In 1972, the U.S. Congress authorized the Pell Grant program with the passage of the Basic Educational Opportunity Grant Program. The initiative provides financial awards to undergraduate students who demonstrate significant financial need. According to federal data, nearly 40 percent of all undergraduates and roughly 60 percent of all Black undergraduate students were Pell Grant recipients in the 2015-2016 school year.
Despite the one-time injection of $10.5 billion in funding this past year, the Pell Grant program is projected to be $5 billion in the red by the end of 2026, according to a recent analysis from the Committee for a Responsible Federal Budget (CRFB). This could lead to a major disruption in full Pell Grant awards in the 2028-2029 academic year.
Since 2021, the cost of the Pell Grant program has grown from $21 billion to a projected $35 billion in 2026. By 2036, the Congressional Budget Office (CBO) estimates the cost of the Pell Grant program could grow to $37 billion. However, annual funding this year is less than $24 billion, resulting in a projected deficit of over $11 billion, when one-time funding is excluded.
When adjusting for inflation, CBO projects this deficit will be roughly $9 billion by 2026, totaling some $104 billion over the next ten years. If Congress continues to keep nominal funding levels flat for the Pell program, CBO estimates the annual shortfall could increase to $14 billion by 2036, totaling $132 billion over the next decade.
However, the CFRB estimates this shortfall could be even larger than the CBO’s projections. If Congress continues to increase the maximum award with inflation and Workforce Pell enrollment grows faster than projected, even if funding grows with inflation, the deficit could grow to as much as $18 billion by 2036, with a 10-year shortfall of $157 billion.
Additionally, while CBO estimates Workforce Pell grants will add roughly $2 billion to program costs by 2036, the CRFB suggests actual costs could be up to $7 billion depending on take-up rates, how states and institutions implement the program, and how the Department of Education enforces accountability measures.
“With the Pell reserves on the verge of depletion – despite a one-time cash injection – Congress can no longer delay action and should work to permanently fix the structural shortfall in the Pell Grant program,” reads the CFRB report.
The article continues, “Congress chose to increase the cost of the Pell Grant program back in 2020 without paying for it, and has since ignored many opportunities to fix the problem, despite knowing about the looming shortfall. Now the bill has come due, and the late notices can no longer be ignored.”
