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Pell Grants on Solid Ground for Now--Let's Keep It That Way

Feb 14, 2013

By Julie Strawn and Marcie Foster

Last week, the Congressional Budget Office (CBO) released updated cost projections for Pell Grants, the program that helps over 9 million low-income students each year afford college. The good news in those projections: the sizeable funding gap previously estimated for FY14 has turned into a surplus. And while Pell Grants—which can be used for 2- and 4-year degrees along with shorter occupational certificates—still are not out of the woods over the long run, the funding gap is now much smaller. According to an analysis by the Center on Budget and Policy Priorities, program costs are now expected to be $33 billion lower over ten years (from 2013-22) than CBO predicted a year ago. The current cumulative surplus in FY13 is projected at $9.2 billion. If this is carried over to FY14 and the Pell Grant discretionary appropriation continues at its current level, the surplus for FY14 is projected to be almost $4.5 billion.

The Pell surplus presents both an opportunity and a danger for the program. In today’s environment of fiscal tightening, that short-term surplus may look attractive to some in Congress who might want to use these funds for other programs, especially now that budget cuts brought on by sequestration seem likely to occur. But while the estimated surplus is strong, these funds will be needed to help close the gap in funding that opens up beginning in FY15, and which will grow to nearly $23 billion by 2023, assuming Congress allows the discretionary Pell Grant appropriation to grow with the Budget Control Act’s spending caps. Even with that help from the current surplus, Pell Grants will need more funding either from appropriations, mandatory spending, or both to maintain the current maximum grant over the next ten years.

In addition, the Pell Grant program has other, equally pressing funding needs. About 100,000 low income students lost Pell Grant eligibility as a result of cost-cutting measures taken by Congress over the last several years; many others have seen their grants reduced. These cuts include the retroactive 12-semester cap on Pell aid, the elimination of Pell Grants for summer classes, and the denial of aid to students who do not have a high school diploma or its equivalent, even if they can demonstrate their “ability to benefit” from postsecondary education. 

Congress should protect the current surplus and use it as an opportunity to put Pell Grants on a sound financial footing for the future, ideally by moving all Pell Grant funding to mandatory appropriations. If combined with other sensible reforms in student aid—such as loan program savings previously proposed by the President and redirection of some current tax-based aid going to high-income households—the surplus can help fill the long term funding gap and open the possibility of reversing some of the harmful cuts that prevent some of the most vulnerable students from returning to school and earning the credentials they need to build a stable life for themselves and their families.

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