: 442. Allocation of funds (a) Reservations (1) Reservation for improved institutions (A) Amount of reservation for improved institutions Beginning with fiscal year 2027, for any fiscal year in which the amount appropriated under section 441(b) exceeds $700,000,000, the Secretary shall— (i) reserve the lesser of— (I) an amount equal to 20 percent of the amount by which the amount appropriated under section 441(b) exceeds $700,000,000; or (II) $150,000,000; and (ii) allocate the amount reserved under clause (i) to each improved institution in an amount equal to the greater of— (I) the amount that bears the same proportion to the amount reserved under clause (i) as the total amount of all Federal Pell Grant funds awarded at the improved institution for the second preceding fiscal year bears to the total amount of Federal Pell Grant funds awarded at improved institutions participating under this part for the second preceding fiscal year; or (II) $5,000. (B) Definition of improved institution As used in this paragraph, the term improved institution means an institution that, on the date on which the Secretary makes an allocation under subparagraph (A)(ii)— (i) is an institution of higher education (as defined under section 102) participating under this part; and (ii) with respect to— (I) the completion rate of Federal Pell Grant recipients at an institution, is in the top 75 percent of all institutions participating under this part for the preceding fiscal year; (II) the percentage of students at an institution who are Federal Pell Grant recipients, has a greater percentage of such students at the institution than at least 50 percent of the institutions participating under this part for the preceding fiscal year; and (III) the annual increase in the completion rate of Federal Pell Grant recipients at an institution, has an annual increase that is greater than the annual increase of at least 50 percent of the institutions participating under this part for the preceding fiscal year. (C) Completion rate For purposes of determining the completion rate of an institution under this section, a Federal Pell Grant recipient who is either a full-time student or a part-time student shall be counted as a completer if, within 150 percent of the normal time for completion of or graduation from the program, the student has completed or graduated from the program, or enrolled in any program of an institution participating in any program under this title for which the prior program provides substantial preparation. (2) Reservation for grant program From the amount appropriated under section 441(b) for a fiscal year and remaining after the Secretary reserves funds under subparagraph (A), the Secretary shall reserve $30,000,000 to carry out grants under section 449. (3) Reallocation of amount returned by improved institutions If an institution returns to the Secretary any portion of the sums allocated to such institution under this subsection for any fiscal year, the Secretary shall reallot the excess to improved institutions on the same basis as under paragraph (1)(A). (4) Publication Beginning 1 year after the first allocations are made to improved institutions under paragraph (1)(A) and annually thereafter, the Secretary shall make publicly available— (A) a list of the improved institutions that received funding under that paragraph for the prior fiscal year; and (B) for each such improved institution— (i) the percentage of students who are Federal Pell Grant recipients; (ii) the completion rate for students who are Federal Pell Grant recipients; and (iii) a comparison between the information described in clauses (i) and (ii) for the prior fiscal year and such information for the fiscal year that is two years prior. (b) Allocation formula for fiscal years 2027 through 2031 (1) In general From the amount appropriated under section 441(b) for a fiscal year and remaining after the Secretary reserves funds under subsection (a) of this section, the Secretary shall allocate to each institution— (A) for fiscal year 2027, an amount equal to the greater of— (i) 90 percent of the amount the institution received under this subsection and subsection (a) for fiscal year 2026, as those subsections were in effect with respect to that fiscal year (in this subparagraph referred to as the 2026 amount for the institution); or (ii) the fair share amount for the institution determined under subsection (d); (B) for fiscal year 2028, an amount equal to the greater of— (i) 80 percent of the 2026 amount for the institution; or (ii) the fair share amount for the institution determined under subsection (d); (C) for fiscal year 2029, an amount equal to the greater of— (i) 60 percent of the 2026 amount for the institution; or (ii) the fair share amount for the institution determined under subsection (d); (D) for fiscal year 2030, an amount equal to the greater of— (i) 40 percent of the 2026 amount for the institution; or (ii) the fair share amount for the institution determined under subsection (d); and (E) for fiscal year 2031, an amount equal to the greater of— (i) 20 percent of the 2026 amount for the institution; or (ii) the fair share amount for the institution determined under subsection (d). (2) Ratable reduction (A) In general If the amount appropriated under section 441(b) for a fiscal year and remaining after the Secretary reserves funds under subsection (a) of this section is less than the amount required to be allocated to the institutions under this subsection, then the amount of the allocation to each institution shall be ratably reduced. (B) Additional appropriations If the amounts allocated to each institution are ratably reduced under subparagraph (A) for a fiscal year and additional amounts are appropriated for that fiscal year, the amount allocated to each institution from the additional amounts shall be increased on the same basis as the basis on which the amounts under subparagraph (A) were reduced (until each institution receives the amount required to be allocated under this subsection). (c) Allocation formula for fiscal year 2031 and each succeeding fiscal year Except as provided in subsection (d)(4), from the amount appropriated under section 441(b) for fiscal year 2031 and each succeeding fiscal year and remaining after the Secretary reserves funds under subsection (a) of this section, the Secretary shall allocate to each institution the fair share amount for the institution determined under subsection (d). (d) Determination of fair share amount (1) In general The fair share amount for an institution for a fiscal year is the sum of— (A) 100 percent of the institutional undergraduate student need calculated under paragraph (2) for the preceding fiscal year; and (B) 25 percent of the institutional graduate student need calculated under paragraph (3) for the preceding fiscal year. (2) Institutional undergraduate student need calculation The institutional undergraduate student need for an institution for a fiscal year is the sum of the following: (A) An amount equal to 50 percent of the amount that bears the same proportion to the available appropriated amount for that fiscal year as the total amount of Federal Pell Grant funds awarded at the institution for the preceding fiscal year bears to the total amount of Federal Pell Grant funds awarded at all institutions participating under this part for the preceding fiscal year. (B) An amount equal to 50 percent of the amount that bears the same proportion to the available appropriated amount for that fiscal year as the total amount of the undergraduate student need at the institution for the preceding fiscal year bears to the total amount of undergraduate student need at all institutions participating under this part for the preceding fiscal year. (3) Institutional graduate student need calculation The institutional graduate student need for an institution for a fiscal year is the amount that bears the same proportion to the available appropriated amount for such fiscal year as the total amount of the graduate student need at the institution for the preceding fiscal year bears to the total amount of graduate student need at all institutions participating under this part for the preceding fiscal year. (4) Eligibility for fair share amount Beginning in fiscal year 2027, the Secretary may not allocate funds under this part for a fiscal year to any institution that, for at least two of the three fiscal years preceding such fiscal year, has— (A) a student population with less than 7 percent of undergraduate students who are recipients of Federal Pell Grants; or (B) in the case of an institution that enrolls only graduate students, a student population with less than 5 percent of students who have a student aid index of zero. (5) Definitions The following definitions apply to this subsection: (A) Available appropriated amount The term available appropriated amount means— (i) the amount appropriated under section 441(b) for a fiscal year, minus (ii) the amounts reserved under subsection (a) of this section for that fiscal year. (B) Average cost of attendance The term average cost of attendance means, with respect to an institution, the average of the attendance costs for a fiscal year for students, which includes— (i) tuition and fees, computed on the basis of information reported by the institution to the Secretary, which includes— (I) total revenue received by the institution from undergraduate and graduate tuition and fees for the second year preceding the year for which it is applying for an allocation; and (II) the institution’s enrollment for that second preceding year; (ii) standard living expenses equal to 150 percent of the difference between the income protection allowance for a family of five and the income protection allowance for a family of six for a single independent student; and (iii) books and supplies, in an amount not exceeding $1,000, adjusted annually thereafter in accordance with inflation as determined by the Department of Labor’s Consumer Price Index for the previous calendar year. (C) Graduate student need The term graduate student need (except when used as part of the term institutional graduate student need) means, with respect to a graduate or professional student for a fiscal year, the lesser of the following: (i) The amount equal to (except the amount computed by this clause shall not be less than zero)— (I) the average cost of attendance for the preceding fiscal year, minus (II) the graduate or professional student’s student aid index (computed in accordance with part F of this title) for the preceding fiscal year. (ii) The maximum annual loan amount for a Federal Direct Unsubsidized Stafford Loan for a graduate or professional student, as applicable. (D) Undergraduate student need The term undergraduate student need (except when used as part of the term institutional undergraduate student need) means, with respect to an undergraduate student for a fiscal year, the lesser of the following: (i) The total of the amount equal to (except the amount computed by this clause shall not be less than zero)— (I) the average cost of attendance for the preceding fiscal year, minus (II) the undergraduate student’s student aid index (computed in accordance with part F of this title) for the preceding fiscal year. (ii) The total of— (I) the maximum annual loan amount of a Federal Direct Unsubsidized Stafford Loan applicable to such undergraduate student; and (II) only in the case of a student who receives a Federal Direct Stafford Loan for such fiscal year, the maximum annual loan amount of a Federal Direct Stafford Loan applicable to such undergraduate student. (e) Return of surplus allocated funds (1) In general Except with respect to funds returned under subsection (a)(3), if an institution returns to the Secretary any portion of the sums allocated to the institution under this section for any fiscal year, the Secretary shall reallot the excess, in the following award year, to institutions that used at least 10 percent of the total amount of funds granted to the institution under this section to compensate students employed during a qualified period of nonenrollment (as such term is defined in section 443(f)) on the same basis as the basis on which fair share amounts are determined under subsection (d). (2) Use of funds Each institution shall, to maximum extent practicable, use funds received pursuant to this subsection to compensate students employed in work-based learning positions. (3) Retained funds (A) Amount returned If an institution returns more than 10 percent of its allocation under paragraph (1), the institution’s allocation for the next fiscal year shall be reduced by the amount returned. (B) Waiver The Secretary may waive subparagraph (A) for a specific institution if the Secretary finds that enforcing that subparagraph would be contrary to the interest of the program. (f) Filing deadlines The Secretary may require applications under this section, at such time, in such manner, and containing such information as the Secretary may require..