Rapid Expansion of Pell Grant Program Creates Budget Challenge

The recent growth of the Pell Grant Program at a time of record federal deficits has Congress considering proposals to create a more sustainable maximum award, roll back recent need analysis changes and set stricter lifetime limits on Pell eligibility, according to a recent Congressional Research Service (CRS) report.

CRS, which provides Congress with nonpartisan policy analysis, estimates that Congress will need to increase discretionary Pell funding to $34.2 billion in fiscal year (FY) 2012 — $11.2 billion more than the FY 2011 discretionary spending level of $23 billion — in order to maintain the current maximum award of $5,550. The rising cost is due to an increase in awards from roughly 6 million students in 2008 to an anticipated 9.4 million students in 2012-13. CRS attributes the jump in program participation to “legislative changes that have led to increased benefits for more students, increases in the number of students enrolling in college and applying for Pell Grant aid, and a weakened economy.” Estimates point to a $20 billion Pell shortfall in 2012-13.

The growth of the program has changed the Pell funding debate in Congress as lawmakers look to cut spending to rein in the growing deficit. Even Pell’s staunchest supporters in Congress have stopped pushing for funding increases. Instead, they’ve conceded that the current (and projected) cost of the program is unsustainable and are trying to find ways to reduce the cost of the program that minimize the impact on the nation’s neediest students.

This change was clearly demonstrated in the Obama administration’s FY 2012 budget request, which called for the elimination of the year-round Pell Grant to reduce program costs. Just one year earlier, the administration proposed making the Pell Grant a true entitlement program, with the maximum award automatically increasing every year based on inflation.

This new Pell funding debate also played out when Congress worked to finalize the FY 2011 budget. House Republicans pushed a proposal to cut the maximum Pell Grant by $845 while Democrats fought to maintain the maximum Pell Grant at $5,550, but conceded the elimination of the year-round Pell Grant in order to reduce the cost of the program.

The elimination of year-round Pell Grants reduced the cost of the program by $8 billion over the next two years — significant savings, but not enough to stop lawmakers from seeking more cuts to the program. The Republican-controlled House passed a FY 2012  budget resolution that would limit Pell Grant eligibility in and possibly cut the 2012-13 maximum award by as much as $2,510 — reducing the maximum award from $5,550 to $3,040. While it’s unlikely that this will pass the Democratic-controlled Senate, it suggests that the FY 2012 budget debate will focus on how to cut Pell spending. Whether those cuts come through reduced Pell Grant amounts or lower participation is the focus of ongoing debate.

While we anticipate that discussions on how to cut the program will continue among policymakers in the coming months, Pell remains a top priority for NASFAA. We will continue to engage in discussions that aim to set the program on stable footing without causing harm to students.

 (This article was provided by NASFAA and is the third in a series of four newsletters)

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3 thoughts on “Rapid Expansion of Pell Grant Program Creates Budget Challenge

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  3. Pingback: Pell grants preserved, Stafford loans for grad school lose subsidy - College Resource Center

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