Biden Seeks Another Pell Grant Increase, but Shortfall Looms

President Biden wants $2.1 billion next fiscal year to increase the Pell Grant and cover a funding gap in the $29 billion program that could lead to eligibility cuts if not addressed. The increase is part of a proposed 2025 budget released Monday that includes free community college and new funding for student support programs and institutions that serve underrepresented students.

Spending on the Pell program, which helps low-income students pay for college, has gone up by nearly 15 percent in the past year following a series of increases to the maximum award and changes to eligibility that expanded access to the pot of money, according to the Office of Management and Budget, which projected a $1.3 billion shortfall for fiscal year 2025. The additional $2.1 billion will help but not avert a shortfall, according to OMB projections, leaving a gap of $4.6 billion in 2026.

The Biden administration is still forging ahead with its plan to double the maximum Pell Grant award by 2029. Since Biden took office, the award has increased by $900, and the proposal for fiscal year 2025 would raise it from $7,395 to $8,145. (Congress has yet to adopt a fiscal year 2024 budget, so the specific figures could change.)

“Our view is that it’s possible not only to fully fund the existing Pell Grant through the rest of the decade but to substantially expand it,” Education Under Secretary James Kvaal said at a budget briefing Monday afternoon.

Congress moved earlier this month to start addressing the shortfall, changing the formula that determines student financial aid eligibility formula and cutting off about 100,000 students from the Pell Grant starting in the 2025–26 award year. The move saved the government about $3.4 billion, according to the Committee for a Responsible Federal Budget. Neither OMB’s projections nor the president’s budget account for Congress’s actions, so it’s unclear what level of shortfall will actually remain for the coming fiscal year. The Congressional Budget Office is expected to release updated numbers soon that should be more definitive.

The Pell Grant has operated at a surplus for years, but experts have warned that those reserves were at risk as lawmakers continued boosting the maximum award and opened up the program to more students without allocating additional dollars. Because of the deal reached last spring to avert a default on the federal government’s debt, which capped spending, Congress has few options to address the funding gap. Congressional aides and higher education experts are worried about potential cuts to eligibility and recent expansions such as year-round Pell.

Jon Fansmith, senior vice president of government relations and national engagement at the American Council on Education, said Biden is taking the right approach by doubling down on Pell Grant investments despite the potential shortfall.

“It’s important that the president is putting down a marker for the need to expand funding,” he said.

The proposed fiscal year 2025 budget increases the maximum Pell Grant for students who attend public and nonprofit private colleges by $750. Students who attend for-profit institutions would see a smaller increase of $100.

Differentiating the Pell Grant based on the type of institution isn’t entirely new; it was part of the President’s Build Back Better Act, which ultimately did not become law. But Fansmith is concerned about the notion of calculating aid based on the institution that students attend, which would be a shift in federal policy. He worries that change could make it more challenging for students to figure out how to pay for college and navigate their postsecondary options as they assess the aid available to them.

Jason Altmire, president of Career Education Colleges and Universities, the association representing for-profit institutions, said the Pell Grant proposal was disappointing and would penalize students who choose to attend proprietary colleges.

“Pell Grants are awarded to students based on their financial needs rather than the institutions in which they enroll,” Altmire said. “Underserved students deserve equal access to Pell Grants and should be able to utilize them at the institutions that align best with their personal circumstances and educational goals.”

‘Historic Investments’

The President’s budget is likely dead on arrival in a bitterly divided Congress that only recently made progress on passing a budget for fiscal year 2024. North Carolina representative Virginia Foxx, the Republican chairwoman of the House Education and Workforce Committee, said in a statement that the President’s budget “treats taxpayer dollars as if they were nothing more than Monopoly money.”

“Under his proposal, the Departments of Education, Labor, and Health and Human Services would gobble up more taxpayer dollars without any shred of accountability to the very people who they purport to serve,” Foxx said. “With the imperative of delivering unfettered accountability to the American people in mind, we must chart a more fiscally judicious path than the one that the president intends to take this nation down.”

Education Secretary Miguel Cardona said Monday on a call with reporters that his department’s budget proposes “historic investments” within the confines of the debt-relief deal.

“This budget still matches the best budgets of the Obama years while building on the best budgets of this administration and blows the Trump budgets out of the water,” Cardona said, who criticized the “reckless and deeply irresponsible” cuts that congressional Republicans have proposed in the past year.

The spending plan outlines a vision for a more robust Education Department that helps higher education better support students and reduce costs. For example, the administration is proposing a new $12 billion program that would fund state efforts to expand dual enrollment programs for high school students and support programs at institutions that increase completion rates and reduce costs.

Under the budget, the Education Department’s Office for Civil Rights would receive $162 million—a $22 million increase from fiscal year 2023. The office has seen a record number of complaints in recent years. Complaints related to allegations of discrimination based on shared ancestry, which includes antisemitism, jumped from 62 in 2023 to 145 in the first quarter of fiscal year 2024, according to budget documents. Over all, OCR received 1,100 more complaints in the first year of 2024 compared to the first quarter of 2023.

The Biden administration also wants $625 million more for the cash-strapped Office of Federal Student Aid, which was flat-funded in the previous budget and is working on a number of projects, including the new Free Application for Federal Student Aid.

The budget reintroduces the president’s proposals for free community college and two years of subsidized tuition for eligible students who attend historically Black colleges and universities, tribal colleges and universities, or minority-serving institutions. HBCUs, TCUs and MSIs also would get $100 million in research and development infrastructure grants under the proposal. Among other investments, the administration also is proposing $12 million for the Open Textbooks Pilot program, a fund that supports projects to create new open educational resources but was zeroed out in the president’s fiscal year 2024 request.

Funding the textbooks program is “in alignment with the administration’s goal of lowering the cost of college and the elimination of junk fees, such as automatic fees for textbooks,” according to budget documents.

“If enacted, these investments will help us work with college leaders, faculty and students to build the higher education system that delivers on the promise of upward mobility, equity and economic growth,” Under Secretary Kvaal said on a call with reporters. “A system that complements the President’s leadership on student debt by no longer relying on unaffordable loans to pay tuition bills and by delivering value to all students.”