Federal Pell Grant Program of the Higher Education Act: Background, Recent Changes, and Current Legislative Issues

Shannon M. Mahan
Specialist in Education Policy

The Federal Pell Grant program, authorized by Title IV of the Higher Education Act of 1965, as amended (HEA; P.L. 89-329), is the single largest source of federal grant aid supporting postsecondary education students. The program is estimated to have provided over $36.5 billion to approximately 8.9 million undergraduate students in FY2010. For FY2011, the total maximum Pell Grant was funded at $5,550. The program is funded primarily through annual appropriations, although mandatory appropriations play a smaller, yet increasing, role in the program.

Pell Grants are need-based aid that is intended to be the foundation for all federal student aid awarded to undergraduates. There is no absolute income threshold that determines who is eligible or ineligible for Pell Grants. Nevertheless, Pell Grant recipients are primarily low-income. In FY2009, an estimated 76% of all Pell Grant recipients had a total family income at or below $30,000.

The Pell Grant program has garnered considerable attention over the past several years in Congress. Most recently, the Department of Defense Full-Year Continuing Appropriations Act of 2011 (P.L. 112-10) provided $23 billion in discretionary appropriations for the program to effectively maintain a $5,550 total maximum award in the upcoming award year (AY) 2011-2012. In addition, P.L. 112-10 also amended the HEA by eliminating a provision that allowed for a student to receive two Pell Grant awards in the same award year. The estimated savings in mandatory spending related to the elimination of this provision were redirected for future general use in the program as specified annual mandatory appropriations beginning in FY2012 and continuing in all subsequent years. In March 2010, the SAFRA Act, passed as part of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152), established indefinite mandatory appropriations beginning in FY2010 to provide for increases to the maximum award amount funded with annual discretionary appropriations. The program also received substantial discretionary and mandatory supplemental funding through the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). The statutory authority for the Pell Grant program was most recently reauthorized by the Higher Education Opportunity Act of 2008 (HEOA; P.L. 110-315).

The Pell Grant program recently experienced substantial increases in program costs—largely due to legislative changes that have led to increased benefits for more students, increases in the number of students enrolling in college and applying for Pell Grant aid, and a weakened economy. Consequently, these factors contributed to annual funding shortfalls in four of the last five years from FY2007 to FY2011. Despite a substantial funding increase in FY2011, the program is expected to face a discretionary funding shortfall of $2.5 billion through FY2011.

Many of the issues concerning the Pell Grant program that confront Congress include potential challenges associated with funding the program, both in the short term and the long term. In the short-term, substantial discretionary appropriations may be required in FY2012 to ensure current award levels are maintained, leading to the program comprising an increasingly larger share of the discretionary funding allocated for programs that are funded in Labor, Health and Human Services (HHS), and Education appropriations. As a long-term strategy, Congress could also consider ways to change the distribution of overall benefits by targeting aid to the most needy students or by revising the program’s award rules and eligibility parameters.

Both the House and Senate versions of the Budget Control Act of 2011 provide additional mandatory appropriations for the Pell Grant Program in FY2012 and FY2013.


Date of Report: July 29, 2011
Number of Pages: 50
Order Number: R41437
Price: $29.95

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