Congress curtails move expanding Pell Grant access for some students

A provision in the short-term funding bill approved by Congress effectively blocks a recent Education Department move that could have expanded access to federal Pell grants for some students who are financially dependent on their families.

Tensions are high between members of Congress and the department over the implementation of the new Free Application for Federal Student Aid. Some lawmakers say the federal agency is doing a poor job of executing the changes in the way Congress intended. Department leaders argue that they are trying to fulfill the law’s goal of providing more financial support to as many students as possible.

At issue is a new formula in the FAFSA that is used to determine how much a student could pay for their college education. Students who fund college on their own could now receive a Student Aid Index of negative $1,500, the lowest level. A student with an index between zero and negative $1,500 would qualify for the maximum Pell award – $7,395 for the 2024-25 academic year.

But the nearly four-year-old law underpinning the FAFSA overhaul did not explicitly say whether the same floor should apply to dependent students. And no one caught that oversight until recently.

The Education Department on Tuesday concluded that “implementing a floor (for dependent students) would be inconsistent with the letter of the law.” Congressional aides say the department notified Congress of its plans Monday evening and did not consult with lawmakers on the decision.

Some House lawmakers said that decision meant that nearly 300,000 more students on the higher end of the income scale would now qualify for Pell, adding to the financial pressures on the already strained grant program.

A measure was added to the short-term spending bill to apply the same floor for dependent and independent students for the 2024-2025 award year, then set a $0 floor for dependents each year thereafter. It was championed by House Republicans with the support of some Democrats.

The FAFSA, which helps students qualify for billions of dollars in federal, state and institutional money for college, is in the throes of a tumultuous update mandated by Congress. Policymakers passed a bipartisan law to reduce the number of questions on the form and provide more grant aid to more students. But this year’s rollout has been besieged by delays, technical glitches and errors.

After initially neglecting to update a set of guidelines used to calculate eligibility for financial aid, Education Department officials say they have been double-checking their methodology and the statute in processing the FAFSA. In doing so, they found the law failed to address the treatment of income from students who are dependent on their families for support.

Seven million students benefited from the $30 billion Pell Grant program in 2023. The program, created in 1972, awards money that does not have to be repaid to students whose household incomes are typically $40,000 or less.

Pell’s funding is stretched thin because of an increase in the maximum award, more people returning to college and increased eligibility through the revised FAFSA formula. A bipartisan proposal to expand access to Pell for short-term programs could place further strain on the program. A Democratic aide in the Senate said Pell will probably face a shortfall in fiscal 2025, despite posting a $12 billion surplus last year.

Members of Congress feared the department’s move this week would only hasten that deficit by creating a $7 billion shortfall next year.

Rep. Virginia Foxx (R-N.C.), chairwoman of the House Education Committee, said in a statement that the provision added to the short-term spending bill “puts a stop to the Department of Education’s reckless action, while still enabling students to get the financial aid information they need in a timely fashion and ensuring the Pell Grant is stable in the future for families truly in need.”

The measure will save an estimated $3.4 billion, according to House Republicans, which will be funneled back into Pell to slow the looming shortfall.

A recent analysis from the Committee for a Responsible Federal Budget predicts the Pell reserves will be exhausted by 2026 or sooner amid expansions and reductions in discretionary spending. The think tank said the program faces a $35 billion to $95 billion ten-year shortfall, net of current reserves. Closing the funding gap, according to the analysis, requires higher appropriations, smaller benefits, tighter eligibility or some combination.

Clawing back Pell benefits, however, could undermine the tepid recovery of higher education coming out of the pandemic. Although the purchasing power of Pell has waned, it remains the largest source of federal grant aid and a critical source of funding for low- and moderate-income students.

As a result, some Democratic lawmakers were livid over the rescission of the Education Department’s policy and bemoaned the loss of student access to the Pell Grant.

“In the wealthiest country on Earth, students who want a college degree should be able to get it without facing financial ruin,” said Sen. Bernie Sanders (I-Vt.), the chairman of the Senate Committee on Health, Education, Labor and Pensions.

He and Rep. Robert C. “Bobby” Scott (Va.), the top Democrat on the House Education Committee, both said they were “extremely disappointed” in the outcome.

“It is a false choice to claim that we must choose between expanding Pell to more low-income students or preserving the long-term viability of the Pell Grant program. We can and should do both,” Scott said.

Despite the change approved by lawmakers on Thursday, the Education Department has estimated that 1.5 million more people could qualify for a maximum Pell after the FAFSA update and 610,000 will be newly eligible for the grant.