Funding Shortfall and Eligibility Concerns
The federal Pell Grant program, established in 1972, faces a looming $2.7 million budget shortfall, according to a January report from the Congressional Budget Office. This funding gap could have significant implications for low-income students, who rely on the Pell Grant to cover college costs.
How Pell Grants Work
The Pell Grant is an entitlement program, meaning that all eligible students receive it. However, its funding model is complex and relies on a mix of mandatory and discretionary funding. Congress must appropriate discretionary funding annually, based on enrollment projections for the following year.
Reasons for the Funding Gap
- Increased enrollment: College enrollment has grown by nearly five percent from the previous year, leading to a greater number of Pell-eligible students.
- FAFSA formula changes: The changes led to a 12.6% increase in the number of Pell-eligible students, according to an Urban Institute study.
- Shortfall in discretionary funding: The shortfall in discretionary funding could lead to a reduction in the number of students or programs that are Pell-eligible, or lower the amount of Pell dollars that individuals can receive.
The Impact on Students
If the funding gap remains unaddressed, students may face reduced financial aid packages, lower Pell Grant awards, or both. This could worsen over time, as the shortfall continues to grow.
Existing Gaps in Funding
| Funding Shortfall | Affect on Students |
|---|---|
| $50 billion over 10 years | Reduced Pell Grant amounts, lifetime limit reduced to 12 semesters, and some students losing eligibility. |
| $2.7 million | Possibility of reduced Pell Grant amounts, lowered maximum Pell award, or reduced number of Pell-eligible students. |
The first step in any financial aid journey is to file the Free Application for Federal Student Aid (FAFSA) each year. This unlocks the Pell Grant, as well as other forms of financial aid, such as work-study opportunities and flexible federal student loans.
Most states offer financial aid in the form of grants, scholarships, and free or reduced tuition programs at public institutions. If there is a Pell shortage, some states may step up their aid to fill in the funding gaps for students.
For example, let’s say a student from a low-income family receives a Pell Grant of $7,395 per year. If the funding gap leads to a reduction in Pell Grant awards, the student may receive only $6,500 per year. This could lead to a significant increase in the amount the student needs to borrow or rely on other forms of financial aid.
Similarly, if a student from a middle-income family receives a Pell Grant of $6,000 per year, and the funding gap leads to a reduction in Pell Grant awards, the student may receive only $5,000 per year. This could lead to a significant increase in the amount the student needs to borrow or rely on other forms of financial aid.
- More than 100 college access organizations are calling on lawmakers to move the Pell Grant to a fully mandatory spending model.
Wil Del Pilar, senior vice president of Ed Trust, warns that if the Pell Grant is not addressed, it could put students at risk and ultimately undermine the educational aspirations of low-income students.
The current funding model of the Pell Grant is complex and relies on a mix of mandatory and discretionary funding. While it is an entitlement program, the Pell Grant’s funding is not solely automatic, and Congress must appropriate discretionary funding annually.
Ed Trust and other organizations argue that moving the Pell Grant to a fully mandatory spending model would provide more stability and predictability for students and ensure that the program remains well-funded.
For example, if the Pell Grant is moved to a fully mandatory spending model, the amount of Pell dollars available to students would be more stable and predictable. This would provide more security and peace of mind for students and their families.
The federal Pell Grant program is facing a significant funding shortfall, which could have far-reaching implications for low-income students. While there are many additional strategies to pay for college, it is essential to address the shortfall to ensure that students have access to the financial aid they need.
