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Wednesday, February 6, 2013

Federal Pell Grant Program of the Higher Education Act: How the Program Works, Recent Legislative Changes, and Current 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 provided over $33.5 billion to approximately 9.7 million undergraduate students in FY2011. For FY2012, the total maximum Pell Grant was funded at $5,550. The program is funded primarily through annual discretionary appropriations, although in recent years mandatory appropriations have played a smaller yet increasing role in the program. 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).

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 FY2010, an estimated 74% 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, primarily due to the ongoing need for additional program funding from FY2009 to FY2011. The need for additional funding during this time period was driven by both anticipated and unanticipated cost increases in the program. Some of the factors contributing to these increased costs included (1) legislative changes enacted in FY2009 and prior years that led to increased benefits for more students; (2) increases in the number of students enrolling in college and applying for Pell Grant aid; and (3) a weakened economy. Congress responded to these funding needs through numerous legislative efforts in FY2010 through FY2011 by providing additional mandatory funding to augment discretionary funding for current and future years. This additional mandatory funding was offset by reductions in spending on the federal student loan programs and changes to the Pell Grant program’s eligibility and award rules.

Most recently, the FY2012 Consolidated Appropriations Act (P.L. 112-74) provided $22.8 billion in discretionary funding for the program in FY2012 and an additional $3.1 billion in mandatory funds for general use in the program from FY2012 to FY2021, of which $612 million is available beginning in FY2012. These mandatory funds were offset by changes also included in the FY2012 Consolidated Appropriations Act to federal student aid programs in the HEA that took effect on July 1, 2012.

Some of the issues concerning the Pell Grant program that may confront this session of Congress center on appropriate satisfactory academic progress measures for students who receive Pell Grant aid and outcome measures for both students and institutions that receive Pell Grant aid. While the funding needs of the program appear to be met for FY2013 due to advance mandatory appropriations and other changes, Congress may begin to consider the implications of additional funding needs in FY2014, when advance mandatory appropriations to augment discretionary appropriations are substantially less than in FY2013. Finally, Congress may also continue to consider ways to decrease future program costs by changing the distribution of overall benefits by targeting aid to the most needy students or by revising the program’s award rules and eligibility parameters.



Date of Report: January 15, 2013
Number of Pages: 51
Order Number: R42446
Price: $29.95

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