Dive Brief:
- The Pell Grant program faces a 10-year shortfall of up to $97 billion, with the recent expansion to include short-term workforce programs adding to existing structural funding problems, according to a Friday analysis from the nonprofit Committee for a Responsible Federal Budget.
- The massive spending package Republicans passed this summer, called the One Big Beautiful Bill Act, gave the Pell Grant program $10.5 billion in one-time funding to avoid a looming budget shortfall. However, this will only delay the shortfall, according to analysts.
- CRFB expects the Pell Grant program’s costs to exceed its funding by $6 billion to $11 billion each year over the next decade. “The underlying structural gap between costs and appropriations remains unaddressed, and in fact was made worse under OBBBA,” the analysts said.
Dive Insight:
Before Republicans passed their spending package, the Pell Grant program was expected to deplete its reserves by the 2025 fiscal year. With the $10.5 billion infusion, lawmakers staved off that crisis — but only by about two years, according to CRFB’s analysis.
That’s in part because the legislative package also expands Pell Grant funding to programs as short as eight weeks, starting in July 2026. CRFB pointed to Congressional Budget Office data estimating that the expansion, known as Workforce Pell, will add about $2 billion to the program’s costs over the next decade.
But authors of Friday’s analysis expect this number to be much higher — $6 billion or more — depending on how many students apply for Workforce Pell, how states and institutions carry out the program, and how the U.S. Department of Education interprets and enforces the accountability measures established by Congress.
"History suggests that when new eligibility is created, enrollment often exceeds initial projections," analysts said, citing a 2020 report on proposals at the time for short-term Pell from New America, a left-leaning think tank.
In 2008, lawmakers expanded Pell Grants to be available year-round. At the time, the CBO estimated the program would cost $2.6 billion over the next five years. But in 2011, a U.S. Education Department official testified before Congress that the program expansion was costing 10 times higher annually than expected.
Similarly, in 2005, Congress lifted restrictions on federal student aid flowing to fully online colleges. While the Education Department expected the change to cost $697 million over 10 years, online-only colleges received “billions in federal aid dollars” in the 2018-19 award year alone, New America found.
In Friday’s analysis, researchers estimated the Pell Grant program would face a $61 billion 10-year shortfall if lawmakers keep its appropriations adjusted for inflation and maintain the maximum award of $7,395. If lawmakers keep both appropriations and the maximum award flat, that shortfall would reach $88 billion.
Moreover, the shortfall would hit $97 billion if lawmakers raise Pell Grant funding and the maximum award in line with inflation and Workforce Pell enrollment outpaces expectations, the researchers estimated.
The Education Department is meeting this week with selected students, employers, college officials and other stakeholders in a process known as negotiated rulemaking to work out regulations for implementing the new program. Under the 2025 statute, short-term programs must have a 70% job placement rate and a 70% graduation rate to be eligible for Pell Grants.
In a draft of regulatory language released last week, the Education Department proposed that, for the first couple years of the program, job placements would count regardless of what fields students enter. However, after the 2027-28 award year, programs would have to show that at least 70% of their students land jobs specifically in fields for which they were being trained.
