CBO Estimates a Nearly $17B Pell Shortfall
The Congressional Budget Office (CBO) released new baseline projections for the cost of the Pell Grant program, which reveals a $16.9 billion cumulative funding shortfall for FY 2027.
To address the shortfall, Congress must add nearly $17 billion to the regular, annual $22 billion appropriation provided in FY 2026.
If Congress does not provide additional baseline appropriations to fund the $7,395 maximum, there are two possible courses of action that could be taken - either cut the maximum grant or reduce eligibility for grants - to reflect the available funds for the program.
The 2026-27 academic year, which begins on July 1, 2026, will not be affected by these funding challenges. Supplemental appropriations must be made for the FY 2027 budget cycle, which could impact the academic year beginning July 1, 2027.
Program costs have dramatically increased since the implementation of the need analysis changes in the FUTURES/FAFSA Simplification Act of 2020, a bipartisan bill signed into law by President Trump. More students are eligible for larger grants, as the legislation intended. When the legislation was enacted, the Pell Grant program boasted a $12 billion funding surplus, which helped fund the program’s eligibility expansions for the first few years while annual congressional appropriations remained flat.
The programmatic expansion costs extended available funds for the first time in 2025, which Congress addressed in July by providing $10.5 billion toward the shortfall as part of the budget reconciliation package. The reconciliation package also included an expansion for Workforce Pell, which adds additional costs to the program.
Budget rules require that the Labor-HHS-Education appropriations subcommittee be charged with the CBO estimated cost of the Pell Grant program each year, meaning Congress must address any annual funding shortfall and is not allowed to punt the cost of the program forward.
The ebb and flow of Pell Grant program costs have traditionally been counter-cyclical, reflecting increased participation in the program during economic downturns. The implementation of more generous need analysis for eligibility adds an additional cost correction that Congress must now cover.
For more information, please contact:
Stephanie Giesecke