Last year, analysts’ predictions of a severe, long-term budget shortfall for the Pell Grant program — the first in more than a decade — sent shockwaves through Congress.
While the Legislature has tried to address the problem with a $10.5 billion Band-Aid, new projections from the Congressional Budget Office show that even such emergency action won’t be enough to prevent devastating deficits in long-term financial aid programs that help low-income students pay for college.
The report, released Thursday evening, projects the Pell Grant program will be $5.5 billion short by fiscal year 2026, which ends September 30; if Congress does not cut spending or invest new money, that number will soar to $11.5 billion by fiscal year 2027. By 2036, the final year of the CBO’s 10-year forecast, cumulative losses could be as high as $132 billion if Congress does not increase spending to keep pace with inflation. (If adjusted for inflation, the 10-year deficit would be about $104 billion.)
“The projected $100 billion shortfall over 10 years is not just a wake-up call, it’s a fire alarm,” said Alex Holt, senior adviser for higher education at the Committee for a Responsible Federal Budget.
Experts say Pell Awards for the 2025-26 school year are already set and many grants have already been awarded, so Congress cannot address the shortfall by clawing back federal funds. That means lawmakers must find $5.5 billion before they can address the larger long-term shortfall.
Without new funding, students may see changes in future years to the top awards, semesters and times when grants can be used. The last time Pell faced a funding shortfall, Congress cut funding eligibility for the summer term, which was restored in 2017. Last year, when the Congressional Budget Office projected a funding gap of $2.7 billion, the Trump administration proposed cutting top funding by more than $1,600 a year and accused Congress of “chronic mismanagement” of the program.
Supporters say any cuts to the program would hit the more than 7 million low-income students who rely on it.
Higher education policy experts and student advocacy groups have been warning for years about the looming consequences of the Pell Grant shortfall, but even they said the scale of the CBO numbers was a bit surprising.
“Most analysts and advocates agree that Congress was generous in providing $10.5 billion [One Big Beautiful Bill Act] David Baime, senior vice president for government relations at the American Association of Community Colleges, said:
Bayme added that this suggested “substantial appropriations will be required” to keep the program afloat.
Holt added that Congress has largely avoided making tough choices related to Pell and now “the bill has really expired.”
“These one-year fixes are unsustainable. Congress made the program more expensive and now they either need to find a way to cut costs or find the money to pay for it or both,” he said. “If you’re worried about low-income students, then you need to worry about protecting Pell, and to protect Pell, you need to think hard about how you’re going to pay for it.”
Growing demand for Pell
In the 2020-21 academic year, Pell Grants benefited 6.4 million students at a cost of $26.5 billion.
According to the CBO, about 7.6 million students have received Pell Grants through this school year, which will cost about $34 billion in discretionary funds. However, Congress has not significantly increased funding for the program beyond one-time funding last summer.
Although Congress decided in 2020 to expand eligibility for the Pell Grant program as part of the Federal Grant Application Simplification Act, funding remains unchanged. The expansion takes effect in spring 2024, and a recent analysis found that 1.5 million additional students are now eligible for the maximum Pell Grant amount this academic year.
Starting July 1, that number will only grow more, as students in short-term workforce training programs will also be able to use Pell Grants to pay for their courses.
Students participating in short-term workforce programs will receive less aid than the maximum $7,395 available to students working toward a certificate. However, experts worry that Pell’s labor shortage could worsen.
It’s unclear whether and how the Congressional Budget Office will account for the new costs associated with Workforce Pell; rules specifying which training programs and students will be eligible have not yet been finalized.
Some, including the AACC’s Baime, say the “significant financial pressure” on Pell comes from the 2020 expansion, not Pell’s workforce. But Ben Cecil, deputy director of higher education policy at the center-left think tank Third Way, said, “We cannot underestimate the impact of Pell labor on the projected shortage.”
Nicholas Kent, deputy secretary of the Department of Education, addressed the potential funding shortfall at a community college legislative summit earlier this week, noting that Pell has bipartisan support but that a lack of new funding could force the department to make some “tough decisions.” He added that the Department of Education wants to work with Congress to determine which areas should be cut rather than receive more support, acknowledging that Workforce Pell is an unknown.
“We don’t know what the behavioral changes will be, which makes calculating costs from the outset a little imperfect,” he said.
Kim Cook, CEO of the National College Attainment Network, a leading advocacy group for federal student aid, said the Pell Labor numbers are “soft” compared to the “firm” numbers from the FAFSA abbreviation.
“FAFSA Simplified is exactly what we hoped for from a policy perspective — more students are seeing it as an easier form. Barriers are removed. They’re filling out the form and they’re getting the aid they’re eligible for,” she said. “The question now is, we have to appeal to Congress and the president who signed this agreement [law] Provide Pell with sufficient funding to deliver on this promise. “
But getting congressional Republicans to support at least an additional $16 billion for the Pell Grant program may be difficult, especially as lawmakers seek to cut, not increase, federal spending. Congress must pass a federal budget for fiscal year 2027 by September 30.
Rep. Tim Walberg, the Republican chairman of the House Education and Workforce Committee, said in a statement Friday that the gap “has been there for some time” and that House Republicans want to make the program sustainable for future students.
“In reconciliation, House Republicans proposed targeted reforms to reduce shortfalls and encourage completion — a responsible approach that recognizes fiscal realities,” he said. “We will continue to advocate for concrete solutions to ensure Pell remains strong and focused on students who need it most.”
Rep. Bobby Scott, D-Va., ranking member of the House Education Committee, declined to comment.
Still, Cook remains hopeful. She said Pell Grants have always been a bipartisan program that represents the core beliefs of American democracy and should be the leverage needed to get lawmakers on board.
“We have a fundamental belief in our country that we should help make higher education affordable for everyone who wants it,” Cook said. “I think every legislator — many of whom like me are Pell Grant recipients — will look at the need for an educated workforce in their district and state and find that this is definitely a program that they need to support.”
