Dive Brief:
- The Pell Grant program is expected to wrack up a $2.7 billion deficit by the end of the 2025 fiscal year, according to a January report from the Congressional Budget Office, sparking concerns that some students could lose or face reduced eligibility in the near future.
- The Institute for College Access & Success, a nonprofit research and advocacy group, on Monday warned that the projected shortfall could translate into program cuts for fiscal 2026 similar to those seen following the Great Recession. At that time, lawmakers reduced Pell program costs by lowering student eligibility and benefits.
- “If program funding is not shored up, students could face eligibility or funding cuts for the first time in more than a decade,” Michele Zampini, the institute’s senior director of college affordability, said in a blog post.
Dive Insight:
The Congressional Budget Office’s new projections come after its June report showed the program was headed into fiscal 2025 with a $11.4 billion surplus. Those estimates assumed fewer students would receive Pell Grant awards amid the botched rollout last year of the revamped Free Application for Federal Student Aid, according to a TICAS post at the time.
Instead aid awards — and enrollment — have increased.
The number of Pell Grant recipients spiked 12.6% between June 2024 and September 2024 compared with the same period last year, according to an analysis of preliminary federal data by the Urban Institute. Similarly, first-year student headcounts surged 5.5% in fall 2024 compared to the year before, according to final data from the National Student Clearinghouse Research Center.
Lawmakers have not yet approved a federal budget for fiscal 2025, which started Oct. 1. A temporary spending bill, passed in December, is funding the government through March 14.
TICAS doesn’t expect the latest Pell Grant projections to impact the fiscal 2025 budget. “However, they will quickly rear their head in the context of the upcoming FY26 funding cycle,” Zampini said. Fiscal 2026 will run Oct. 1, 2025, through Sept. 30, 2026.
Zampini warned that cuts similar to those made to the Pell Grant program in the wake of the Great Recession could surface again.
During the Great Recession, the Pell Grant program experienced shortfalls as college enrollment surged and more people qualified for federal aid. To address the deficit, lawmakers made changes to the program in 2011 and 2012 that lowered eligibility and benefits.
The changes included retroactively reducing students’ lifetime Pell Grant benefits from 18 semesters to 12 semesters, which immediately made millions of recipients no longer eligible for funding, according to TICAS. Lawmakers also eliminated year-round Pell, which enables students to use their grants for summer coursework, though they reinstated it in 2017.
“To prevent harmful program cuts in the short term, lawmakers must shore up program funding,” Zampini said in the post. “Otherwise, students will pay the price.”
TICAS also recommended that lawmakers change how the Pell Grant program is funded.
Currently, legislation automatically funds part of the program, while lawmakers appropriate the rest. The group is calling for the Pell Grant program to be entirely moved to mandatory funding.
Democrats proposed a bill last year in both the Senate and House that would switch the program to entirely mandatory funding, as well as double the maximum Pell Grant award. It failed, however, to gain traction with Republicans in either chamber.
