Pell Grant Facing $11.5B Shortfall

Last year, analysts projected a significant long-term budget shortfall for the Pell Grant program—the first in more than a decade—sending shock waves through Congress.

And while the Legislature tried to address it with a $10.5 billion Band-Aid, the Congressional Budget Office’s latest projection shows that even such an emergency action won’t be enough to prevent devastating deficits for the long-standing financial aid program that helps low-income students pay for college.

The report, released late Thursday evening, projects that by the end of fiscal year 2026, which ends Sept. 30, the Pell Grant program will be short $5.5 billion; that number skyrockets to $11.5 billion in fiscal year 2027 if Congress doesn’t make cuts or put in new money. And by 2036, the final year included in the CBO’s 10-year projection, the cumulative toll could reach up to $132 billion if Congress doesn’t up its spending to keep pace with inflation. (The 10-year deficit would be about $104 billion if adjusted for inflation.)

“A $100 billion 10-year projected shortfall isn’t 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.

Pell awards are already set for the 2025–26 academic year and many grants have already gone out the door, so Congress can’t address the shortfall by clawing back federal dollars, experts said. That means lawmakers will have to find the $5.5 billion before grappling with the larger long-term shortfall.

Without new money, students in future years could see changes to the maximum award, how many semesters they can use the grant for and when. The last time Pell faced a shortfall, Congress cut eligibility for the grant during the summer term, which was restored in 2017. And last year, when the CBO projected a $2.7 billion funding gap, the Trump administration proposed cutting the maximum award by more than $1,600 a year and blamed Congress for the program’s “chronic mismanagement.”

Any cuts to the program would be a blow for the more than seven million low-income students who rely on it, advocates say.

Higher education policy experts and student advocacy groups have warned about the looming consequences of a Pell Grant shortfall for years, but even they say that the scale of the CBO’s numbers came as a bit of a surprise.

“Most analysts and advocates were of the mind that the $10.5 billion that Congress generously provided in the [One Big Beautiful Bill Act] would make the program whole through fiscal year 2026,” said David Baime, senior vice president for government relations at the American Association of Community Colleges.

What this shows, Baime added, is that “substantially more appropriations will be needed” to keep the program afloat.

Holt added that Congress has largely avoided making tough choices related to Pell and now “the bill really has come due.”

“These one-year fixes are not sustainable. Congress made the program more expensive and now they either need to find a way to cut costs, find the money to pay for it, or both,” he said. “If you’re worried about low-income students, then you need to be worried about protecting Pell, and to protect Pell you need to get serious about how to pay for it.”

Increasing Demand on Pell

In the 2020–21 academic year, the Pell Grant went to 6.4 million students, costing $26.5 billion.

By this current academic year, about 7.6 million students received the Pell Grant, according to CBO, which would cost about $34 billion in discretionary funds. Yet Congress hasn’t substantially increased funding for the program beyond the one-time funding last summer.

The flat funding is in spite of Congress’s decision in 2020 to expand access to the Pell Grant program as part of the FAFSA Simplification Act. That expansion took effect in spring 2024, and a recent analysis found that 1.5 million additional students are now eligible to receive the maximum Pell Grant this academic year.

Starting July 1, that number will only increase more as students in short-term workforce training programs will be able to use the Pell Grant to pay for their classes as well.

Students in the short-term workforce programs won’t receive nearly as much in aid as the maximum $7,395 that students who are working toward a credential can access. However, experts worry Workforce Pell could exacerbate the shortfall.

It remains unclear whether and how the Congressional Budget Office accounted for new costs related to Workforce Pell; the regulations that specify which training programs and students are eligible have yet to be finalized.

Some, like Baime from AACC, say the “overwhelming financial pressure” put on Pell is from the 2020 expansion, not Workforce Pell. But Ben Cecil, the deputy director of higher education policy at Third Way, a left-of-center think tank, says, “We can’t underestimate the effects of Workforce Pell on the projected shortfall.”

Education Under Secretary Nicholas Kent addressed the potential shortfall during a talk at the Community College Legislative Summit earlier this week, noting that Pell has had bipartisan support but that the lack of new money could force some “hard decisions” at the Education Department. He added that ED wants to work with Congress to identify which areas should be cut versus gain more support and acknowledged that Workforce Pell is a wild card.

“We don’t know what the behavioral change will be, which makes costing this out a little bit of an imperfect science at the very beginning,” he said.

Kim Cook, CEO of the National College Attainment Network, a leading advocacy group for federal student aid, said the numbers for Workforce Pell are “soft,” compared to the “firm” numbers for FAFSA Simplification.

“FAFSA Simplification is doing exactly what we hoped for from a policy point of view—that more students are seeing this as a simpler form. The barriers are taken down. They’re completing the form, and they’re getting the aid for which they’re eligible,” she said. “Now the piece is that we have to call on Congress and the president who signed this into [law] to give Pell sufficient funding to keep that promise.”

But getting Republicans in Congress to support an additional $16 billion at minimum for the Pell Grant program could prove difficult, especially as lawmakers are looking to trim—not increase—federal spending. Congress has until Sept. 30 to pass a federal budget for fiscal year 2027.

Rep. Tim Walberg, the Republican chair of the House Education and Workforce committee, said in a statement Friday that the shortfall has been known “for some time,” and House Republicans want to make the program sustainable for future students.

“In reconciliation, House Republicans proposed targeted reforms to reduce the shortfall 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 with the greatest need.”

Rep. Bobby Scott, a Virginia Democrat and ranking member of the House education committee, declined to comment.

Still, Cook remains hopeful. The Pell Grant has always been a bipartisan program that represents the core beliefs of American democracy, she said, and that should be the kind of leverage that’s needed to get lawmakers on board.

“We have a fundamental belief in this country that we should help everyone who wants to pursue higher education be able to afford it,” Cook said. “And I think every lawmaker—many of whom have been Pell Grant recipients like me—will look at the need for an educated workforce in their districts and their states and see that this is absolutely a program that demands their support.”