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Federal Pell Grant Program of the Higher
Education Act: Background, Recent Changes,
and Current Legislative Issues
Shannon M. Mahan
Specialist in Education Policy
February 25, 2011
Congressional Research Service
7-5700
www.crs.gov
R41437
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008
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Federal Pell Grant Program of the Higher Education Act
Summary
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 $33 billion to
approximately 8.7 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
FY2008, an estimated 62% of Pell Grant recipients considered to be dependent upon their parents
had a total family income at or below $30,000. Of Pell Grant recipients considered to be
independent of their parents, an estimated 83% 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, H.R. 1, the Full-Year Continuing Appropriations Act of 2011, as passed
by the House of Representatives on February 19, 2011, provides for a reduction in the
discretionary maximum award amount for the upcoming award year (AY) 2011-2012 of $845,
while maintaining the current FY2010 discretionary funding level of $17.5 billion in FY2011.
The program is currently operating under the funding provisions included in the current
continuing resolution, known as the Continuing Appropriations and Surface Transportation
Extensions Act of 2011 (P.L. 111-322), which is set to expire on March 4, 2011. 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. These factors, combined with inadequate discretionary and mandatory appropriations in
some years, and catch-up appropriations in other years, led to funding shortfalls and surpluses in
the program from FY2008 to FY2010.
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 for funding the program,
Congress could consider reclassifying the program as an entitlement, and thus providing only
mandatory funding for the program each year. Such action would preclude annual funding
shortfalls and surpluses in the program, but the initial costs of reclassification could be substantial
under congressional budgetary rules. 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.
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Federal Pell Grant Program of the Higher Education Act
Contents
Introduction ................................................................................................................................ 1
How the Program Works ............................................................................................................. 1
Student Eligibility ................................................................................................................. 2
Underlying Concepts and Award Rules.................................................................................. 4
Underlying Concepts....................................................................................................... 5
Primary Award Rule...................................................................................................... 13
Institutional Role....................................................................................................................... 16
Characteristics of Recipients ..................................................................................................... 17
Income...................................................................................................................................... 18
Participation Rate...................................................................................................................... 19
Enrollment Status...................................................................................................................... 21
Type and Control ...................................................................................................................... 21
Role of the Pell Grant................................................................................................................ 23
Purchasing Power ............................................................................................................... 24
Pell Grant Recipients and Other Federal Aid ....................................................................... 25
Program Funding ...................................................................................................................... 27
Role of Discretionary Funding ............................................................................................ 28
Increasing Role of Mandatory Funding................................................................................ 28
Summary of Recent Funding (FY2008-FY2018) ................................................................. 29
Discretionary Funding Shortfalls and Surpluses................................................................... 30
Measures to Address Funding Shortfalls.............................................................................. 33
Pre-2002 ....................................................................................................................... 33
Funding Shortfalls From FY2002 to FY2006 ................................................................ 34
Adoption of FY2006 CBO Scoring Rule ....................................................................... 34
Recent Funding Shortfalls and Surpluses (Post-Scoring Rule to FY2010) ...................... 35
Impact of The SAFRA Act on the FY2010 Funding Shortfall ........................................ 36
FY2011 Appropriations ................................................................................................. 36
Current Legislative Issues ......................................................................................................... 37
Entitlement ......................................................................................................................... 38
Program Cost Escalation ..................................................................................................... 39
Large Increase in the Discretionary Base Maximum Award ........................................... 40
Increase in FAFSA Applications and College Enrollments ............................................. 40
Recent Economic Conditions ........................................................................................ 41
Legislative Changes to the Federal Need Analysis Calculation and Award Rules............ 41
Funding Beyond FY2011 .................................................................................................... 41
Figures
Figure 1. Calculating the Pell Grant Maximum Award Increase Funded with Mandatory
Appropriations in The SAFRA Act for AY2013-2014 (FY2013) ............................................... 7
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Figure 2. Calculating the Pell Grant Maximum Award Increase Funded with Mandatory
Appropriations in The SAFRA Act for AY2014-2015 (FY2014) Through AY2017-2018
(FY2017) ................................................................................................................................. 8
Figure 3. Pell Grant Recipients, AY1973-1974 to AY2010-2011 ................................................ 17
Figure 4. Percentage Change in Pell Grant Recipients, AY2001-2002 to AY2010-2011.............. 18
Figure 5. Percentage of Total Pell Grant Aid Received by Type of Institution,
AY1984-1985 to AY2009-2010 .............................................................................................. 23
Figure 6. Percentage of Tuition, Fees, Room, and Board Covered by the Total Maximum
Pell Grant, by Institution Type and Control: AY1973-1974 to AY2010-2011........................... 24
Tables
Table 1. Total Maximum Pell Grant Amounts Under the SAFRA Act,
FY2010 and Subsequent Years ................................................................................................. 9
Table 2. Pell Grant Award Amounts, AY1973-1974 and Subsequent Years ................................. 11
Table 3. Percentage of Eligible Pell Grant Students with a Zero EFC and Automatic Zero
EFC by Dependency Status, AY2007-2008 to AY2010-2011 .................................................. 14
Table 4. Estimated Pell Grant Participation by
Dependency and Total Family Income, AY2007-2008 ............................................................ 19
Table 5. Estimated Distribution of Undergraduates and Pell Grant Recipients by
Enrollment Status, AY2007-2008 ........................................................................................... 21
Table 6. Estimated Distribution of Undergraduates and Pell Grant Recipients by Type and
Control of Enrolling Institution, AY2007-2008 ....................................................................... 22
Table 7. Pell Grant Aid, FFEL and DL Federal Loans, and Total Aid as Average
Percentages of Cost of Attendance for Undergraduate Students Who Received a Pell
Grant, by Total Family Income ............................................................................................... 26
Table 8. Pell Grant Appropriations, FY2008 to FY2018............................................................. 29
Table 9. Annual and Cumulative Discretionary Funding Shortfalls in
the Pell Grant Program, FY1973-FY2011............................................................................... 31
Table 10. Pell Grant Program Costs, AY2007-2008 to AY2011-2012 ......................................... 39
Table A-1. Authorized Maximum Pell Grant Award Amounts (Pre-SAFRA Act), AY2009-
2010 Through AY2014-2015 .................................................................................................. 43
Table A-2. Mandatory Add-On Amounts to the Base Maximum Award (Pre-SAFRA Act),
AY2008-2009 to AY2012-2013 .............................................................................................. 43
Table A-3. Mandatory Appropriations for the Pell Grant Program (Pre-SAFRA Act),
FY2008-FY2017.................................................................................................................... 44
Appendixes
Appendix. Tables on Selected Pell Grant Information Prior to the Enactment of the
SAFRA Act............................................................................................................................ 43
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Federal Pell Grant Program of the Higher Education Act
Contacts
Author Contact Information ...................................................................................................... 44
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Federal Pell Grant Program of the Higher Education Act
Introduction
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 $33 billion to
approximately 8.7 million undergraduate students in fiscal year (FY) 2010.1 Pell Grants are need-
based aid that is intended to be the foundation for all federal student aid awarded to
undergraduates. The U.S. Department of Education (ED) data suggest that in FY2009, Pell Grants
constituted approximately 22% of all federally supported student aid—including grants, loans,
and work opportunities—that benefit postsecondary education students at all levels.2
The Pell Grant program has garnered considerable attention over the past several years in
Congress. Most recently, H.R. 1, the Full-Year Continuing Appropriations Act of 2011, as passed
by the House of Representatives on February 19, 2011, provides for a reduction in the
discretionary base maximum award of $845, when compared to the amount included in the
Continuing Appropriations and Surface Transportation Extensions Act of 2011 (P.L. 111-322),
which is set to expire on March 4, 2011. H.R. 1 provides $17.5 billion in discretionary funding
for the program in FY2011, the same level as provided in FY2010.3 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 for the Pell Grant program and
changed the method by which future additional mandatory Pell Grant award amounts are
determined.4 Additionally, the SAFRA Act provides $13.5 billion in mandatory funds in FY2011
for use through the end of FY2012. Prior to the SAFRA Act, 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).
This report reviews how the program works and provides an analysis of recent program funding,
recipients (numbers and characteristics), and the role the program plays in the distribution of
federal student aid. In addition, this report highlights some of the current legislative issues
pertaining to the program.
How the Program Works
This section of the report provides an overview of the structure of the Pell Grant program and the
process through which grants are made to students. It describes student eligibility, underlying
concepts associated with the program, the award rules for determining students’ grants, program
funding, and the role played by postsecondary institutions in the program.
1 U.S. Department of Education, unpublished data.
2 Percentage calculated by CRS from data presented in U.S. Department of Education, Fiscal Year 2011 Budget
Summary, p. 50. Total federal aid excludes $13 billion in consolidation loans under which borrowers consolidate prior
loans and any federal tax benefits.
3 For more detailed information on the FY2011 appropriations process, see p. 36 of this report.
4 For more information on the SAFRA Act, see CRS Report R41127, The SAFRA Act: Education Programs in the
FY2010 Budget Reconciliation , coordinated by Cassandria Dortch.
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Federal Pell Grant Program of the Higher Education Act
Briefly, the Pell Grant program provides grants (i.e., aid that does not have to be repaid) to needy
undergraduates. In any year, federal funding is made available to ensure that all eligible students
attending eligible institutions receive Pell Grants.5 To apply for a Pell Grant, students must
complete the Free Application for Federal Student Aid (FAFSA), providing requested financial
and other information, and submit it to a “central processor” under contract with ED.6 The central
processor provides each applicant with a Student Aid Record (SAR) and provides each institution
of higher education (IHE) designated by the applicant with an Institutional Student Information
Record (ISIR). These documents contain the information submitted on the FAFSA and the
calculated expected family contribution (EFC). The EFC is what is expected to be contributed by
the student and the student’s family toward postsecondary education expenses for the upcoming
award year. (The EFC is described in detail below.)
Pell Grants are portable, that is, the grant aid follows students to the eligible postsecondary
education institutions in which they enroll. Institutions that receive valid SARs or valid ISIRs for
eligible Pell applicants are required to disburse Pell funds to students who successfully enroll in
approved coursework. The size of the grant is based, principally, on the financial resources that
students and their families are expected to contribute toward postsecondary education expenses,
and the discretionary base maximum award amount7 that is set in the annual appropriations
process and any additional increases to the discretionary base maximum award funded with
mandatory appropriations8 specified for each year in the HEA.
Student Eligibility
To be eligible for a Pell Grant, a student must meet requirements that apply to federal student aid
in general as well as requirements specific to the Pell Grant program.
Among the requirements generally applicable to federal student aid, as of award year9 (AY) 2010-
2011, are the following:
• Students must be enrolled for the purpose of earning a degree or certificate at an
eligible institution.
• Students must have a high school diploma or the recognized equivalent.10 Absent
such diploma or its equivalent, students must demonstrate an ability to benefit
from postsecondary education by passing an examination approved by ED.
5 As noted below, if costs for the Pell Grant program exceed the prescribed appropriation level in any one year,
additional funds can be allocated from the most recently enacted appropriation to pay for obligations incurred in
previous award years. This process of ensuring that grant payments will be made has led some to liken the program to a
“quasi entitlement.” The issue of making the program into an actual entitlement is discussed later in this report.
6 There are several ways to complete and submit a FAFSA for consideration of federal student aid. For instance,
students and families may use FAFSA on the Web, which is an interactive online process. Alternatively, they may
obtain a paper FAFSA from their financial aid office or other locations and submit it to the address listed on the form.
7 The discretionary base maximum award amount is discussed below.
8 Annual increases to the discretionary base maximum award funded with mandatory appropriations are discussed
below.
9 The Pell Grant award year begins July 1 of each year and ends on June 30 of the subsequent year. For example,
AY2010-2011 begins on July 1, 2010, and ends June 30, 2011.
10 Students completing home schooling through the secondary level as recognized under state law are considered to be
eligible and are allowed to self-certify on the FAFSA.
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Students who successfully complete six credits or 225 clock hours of college
work applicable to a certificate or degree offered by a postsecondary institution
are also eligible.
• Students have to maintain satisfactory academic progress while enrolled in
postsecondary education in order to be eligible for federal student aid.
Satisfactory progress is delineated by policies developed by each participating
IHE.
• Conviction for possession or sale of drugs while receiving federal student aid can
disqualify students for federal student aid.11
• Students are ineligible if they are in default on a Title IV student loan or have
failed to repay an overpayment on a Title IV grant.
• Students must meet citizenship requirements.12
• Males between 18 and 25 years of age must register with the selective service
system in order to be eligible for federal student aid.
• Students with an intellectual disability are eligible to receive certain types of
federal student aid.13
Specific eligibility requirements for the Pell Grant program include the following:
• Full-time and part-time14 undergraduates15 are eligible to receive Pell Grants.
• Effective for students who receive their first Pell Grant on or after July 1, 2008,
cumulative Pell Grant eligibility is limited to 18 full-time semesters (or the
equivalent).
• Students who are incarcerated in a federal or state penal institution are ineligible
for Pell Grants.
11 Periods of ineligibility for federal student aid funds are based on whether the conviction was for the sale or
possession of drugs and whether the student had previous offenses. A conviction for the sale of drugs includes
convictions for conspiring to sell drugs.
12 In general, students must be U.S. citizens or permanent U.S. residents. Individuals with several other entrance
statuses can qualify for aid. Individuals in the United States on a temporary basis, such as those with a student visa or
an exchange visitor visa, are not eligible for federal student aid.
13 A student with an intellectual disability, as defined in the HEA, must be enrolled or accepted for enrollment in a
comprehensive transition and postsecondary program for students with intellectual disabilities and must maintain
satisfactory academic progress as determined by the school for this program. Students with an intellectual disability are
only allowed to receive federal funds from the Pell Grant Program, Supplemental Educational Opportunity Grant
(SEOG), and Work Study program.
14 Students enrolled on a less-than-half-time basis are eligible.
15 In general, a student must be enrolled in an undergraduate course of study to receive a Pell Grant. For Pell Grant
eligibility purposes, a student who has received an associate degree, or any certificate or diploma below the
baccalaureate level, and who enrolls in another undergraduate program continues to be considered an undergraduate
student until the student completes the curriculum requirements for a first bachelor’s degree. Students enrolled on at
least a half-time basis in a post-baccalaureate program required by a state for K-12 teacher certification or licensure are
also eligible, as long as the program does not lead to a graduate degree and the enrolling institution does not offer a
baccalaureate degree in education.
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• Students who are subject to an involuntary civil commitment following
incarceration for a sexual offense (as determined under the FBI’s Uniform Crime
Reporting Program) are ineligible for Pell Grants.
• A student who qualifies for a Pell Grant is eligible to receive an automatic zero
EFC if the student’s parent or guardian was a member of the U.S. Armed Forces
and died as result of performing military service in Iraq or Afghanistan after
September 11, 2001, provided that the student was under 24 years old or was
enrolled at an IHE at the time of the parent or guardian’s death.16
• The program provides assistance only to financially needy students as determined
under the program’s award rules (see below).
Underlying Concepts and Award Rules
An eligible student’s annual Pell Grant award is determined on the basis of a set of award rules.
In general, these award rules are designed to ensure that the neediest students (as determined by
the EFC) receive the highest Pell Grant awards in each award year. Conversely, students with the
lowest need (relative to the eligibility parameters of the program) receive the smallest Pell Grant
awards in a given award year. Students who demonstrate a need that falls between these two
extremes are awarded Pell Grant aid on a sliding scale. Additionally, Pell Grant awards are
prorated for students who attend on a less-than-full-time basis. An important feature of the Pell
Grant award rules is that the grant is determined without consideration of any other financial
assistance a student may be eligible to receive or may be receiving. This reflects the intention to
make the Pell Grant the foundation of a financial aid package to which other assistance is added.
Over the last several years, some of the underlying concepts and award rules of the program have
been revised or eliminated, leading to an inconsistency in their application across years. Some of
these changes resulted from enacted legislation aimed at providing mandatory funding increases
for the program under certain budget rules while at the same time targeting additional funds to the
neediest students. Most recently, in March 2010, the SAFRA Act amended some of the award
rules and underlying concepts for AY2010-2011 and all subsequent years.
Some of the underlying concepts associated with the Pell Grant program are discussed below and
are key to understanding the application of the program’s primary award rule, which is also
examined in more detail below. Where appropriate, these concepts are explained for two specific
time periods: (1) the period of time following enactment of the College Cost Reduction and
Access Act of 2007 (CCRAA; P.L. 110-84) and before the enactment of the SAFRA Act in March
2010; and (2) the period of time subject to the provisions enacted in the SAFRA Act. Information
related to the key concepts, award rules, or appropriation levels in effect prior to the enactment of
the SAFRA Act that is not discussed in the body of this report is included in the Appendix.
16 For students who are not eligible for Pell Grants due to their EFC and who had a parent or guardian die as a result of
military service in Iraq or Afghanistan after September 11, 2001, non-need-based grants called Iraq and Afghanistan
Service Grants (IASG) are available. The amount of the IASG is the same as the Pell Grant the student would be
eligible for if he had a zero EFC. IASG payments are adjusted like Pell Grants for students who are enrolled less than
full time, but unlike Pell Grants, these non-need-based grants do not count as estimated financial assistance.
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Underlying Concepts
Authorized Maximum Award
The authorized maximum award is the annual maximum Pell Grant specified for each award year
in the HEA. The maximum award amount a student may receive, however, is effectively based on
the total maximum award, which is the combination of the discretionary base maximum award
amount established in the annual discretionary appropriations process and the annual increase to
this amount funded with mandatory appropriations as specified in the HEA. The authorized
maximum grant and total maximum grant have been equal in only three instances during the
program’s history (AY1975-1976, AY1976-1977, and AY1979-1980). In all other years, the total
maximum award has been less than the authorized maximum award.
The authorized maximum Pell Grant award amounts specified in the HEA and established by the
HEOA for AY2009-2010 through AY2014-2015 were eliminated under the SAFRA Act. The
elimination of the authorized maximum award levels from the HEA will have no impact on the
determination of maximum award levels in future years. The program remains authorized through
FY2017 under section 401(a)(1) of the HEA.
Discretionary Base Maximum Award
The discretionary base maximum award is the amount specified in annual appropriations bills.
The annual appropriations bills determine the amount of discretionary funding available for the
program and specify the base maximum award level for the corresponding award year.
Mandatory “Add-On” Award17
Prior to the SAFRA Act, the CCRAA established mandatory add-on amounts to the base
maximum Pell Grant award amounts for AY2008-2009 to AY2012-2013. In order to receive the
add-on award under the provisions enacted in the CCRAA, a student must receive the qualifying
minimum award,18 which is defined as 5% of the discretionary base maximum award.19
17 Prior to the enactment of the SAFRA Act, the additional increase to the discretionary maximum grant in each year
was commonly referred to as the “mandatory add-on” award since the increase specified in the HEA was added on to
the discretionary base award for only those students who received a Pell Grant under the discretionary base award
parameters. The SAFRA Act, as discussed below, changed the basis for awarding future Pell Grants; thus, the term
“mandatory add-on” is used only when referencing increases to the discretionary base maximum award funded with
mandatory appropriations prior to the SAFRA Act.
18 The qualifying minimum award is discussed below.
19 Congress created a more complicated system of awarding Pell Grants in the CCRAA with the purpose of targeting
the add-on mandatory funds to the most needy students who would otherwise already qualify for a Pell Grant. By
awarding the mandatory add-on amount only to students who qualify for the program based on a proportion of the
discretionary base maximum amount instead of a proportion of the higher total maximum award amount, Congress
restricted expansion of the program for students who have a slightly higher EFC and who would have otherwise
qualified based on the higher total maximum amount.
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Increases to the Base Maximum Award Funded with Mandatory Appropriations
The SAFRA Act eliminated the mandatory add-on amounts authorized by the CCRAA for
AY2010-2011 through AY2012-2013 and replaced these amounts with specified annual increases
to the discretionary base maximum award (funded with mandatory appropriations) through
AY2012-2013 and statutorily defined formulas for determining the amounts for all future award
years. Additionally, the SAFRA Act eliminated the requirement that a student receive the
qualifying minimum award in order to receive the additional aid amount funded with mandatory
appropriations. Beginning in AY2010-2011, students qualify for a Pell Grant based on a
proportion of the total maximum Pell Grant award.
For AY2010-2011 through AY2012-2013, increases to the discretionary base maximum award
funded with mandatory appropriations will be $690 in each year.
For AY2013-2014 only, the increase to the discretionary base maximum award funded with
mandatory appropriations will be determined according to a formula that is dependent upon the
amount of the discretionary base maximum award amount for AY2012-2013. If the AY2012-2013
discretionary base maximum award amount is less than or equal to $4,860, then the maximum
grant increase funded with mandatory appropriations for AY2013-2014 will be determined by
multiplying $5,550 by the rate of change in the Consumer Price Index for All Urban Consumers
(CPI-U) over the period from December 2011 to December 2012, and then subtracting $4,860
from this amount.
If in AY2012-2013 the discretionary base maximum award amount is greater than $4,860, then
the maximum grant increase funded with mandatory appropriations for AY2013-2014 will be
determined by adding $690 to the discretionary base maximum award in AY2012-2013 and
multiplying this amount by the rate of change in the CPI-U over the period from December 2011
to December 2012, and then subtracting from this amount the discretionary base maximum award
amount for AY2012-2013.
Figure 1 provides a mathematical expression and example of how this formula would work in
AY2013-2014.
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Figure 1. Calculating the Pell Grant Maximum Award Increase Funded with
Mandatory Appropriations in The SAFRA Act for AY2013-2014 (FY2013)
Expressed As:
IF DBAY1213 ≤ $4,860, THEN:
MIAY1314 = ($5,550 X (1 + CPI-UCY2012)) – $4,860
IF DBAY1213 > $4,860, THEN:
MIAY1314 = ((DBAY1213 + $690) X (1 + CPI-UCY2012)) – DBAY1213
WHERE
DBAY1213 = Discretionary base maximum award in AY2012-2013 (FY2012);
MIAY1314 = Increase to discretionary base maximum award funded with mandatory
appropriations for AY2013-2014 (FY2013), rounded to nearest $5 increment; and
CPI-UCY2012 = Change (increase or decrease) in Consumer Price Index for All Urban
Consumers (CPI-U) from December 2011 to December 2012.
Example:
For example, consider what the increase to the discretionary base maximum award funded with
mandatory appropriations would be in AY2013-2014 if (1) the discretionary base maximum
amount is $4,500 in AY2012-2013, and (2) the change in the CPI-U from calendar year
December 2011 to December 2012 is measured at -2%. This would be determined as follows:
MIAY1314 = $5,550 X (1 + -.02) – $4,860
MIAY1314 = ($5,550 X .98) – $4,860
MIAY1314 = $5,439 – $4,860
MI AY1314 = $579
MI AY1314 = Round $579 to nearest $5 increment
MIAY1314 = $580
Source: CRS analysis of P.L. 111-152.
For AY2014-2015 through AY2017-2018, increases to the discretionary base maximum award
funded with mandatory appropriations in each year will be determined according to a formula that
is dependent upon (1) the previous year’s total maximum award, (2) the previous year’s
discretionary base maximum award, and (3) the change in the CPI-U as measured from the most
recently completed calendar year before the start of each award year.
If in any year during this period the previous year’s discretionary base maximum award is less
than or equal to $4,860, then the maximum grant increase to the discretionary base maximum
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award amount is determined by multiplying the previous year’s total maximum award amount by
the rate of change in the CPI-U as measured from the most recently completed calendar year
before the start of each applicable award year, and then subtracting $4,860 from this amount.
If in any year during this period the previous year’s discretionary base maximum award exceeds
$4,860, then the maximum grant increase to the discretionary base maximum award amount is
determined by multiplying the previous year’s total maximum award amount by the rate of
change in the CPI-U as measured from the most recently completed calendar year before the start
of each applicable award year and then subtracting from this amount the previous year’s
discretionary base maximum award amount.
Figure 2 provides a mathematical expression and example of how this formula would work in
AY2013-2014 through AY2017-2018.
Figure 2. Calculating the Pell Grant Maximum Award Increase Funded with
Mandatory Appropriations in The SAFRA Act for AY2014-2015 (FY2014)
Through AY2017-2018 (FY2017)
Expressed As:
IF DBAY(n-1) ≤ $4,860, THEN:
MIAY(n) = (TMPAY(n-1) X (1 + CPI-UCY(n-1) )) – $4,860
IF DBAY(n-1) > $4,860, THEN:
MIAY(n) = (TMPAY(n-1) X (1 + CPI-UCY(n-1) )) – DBAY(n-1)
WHERE
DBAY(n-1) = Discretionary base maximum award for previous award year (n-1);
MIAY(n) = Increase to discretionary base maximum award funded with mandatory
appropriations for the current award year (n), rounded to the nearest $5 increment;
TMPAY(n-1) = Total maximum Pel Grant award for previous award year (n-1); and
CPI-UCY(n-1) = Change (increase or decrease) in CPI-U from most recently completed
calendar year prior to start of current award year (n-1).
Example:
For example, consider what the increase to the discretionary base maximum award funded with
mandatory appropriations would be in AY2016-2017 if (1) the discretionary base maximum
amount is $4,900 in AY2015-2016; (2) the calculated increase to the base discretionary
maximum award funded with mandatory appropriations is $850 in AY2015-2016; and (3) the
change in the CPI-U from calendar year December 2014 to December 2015 is measured at 1%.
This would be determined as follows:
Congressional Research Service
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Federal Pell Grant Program of the Higher Education Act
MIAY1617 = ($4,900 + $850 ) X (1 + .01) – $4,900
MI AY1617 = ($5,750 X 1.01) – $4,900
MI AY1617 = $5,807.5 – $4,900
MI AY1617 = $907.5
MIAY1617 = Round $907.5 to nearest $5 increment
MIAY1617 = $910
Source: CRS analysis of P.L. 111-152.
For AY2018-2019 and all subsequent award years, the additional mandatory Pell Grant award
amount will be the same amount as determined for AY2017-2018 by the formula described above
in Figure 2.
Table 1 below illustrates how the total maximum Pell Grant amount will be determined in
AY2010-2011 and beyond under the provisions in the SAFRA Act. Since the increases to the
discretionary base maximum award funded with mandatory appropriations will be primarily
determined beginning in AY2013-2014 by two factors that are not known at the present time—the
annual discretionary base maximum award and the annual change in the CPI-U—future total
maximum award levels are not listed below for AY2012-201320 and beyond.
Table 1. Total Maximum Pell Grant Amounts Under the SAFRA Act,
FY2010 and Subsequent Years
Increase to
Discretionary Base
Discretionary
Maximum Award
Total
Base Maximum
Funded with Mandatory
Maximum
Fiscal Year
Award Year
Award
Appropriations
Award
2010 2010-2011
$4,860a +
$690
= $5,550
2011 2011-2012
$4,860b +
$690
= $5,550
2012 2012-2013 TBD
+ $690 =
TBD
2013 2013-2014 TBD
+
See formula
in Figure 1
= TBD
2014 2014-2015 TBD
+
See formula
in Figure 2
= TBD
2015 2015-2016 TBD
+
See formula
in Figure 2
= TBD
20 The discretionary base maximum award for AY2012-2013 has not been determined.
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Federal Pell Grant Program of the Higher Education Act
Increase to
Discretionary Base
Discretionary
Maximum Award
Total
Base Maximum
Funded with Mandatory
Maximum
Fiscal Year
Award Year
Award
Appropriations
Award
2016 2016-2017 TBD
+
See formula
in Figure 2
= TBD
2017 2017-2018 TBD
+
See formula
in Figure 2
= TBD
Same as the amount
2018 and
2018-2019
determined for AY2017-
subsequent years
and beyond
TBD +
2018 under formula
= TBD
described in Figure 2
Source: CRS analysis of P.L. 111-152.
Note: TBD = To be determined.
a. The discretionary base maximum award was specified as $4,860 in the Consolidated Appropriations Act of
FY2010 (P.L. 111-117).
b. The discretionary base maximum award was specified as $4,860 in the Continuing Appropriations and
Surface Transportation Extensions Act of 2011 (CASTEA; P.L. 111-322). This amount, however, is subject
to change after the expiration of CASTEA on March 4, 2011.
Qualifying Minimum Award
The qualifying minimum Pell Grant award is the minimum amount of Pell aid on which
qualification for the program is based. Prior to the enactment of the SAFRA Act, the qualifying
minimum award amount was equal to 5% of the discretionary base maximum award. For
example, in AY2009-2010, the qualifying minimum award is $243 (i.e., 5% of $4,860).
The SAFRA Act revised the basis for determining the qualifying minimum award. Effective
AY2010-2011 and for all future award years, the qualifying minimum award will equal 5% of the
total maximum award. For example, in AY2010-2011 the qualifying minimum award is $277, or
approximately 5% of $5,550.
“Bump” Award
The so-called bump award is an additional statutory increase to the qualifying minimum Pell
Grant award, ensuring that students who are eligible for the qualifying minimum award receive a
small increase in Pell aid.21 Prior to the enactment of the SAFRA Act, the bump award was equal
to 5% of the discretionary base maximum award. The SAFRA Act revised the basis for
calculating the bump award. Effective AY2010-2011 and all future years, the bump award will be
equal to 5% of the total maximum award. For example, in AY2010-2011 the bump award is $277,
or approximately 5% of $5,550.
21 In effect, the increase to the qualifying minimum award serves to ensure that the program will not disburse grants in
such small amounts that they would not be a meaningful contribution to supporting students’ educational pursuits.
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Federal Pell Grant Program of the Higher Education Act
Effective Minimum Award
The effective minimum award is the minimum amount of Pell Grant aid available to a student in
any given year as determined by law. The effective minimum award for AY2010-2011 and all
subsequent years is the same for all eligible students, regardless of enrollment status. Prior to the
enactment of the SAFRA Act, the effective minimum award varied by enrollment status and
included the qualifying minimum award based on the discretionary base maximum award, the
bump award, and a percentage of the mandatory add-on award.22 As discussed above, the SAFRA
Act revised the annual increases to the discretionary base maximum award funded with
mandatory appropriations, and consequently, the basis for calculating the qualifying minimum
award. The effective minimum award for AY2010-2011 and all future years will be equal to 10%
of the total maximum award amount.23 The effective minimum award for AY2010-2011 is 10% of
$5,550, or $555.
Table 2. Pell Grant Award Amounts, AY1973-1974 and Subsequent Years
Mandatory Add-
On or Increase
to Discretionary
Discretionary
Base Maximum
Authorized
Base
Award Funded
Total
Effective
Maximum
Maximum
with Mandatory
Maximum
Minimum
Award Year
Award
Award
Appropriations
Award
Award
(AY)
($)
($)
($)
($)
($)
1973-1974 1,400
452
N/A
452
50
1974-1975 1,400
1,050
N/A
1,050
50
1975-1976 1,400
1,400
N/A
1,400 200
1976-1977 1,400
1,400
N/A
1,400 200
1977-1978 1,800
1,400
N/A
1,400 200
1978-1979 1,800
1,600
N/A
1,600
50
1979-1980 1,800
1,800
N/A
1,800 200
1980-1981 1,800
1,750
N/A
1,750 150
1981-1982 1,900
1,670
N/A
1,670 120
1982-1983 2,100
1,800
N/A
1,800
50
1983-1984 2,300
1,800
N/A
1,800 200
1984-1985 2,500
1,900
N/A
1,900 200
1985-1986 2,600
2,100
N/A
2,100 200
1986-1987 2,600
2,100
N/A
2,100 100
1987-1988 2,300
2,100
N/A
2,100 200
22 By definition, the effective minimum award for the program would apply to students enrolled on a less-than-half-
time basis. Prior to the SAFRA Act, the amount of the mandatory add-on award was determined in proportion to a
student’s enrollment status, which would have affected the effective minimum award a student would receive.
23 On April 8, 2010, ED issued revised AY2010-11 Federal Pell Grant Payment and Disbursement Schedules to reflect
the provisions included in the SAFRA Act.
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Federal Pell Grant Program of the Higher Education Act
Mandatory Add-
On or Increase
to Discretionary
Discretionary
Base Maximum
Authorized
Base
Award Funded
Total
Effective
Maximum
Maximum
with Mandatory
Maximum
Minimum
Award Year
Award
Award
Appropriations
Award
Award
(AY)
($)
($)
($)
($)
($)
1988-1989 2,500
2,200
N/A
2,200 200
1989-1990 2,700
2,300
N/A
2,300 200
1990-1991 2,900
2,300
N/A
2,300 100
1991-1992 3,100
2,400
N/A
2,400 200
1992-1993 3,100
2,400
N/A
2,400 200
1993-1994 3,700
2,300
N/A
2,300 400
1994-1995 3,900
2,300
N/A
2,300 400
1995-1996 4,100
2,340
N/A
2,340 400
1996-1997 4,300
2,470
N/A
2,470 400
1997-1998 4,500
2,700
N/A
2,700 400
1998-1999 4,500
3,000
N/A
3,000 400
1999-2000 4,500
3,125
N/A
3,125 400
2000-2001 4,800
3,300
N/A
3,300 400
2001-2002 5,100
3,750
N/A
3,750 400
2002-2003 5,400
4,000
N/A
4,000 400
2003-2004 5,800
4,050
N/A
4,050 400
2004-2005 5,800a 4,050 N/A 4,050 400
2005-2006 5,800
4,050
N/A
4,050 400
2006-2007 5,800
4,050
N/A
4,050 400
2007-2008 5,800
4,310
N/A
4,310 400
2008-2009 5,800
4,241
490
4,731 523
2009-2010 6,000
4,860
490
5,350 609
2010-2011 None
Specified
4,860
690
5,550
555
2011-2012 None
Specified
4,860
690
5,550
555
2012-2013 None
Specified
TBD
690
TBD
TBD
2013-2014 None
Specified
TBD
TBD
TBD
TBD
2014-2015 None
Specified
TBD
TBD
TBD
TBD
2015-2016 None
Specified
TBD
TBD
TBD
TBD
2016-2017 None
Specified
TBD
TBD
TBD
TBD
2017-2018 None
Specified
TBD
TBD
TBD
TBD
2018-2019
None Specified
TBD
Same amount as
TBD TBD
(and beyond)
in AY2017-2018
Sources: U.S. Department of Education, AY2008-09 Pel Grant End-of-Year Report and the HEA.
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Federal Pell Grant Program of the Higher Education Act
Notes: TBD = To be determined; N/A = not applicable.
a. Prior to the reauthorization of the HEA by the HEOA in 2008, Congress passed measures to extend the
HEA allowing for the continuation of the Pell Grant program. The last authorized maximum award specified
in law prior to the HEOA was $5,800 for AY2003-2004; therefore, the authorized maximum award is listed
as $5,800 from AY2004-2005 through AY2008-2009 in this table.
Primary Award Rule
The primary Pell Grant award rule, as revised by the SAFRA Act, is that a student’s annual grant
is the least of (1) the total maximum Pell Grant minus the student’s EFC, or (2) Cost of
Attendance (COA) minus EFC, 24 and is ratably reduced for a student who enrolls on a less-than-
full-time basis. Most students are awarded Pell Grant aid based on the first condition of this rule
(i.e., Pell Grant Award = Total Maximum Pell Grant – EFC), since the total maximum Pell Grant
award available to a student in an award year is typically less than the attending institution’s
COA.
Prior to the enactment of the SAFRA Act, a student’s Pell Grant award was determined by taking
the least of (1) the discretionary base maximum Pell Grant award minus the student’s EFC, or (2)
COA minus EFC. Next, this award amount was ratably reduced if a student enrolled on a less-
than-full-time basis. Finally, the mandatory “add-on” award, as prescribed in the HEA and also
ratably reduced for a student enrolled on a less-than-full-time basis, was added to the student’s
award.
Some of the concepts that are specifically related to the primary award rule are discussed in detail
below.
Expected Family Contribution (EFC)
The EFC is the amount that, according to the federal need analysis methodology, can be expected
to be contributed by a student and the student’s family toward the student’s cost of education.
This calculation is based on consideration of available income and, for some families, available
assets. Basic living expenses, federal income tax liability, retirement needs, and other expenses
are taken into account in this process. Different EFC formulas are applied to three different
groups of students: those who are considered dependent on their parents (the EFC formula
assesses the financial resources of both the parents and the dependent student); independent
students with no dependents, other than a spouse (if any); and independent students with
dependents other than a spouse (e.g., children).25 The EFC determination utilizes financial
information submitted by the aid applicant on the FAFSA.
24 The HEA prohibits the Pell Grant from exceeding the difference between the COA and the EFC. This precludes the
awarding of a Pell Grant in excess of what a student might need to cover the COA after taking the EFC into account.
25 For federal student aid purposes and the calculation of the EFC, an individual is considered independent of his or her
parents (i.e., parental income and assets are not considered in determining the EFC), if the individual is at least 24 years
of age by December 31 of the award year; is married; has dependents other than a spouse; is a veteran of the U.S.
Armed Forces or currently serving on active duty in the military; is a graduate or professional student; is an orphan, in
foster care, or a ward of the state (anytime since the age of 13); is an emancipated minor as determined by a court; is an
unaccompanied youth in a homeless shelter; or is deemed independent by a financial aid officer for “other unusual
circumstances.”
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Federal Pell Grant Program of the Higher Education Act
Automatic Zero EFC
Students who apply for federal student aid and meet certain qualifications automatically receive a
zero EFC. 26 A student with a zero EFC would receive the total maximum Pell Grant award if
enrolled full-time at an institution where the COA is equal to or exceeds the total maximum Pell
Grant award. The percentage of eligible Pell Grant students who automatically qualify for a zero
EFC increased markedly in AY2009-2010 due to the combination of changes in the qualification
criteria for a zero EFC and weaker economic conditions.27 Table 3 shows the percentage of
eligible28 Pell Grant students by dependency status with a zero EFC (both calculated and
automatic combined) and the percentage of eligible Pell Grant students with an automatic zero
EFC in AY2007-2008 through AY2010-2011. The percentage of eligible dependent Pell Grant
students with an automatic zero EFC increased from 39% in AY2008-2009 to 53% in AY2009-
2010. Furthermore, the percentage of all eligible Pell students with a zero EFC, whether
calculated or automatic, increased from 59% in AY2008-2009 to 69% in AY2009-2010.
Preliminary data for AY2010-2011 show small decreases in the share of eligible students with a
zero EFC when compared to AY2009-2010.
Table 3. Percentage of Eligible Pell Grant Students with a Zero EFC and Automatic
Zero EFC by Dependency Status, AY2007-2008 to AY2010-2011
Automatic Zero EFC Only
All Zero EFC (calculated and automatic)
Award Year (AY)
Award Year (AY)
AY
AY
AY
AY
AY
AY
AY
AY
Dependency Status
2007-08 2008-09 2009-10 2010-11a 2007-08 2008-09 2009-10 2010-11a
Eligibleb Dependent Students 38% 39% 53%
47%
48% 50% 59% 54%
Eligible Independent
38% 39% 49%
45%
64% 64% 74% 74%
Studentsc
All Eligible Pell Studentsc
38% 39% 50%
45%
58% 59% 69% 67%
Source: CRS analysis of data provided by the U.S. Department of Education.
a. The percentages for AY2010-2011 are based on partial y completed data through 52 of 87 weeks of FAFSA
processing and are subject to change.
26 Dependent students and independent students with dependents other than a spouse can qualify for an automatic zero
EFC. In general, these students must have received means-tested benefits from other federal programs or have been
eligible to file or have filed certain federal income tax returns, or have been a dislocated worker. In addition, parents or
students must have family income levels at or below certain income thresholds. For AY2010-2011, this income
threshold is $30,000. In addition, children of deceased Iraq/Afghanistan service members also qualify for an automatic
zero EFC. One of the benefits of qualifying for an automatic zero EFC is that it greatly reduces the response burden
associated with completing financial aid forms.
27 For example, HERA expanded eligibility for the automatic zero EFC by changing the income basis for qualification
from the Earned Income Credit (EIC) amount determined annually by the Internal Revenue Service (IRS) to $20,000
beginning in AY2006-2007. The CCRAA further expanded eligibility by increasing the income basis to $30,000
beginning in AY2009-2010 and indexing the future amounts to the Consumer Price Index (CPI). Additionally, HERA,
CCRAA, and the HEOA further expanded eligibility for the automatic zero EFC by allowing individuals who meet
other criteria to receive an automatic zero EFC.
28 An eligible student is defined here as a student who is eligible to receive the qualifying minimum Pell Grant award
(or larger award amount) in each award year, as determined by the student’s EFC.
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Federal Pell Grant Program of the Higher Education Act
b. An eligible student is defined in this table as a student who is eligible to receive the qualifying minimum Pell
Grant award (or a larger amount) in each award year.
c. Totals used to calculate percentages for eligible independent students include independent students without
dependents other than a spouse, who are not eligible to receive an automatic zero EFC.
Maximum EFC for Pell Grant Eligibility
The maximum EFC for Pell Grant eligibility is equivalent to 95% of the total maximum Pell
Grant award specified in any award year beginning in AY2010-2011. Prior to the SAFRA Act, the
maximum EFC for Pell Grant eligibility was equivalent to 95% of the discretionary base
maximum award. To qualify for a $243 minimum award in AY2009-2010, a student must have an
EFC of $4,617 or less. In AY2010-2011, the maximum EFC for Pell Grant eligibility is 95% of
$5,550, or $5,273. A student with an EFC of $5,273 would receive the effective minimum award
of $555. A student with an EFC of $5,274 or higher would not be eligible for a Pell Grant in
AY2010-2011. In effect, the SAFRA Act expanded the qualification parameters for the program,
ensuring that students with a higher EFC receive the qualifying minimum award.
Cost of Attendance (COA)
The cost of attendance (COA) is a measure of a student’s educational expenses for the period of
enrollment. In general, it is the sum of (1) tuition and fees; (2) an allowance for books, supplies,
transportation, and miscellaneous personal expenses; (3) an allowance for room and board;29 and
(4) for a student with dependents, an allowance for costs expected to be incurred for dependent
care. For determining a student’s Pell Grant award, the cost of attendance amount is based on the
full-year costs for a full-year student and must be prorated for students who attend on a less-than-
full-time basis. Additionally, for the purpose of determining a student’s Pell Grant award,
institutions may use average costs for students at their school, rather than calculating actual
expenses for each student.30
Year-Round Pell
Eligible students may receive so-called “year-round” Pell Grants, or up to two scheduled31 awards
in a single award year. For example, a second scheduled Pell Grant award may support a summer
term in addition to the regular academic year. To qualify, students must be enrolled on at least a
half-time basis in a program of study longer than one academic year in length and have received
100% of the first scheduled award during the academic year.32
29 The cost of attendance includes an allowance to cover the basic expenses incurred for board only for students living
in housing provided on a military base or for which a basic living allowance is provided.
30 Average COA amounts must be based on the same category of students. For example, institutions cannot combine
COA amounts for separate enrollment statuses and award aid to a student on the basis of this average.
31 A scheduled award is defined as the maximum Pell aid a full-time student may receive for an award year based on
the Pell Grant Payment and Disbursement Schedules issued by ED.
32 The rules and regulations pertaining to year-round Pell Grants are viewed by some as complex due to the treatment
of enrollment and payment periods within different academic years. For more information on receiving two scheduled
Pell Grant awards in a single award year, refer to http://ifap.ed.gov/fsahandbook/attachments/
0910FSAHbkVol3Master.pdf, p. 3-44. Also, ED issued final regulations on year-round Pell Grants on October 29,
2009, that can be accessed online at http://edocket.access.gpo.gov/2009/pdf/E9-25373.pdf.
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Federal Pell Grant Program of the Higher Education Act
Institutional Role
To be eligible for the HEA Title IV programs, including the Pell Grant program, an IHE must be a
public or private nonprofit IHE, a proprietary postsecondary institution, or a postsecondary
vocational institution. Among other requirements, it must be legally authorized by its state to
provide a postsecondary education, be accredited by a nationally recognized accrediting agency
or meet alternative requirements, and admit as regular students only individuals with a high
school diploma or the equivalent, or individuals beyond the age of compulsory school attendance.
ED certifies an institution for participation in HEA Title IV programs based on consideration of
its institutional eligibility, administrative capacity, and financial responsibility. The institution
must then enter into a program participation agreement with ED that delineates the requirements
and responsibilities for participating institutions.
In addition to other Title IV eligibility requirements, a high student loan default rate can render an
institution ineligible for the Pell Grant program. This applies if an institution is ineligible for the
Federal Family Education Loan (FFEL) program33 or William D. Ford Direct Loan (DL) program
under HEA Title IV as a result of its loan default rate determined by the Secretary of Education
for FY1996 or subsequent fiscal years.
An eligible institution’s role in the Pell Grant program primarily involves determining student
eligibility, disbursing awards, adjusting awards to ensure students do not receive more assistance
than they are eligible for, record keeping, and reporting to ED.34
An eligible institution calculates a student’s Pell Grant award using the COA and enrollment
status it has determined for the student, and applying these values with the student’s EFC to the
Pell Grant payment schedules published annually by ED. Pell Grants must be paid out in
installments over the academic year. A student receives a Pell Grant only for the payment period
for which he or she is enrolled. Generally, institutions credit a student’s account with the Pell
payment to meet unpaid tuition, fees, room, and board; any remaining Pell funds are paid directly
to the student to cover other living expenses.
Based on estimates of the funds an institution needs to cover initial Pell payments, ED establishes
an initial authorization of Pell Grant funding against which an institution may request funds. This
initial authorization level is adjusted as the award year advances to reflect actual disbursements.
Institutions can receive federal payments for Pell awards in several different ways. For most
schools, the advance payment method is used, under which an institution receives federal funds
prior to making payments to students. Schools for which ED has concerns about their ability to
meet Title IV participation requirements may be required to use the reimbursement payment
method, under which the institution is paid back for funds it has disbursed to students. In addition,
the Pell Grant program pays participating institutions an administrative cost allowance of $5 per
enrolled recipient.
33 The SAFRA Act amended the HEA to terminate the authority for new loans to be made or insured under the FFEL
program after June 30, 2010. Beginning with AY2010-2011, all new Subsidized and Unsubsidized Stafford Loans,
PLUS Loans, and Consolidation Loans will be made under the William D. Ford Federal Direct Loan program.
34 Much of the information in this section is based on the U.S. Department of Education’s Federal Student Aid
Handbook for 2009-2010, available at http://ifap.ed.gov/ifap/byAwardYear.jsp?type=fsahandbook&awardyear=2009-
2010.
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Federal Pell Grant Program of the Higher Education Act
Characteristics of Recipients
The Pell Grant program reaches a significant portion of undergraduates each year. In AY2007-
2008, 27% of all undergraduates were estimated to have received Pell Grants.35 During the
program’s first year in AY1973-1974, approximately 176,000 students received a Pell Grant
award.36 Since then, the annual number of Pell Grant recipients has risen substantially. Based on
data provided by ED, the number of Pell Grant recipients reached 8,105,000 in AY2009-2010 and
is estimated to grow an additional 640,000 in AY2010-2011 to 8,745,000.37 Figure 3 illustrates
the changes in the number of Pell Grant recipients from AY1973-1974 to AY2010-2011. It is
important to note that myriad factors38 can affect the number of Pell Grant recipients in any given
award year.
Figure 3. Pell Grant Recipients, AY1973-1974 to AY2010-2011
10,000,000
9,000,000
8,000,000
ts
7,000,000
en
pi
6,000,000
eci
f R
5,000,000
o
4,000,000
ber
um
3,000,000
N
2,000,000
1,000,000
0 1973-74
1975-76
1977-78
1979-80
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
2007-08
2009-10
Award Year
Source: U.S. Department of Education, AY2008-09 Pel Grant End-of-Year Report (for AY1973-1974 through
AY2007-2008).
Notes: Data for AY2009-2010 and AY2010-2011 are estimates provided by the U.S. Department of Education
and are subject to change.
35 CRS analysis of AY2007-2008 NPSAS data. A CRS analysis of AY2003-2004 NPSAS data shows that the
percentage of all undergraduates estimated to have received Pell Grants in AY2003-2004 was also 27%.
36 U.S. Department of Education, AY2008-09 Pell Grant End of Year Report, Table 1.
37 U.S. Department of Education, unpublished data provided to CRS.
38 Such factors include, but are not limited to, (1) amendments to the HEA that affect the federal need analysis
calculation and Pell Grant award rules; (2) changes in the maximum grant level specified in annual appropriations bills;
(3) trends in enrollment at postsecondary institutions; and (4) macroeconomic and microeconomic variables.
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Federal Pell Grant Program of the Higher Education Act
Figure 4 shows the annual percentage change in Pell Grant recipients over the past 10 years.
From AY2001-2002 to AY2010-2011, the average annual percentage change in Pell Grant
recipients was 8.75%. During AY2005-2006 and AY2006-2007, the number of Pell Grant
recipients decreased by 2.65% and .06%, respectively. Pell Grant recipients increased by 32% in
AY2009-2010 and are estimated to increase by 8% in AY2010-2011.39
Figure 4. Percentage Change in Pell Grant Recipients, AY2001-2002 to AY2010-2011
om
35.00%
nts fr
30.00%
r
cipie
25.00%
rd Yea 20.00%
t Re
ran
wa 15.00%
10.00%
ell G
P
ious A
ev
5.00%
Pr
ge in
0.00%
han
-5.00%
C
20
20
20
20
20
20
20
20
20
20
%
01
02
03
04
05
06
07
08
09
10
-20
-20
-20
-20
-20
-20
-20
-20
-20
-20
02
03
04
05
06
07
08
09
10
11
Award Year
Source: U.S. Department of Education (ED), AY 2008-09 Pel Grant End-of-Year Report, Table 1, and unpublished
data provided by ED.
Notes: Data for AY2010-2011 are estimates and subject to change.
Income
There is no absolute income threshold that determines who is eligible or ineligible for a Pell
Grant award. Nevertheless, Pell Grant recipients are primarily low-income. In FY2008 (AY2008-
2009), an estimated 62% of dependent Pell Grant recipients had a total family income40 at or
below $30,000. Independent Pell Grant recipients’ income is generally lower than their dependent
counterparts. In FY2008, an estimated 83% of independent Pell Grant recipients had a total
income at or below $30,000.41
It is important to note, however, that a small percentage of Pell Grant awards go to mid- and high-
income families. For the most part, these awards are smaller than the average Pell Grant award
39 Recipient data for AY2009-2010 and AY2010-2011 are estimates and subject to change. Data provided by the U.S.
Department of Education.
40 Total family income is defined here as the adjusted gross income (if a tax filer), any taxable income (if not a tax
filer), and any non-taxable income.
41 Data in this paragraph taken from Tables 2-B, 2-C, and 2-D from the AY 2008-09 Pell Grant End-of-Year Report.
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Federal Pell Grant Program of the Higher Education Act
for all students and are typically provided to dependent students from families who have multiple
students enrolled in postsecondary education at the same time.42
Participation Rate
Although the primary purpose of the program is to aid needy undergraduate students, a significant
amount of low-income undergraduate students who enroll in postsecondary education do not
receive a Pell Grant, primarily because they did not apply for federal financial aid.43 Table 4,
which presents a CRS analysis of data from the National Postsecondary Student Aid Study
(NPSAS), shows the percentage of dependent and independent undergraduates from different
income levels who were Pell recipients in AY2007-2008. Two participation rates are provided for
each income level and dependency status; one measuring the percentage of all undergraduate
students (of the relevant dependency status) who were Pell recipients and the other providing the
percentage of undergraduate aid applicants (of the relevant dependency status) who received a
Pell Grant.
With regard to the lowest income categories, estimates presented in Table 4 suggest that
approximately 63.2% of all dependent undergraduates from families with total family income of
less than $10,000 were Pell recipients, and 81.5% of the aid applicants from that income category
were Pell recipients. Approximately 53.3% of all independent undergraduates with total income
of less than $5,000 were Pell recipients, and about 79.3% of the aid applicants in that category
received a Pell Grant. Table 4 shows that, in general, as income rose, participation rates in the
Pell program dropped for dependent and independent students.
Table 4. Estimated Pell Grant Participation by
Dependency and Total Family Income, AY2007-2008
Estimated Percentage Receiving Pell Grantsa
Total Family Income
All Students
All Federal Aid Applicants
Dependent Undergraduatesb
Less than $10,000
63.2
81.5
$10,000-$19,999 72.7
87.4
$20,000-$29,999 64.9
80.6
$30,000-$39,999 53.5
70.8
$40,000-$49,999 32
49.5
$50,000-$59,999 15.4
25.3
$60,000 or more
2.3
4.2
42 According to Table 2-A of the AY 2008-09 Pell Grant End-of-Year Report, approximately 67,593 Pell Grant
recipients, or 1.1% of the total recipient population, had a family income above $60,000.
43 Furthermore, some students who apply and qualify for Pell Grant aid do not enroll in postsecondary institutions.
Some have labeled this measure as a “show-up” rate. According to data provided in Table 1 of the AY 2008-09 Pell
Grant End-of-Year Report, approximately 74% of Pell Grant applicants who applied and qualified for Pell Grant aid
based on their EFC level in AY2008-2009 actually enrolled and received a Pell Grant.
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Federal Pell Grant Program of the Higher Education Act
Estimated Percentage Receiving Pell Grantsa
Total Family Income
All Students
All Federal Aid Applicants
Independent Undergraduatesc
Less than $5,000
53.3
79.3
$5,000-$9,999 65.5
85.2
$10,000-$19,999 52.3
74.1
$20,000-$29,999 34.8
54.2
$30,000-$49,999 28.2
55.5
$50,000 or more
0.23
0.85
Source: CRS estimates from 2007-2008 NPSAS.
Note: How to read Table 4: The first row shows that 63.2% of al dependent undergraduate students with a
total family income of less than $10,000 received a Pel Grant in AY2007-2008, whereas 81.5% of dependent
undergraduate students with a total family income of less than $10,000 who applied for Federal Student Aid
received a Pel Grant in AY2007-2008.
a. Includes students enrolled at any intensity.
b. Includes income of dependent student and parents.
c. Includes income of independent student and spouse.
It is noteworthy that a significant number of low-income undergraduate students did not receive a
Pell Grant in AY2007-2008. Based on data presented in Table 4, it appears that a large portion of
low-income undergraduate students did not apply for federal student aid.44 The percentage of
dependent undergraduates from the lowest income category who received a Pell Grant is
markedly higher when aid application is taken into account, 81.5% versus 63.2%. A similar
increase in participation characterized the lowest-income independent undergraduates when aid
application is considered—from 53.3% to 79.3%. Nevertheless, even among aid application
filers, a relatively significant portion of the lowest-income students did not receive Pell Grants.
It is possible that many of these lowest-income students who did not apply for aid may have
believed they were not financially eligible for aid, or they may have had sufficient resources to
meet their costs. At least some of those who believed they were ineligible for aid may have
actually been eligible. Among other possible explanations are that very low-income students in
particular find the federal financial aid application process too complex to pursue, or that such
students may not be aware of the availability of federal student aid. Additionally, aid outreach
efforts at low-cost institutions may be less vigorous. It is also important to note that current
operational data for award years 2008-2009, 2009-2010, and 2010-2011 suggest increases in the
number of students who applied for federal financial aid across all income categories.
44 The ability to speak with confidence about the income levels of students who did not file a FAFSA is adversely
affected by certain data quality issues. For non-aid filers, income information is derived from surveys of students and
from imputation.
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Federal Pell Grant Program of the Higher Education Act
Enrollment Status
Pell recipients, regardless of dependency status, are more likely to be exclusively full-time
students than are undergraduates as a whole and far less likely to be enrolled exclusively part-
time. Table 5, based on a CRS analysis of NPSAS data, shows the distribution of dependent and
independent undergraduates in general and Pell recipients in particular by enrollment status.
Table 5. Estimated Distribution of Undergraduates and Pell Grant Recipients by
Enrollment Status, AY2007-2008
Enrollment Status
All Students
Pell Recipients
Dependent Undergraduates
Exclusively full-time
62.1%
68.8%
Exclusively part-time
18.7%
10.5%
Mixed (status changed during
19.2% 20.7%
enrollment period)
Total 100%
100%
Independent Undergraduates
Exclusively full-time
31.5%
49.9%
Exclusively part-time
54.1%
28.4%
Mixed (status changed during
14.4% 21.7%
enrollment period)
Total 100%
100%
Source: CRS estimates from 2007-2008 NPSAS.
Notes: Due to rounding, sum of column entries may not equal column totals.
How to read Table 5: The first row shows that 62.1% of dependent undergraduate students were enrolled
exclusively full-time, whereas 68.8% of dependent undergraduate Pell Grant recipients were enrolled exclusively
full-time. The first row under the sub-heading titled “Independent Undergraduates” shows that 31.5% of
independent undergraduate students were enrol ed exclusively full-time, whereas 49.9% of independent
undergraduate Pell Grant recipients were enrolled exclusively full-time.
Type and Control
Compared to all undergraduates, Pell Grant recipients are less likely to be enrolled in public two-
year institutions and more likely to be enrolled in proprietary institutions. Table 6 shows the
distribution of dependent and independent undergraduates and Pell Grant recipients by type and
control of the institutions they attended.
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Federal Pell Grant Program of the Higher Education Act
Table 6. Estimated Distribution of Undergraduates and Pell Grant Recipients by
Type and Control of Enrolling Institution, AY2007-2008
% of Total
% of
% of Total
% of
Type and
Dependent
Dependent
Independent
Independent
Control of
Undergraduates
Pell Grant
Undergraduates
Pell Grant
Institution
Enrolled
Recipients
Enrolled
Recipients
Public
Four-Year
38.1 37.8 19.2 19.3
Private Four-Year
16.3
15.3
9.3
9.9
Public
Two-Year
32.3 27.8 48.6 32.9
Proprietary 4 9.6 14.6 28.7
More than one
institution during
9.2 9.5 8.3 9.2
enrollment period
Total
100 100 100 100
Source: CRS estimates from 2007-2008 NPSAS.
Note: Due to rounding, sum of column entries may not equal column totals.
Recently, there has been a renewed focus on the distribution of Pell Grant aid by type of
institution. While proprietary institutions have consistently increased their share of Pell Grant aid
since the beginning of the last decade, public institutions continue to be the largest beneficiary of
Pell Grant aid. Figure 5 illustrates, however, that the total share of Pell Grant aid at public
institutions declined from 68% in AY2002-2003 to 62% in AY2009-2010. Total Pell Grant aid
during this same period increased by approximately $16.7 billion, from $11.7 billion to
$28.4 billion.
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Federal Pell Grant Program of the Higher Education Act
Figure 5. Percentage of Total Pell Grant Aid Received by Type of Institution,
AY1984-1985 to AY2009-2010
80%
id 70%
ll A 60%
e
l P
a 50%
Tot 40%
of
ge 30%
a
nt
e 20%
rc
e 10%
P
0%
19
19
19
19
19
19
19
19
20
20
20
20
20
84
86
88
90
92
94
96
98
00
02
04
06
08
-85
-87
-89
-91
-93
-95
-97
-99
-01
-03
-05
-07
-09
Award Year
Public Institutions
Private Institutions
Proprietary Institutions
Sources: Compiled by CRS from data published by The U.S. Department of Education (ED) in the End-of-Year
Reports for the Title IV/Pell Grant Program for each applicable award year. AY2009-2010 data were provided by ED
and are unpublished.
Additionally, Figure 5 shows that proprietary institutions received approximately 25% of the total
Pell aid in AY2009-2010 compared to 15.4% in AY2002-2003. Despite this large increase,
proprietary institutions received a larger share of Pell aid in the late 1980s, receiving nearly 27%
of all Pell aid in AY1987-1988. It is important to note that requirements for institutions to
participate in the Pell Grant program have varied over the time period highlighted in this figure.
Changes to institutional eligibility requirements, either through legislation or regulatory guidance,
may have increased or limited the number of participating institutions from year to year, or
disproportionally affected certain types of institutions.
Role of the Pell Grant
The Pell Grant is intended to function as the foundation aid for needy undergraduates; all other
need-based federal student aid is to build on the Pell Grant.45 As described earlier, other financial
aid received by a student is not taken into account in determining a student’s Pell Grant. How
well does the Pell Grant currently function as the foundation aid? This section explores this
45 Eligibility for the Pell Grant program and annual Pell Grant level maximum award levels is also used for determining
eligibility or award levels in other federal programs. For example, a student must receive a Pell Grant in order to
receive aid under the Academic Competitiveness Grant (ACG) Program. Also, individuals can receive a national
service educational award under the Serve America Act that is equal to the annual Pell Grant maximum award.
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Federal Pell Grant Program of the Higher Education Act
question by analyzing the purchasing power of the Pell Grant and the distribution of other federal
aid to Pell recipients.
Purchasing Power
The total maximum Pell Grant, available to students with a zero EFC who enroll on a full-time
basis, is often used as a gauge of the Pell Grant program’s level of support in each year. In
AY2010-2011, the total maximum grant ($5,550) is expected to cover approximately 62% of the
average tuition, fees, room, and board at public two-year institutions, 34% at public four-year
institutions, and 14% at private four-year institutions. Figure 6 compares the total maximum
grant to average undergraduate tuition, fees, room, and board charges at public two-year, public
four-year, and private four-year institutions between AY1973-1974 and AY2010-2011. It is
evident that the maximum was at its peak relative to these average charges during the 1970s.
Figure 6. Percentage of Tuition, Fees, Room, and Board Covered by the Total
Maximum Pell Grant, by Institution Type and Control: AY1973-1974 to AY2010-2011
120%
100%
80%
60%
40%
20%
0% 19
19
19
19
19
19
19
20
20
20
73
77
81
85
89
93
97
01
05
09
-7
-
-
-
-
-
-
-
-
-
4
78
82
86
90
94
98
02
06
10
Award Year
Two-Year Public
Four-Year Public
Four-Year Private
Sources: CRS calculations using data from National Center for Education Statistics (NCES), 2009 Digest of
Education Statistics, Table 334; and The College Board, Trends in College Prices, 2009.
Notes: The purchasing power of the Pel Grant through AY1992-1993 was constrained by a statutory cap on
the percentage of cost of attendance (COA) that a Pel Grant could cover. From AY1973-1974 to AY1984-1985,
the cap was 50%; from AY1985-1986 to AY1992-1993, the cap was 60%. After that time there has been no
absolute limit on the percentage of COA that can be covered.
From the mid-1980s through the early 1990s, the total maximum Pell Grant lost ground relative
to average tuition, fees, room, and board at public and private four-year institutions. Despite
recent increases in coverage, the estimated percentages for AY2010-2011 remain below the
AY1985-1986 percentages (54% for public four-year colleges and 23% for private four-year
colleges).
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Federal Pell Grant Program of the Higher Education Act
Another approach to measuring the purchasing power of the maximum Pell Grant is to compare
its coverage of only the average tuition and fees published by IHEs.46 For example, in AY2009-
2010, the maximum Pell Grant covered approximately 79% of the average published in-state
tuition and fees at four-year public institutions. At two-year public institutions, where students
often commute to classes, the maximum Pell Grant in AY2009-2010 exceeded the average
published tuition and fees at these institutions ($5,550 compared to $2,544). At for-profit
institutions, where tuition and fees are typically higher, the maximum Pell Grant covered only
39% of the average published tuition and fees in AY2009-2010. Finally, at four-year private (not-
for-profit) institutions, the maximum Pell Grant covered only 21% of the average published
tuition and fees in AY2009-2010.47
It is also important to note that in all sectors of higher education, published tuition, fees, and room
and board have consistently risen more rapidly than average prices in the economy for a number
of years.48 An analysis of the purchasing power of the Pell Grant maximum award as a percentage
of the COA or tuition and fees only, therefore, could also include an examination of why
published prices at institutions of higher education have risen at such a rapid rate.49 Some
economists and public policy analysts believe the Pell Grant program, while immensely popular
and successful in providing access to postsecondary education for many low-income
undergraduate students over the years, has not adequately served the goal of making college more
affordable. Rather, some believe there is a connection between increased federal student aid in
general and the rate of increase in tuition and fees at institutions of higher education.50 Others
have concerns about the role of the Pell Grant in the process known as tuition discounting. For
instance, do increases in the Pell Grant maximum award lead to reductions in tuition discounts
offered by IHEs to lower-income Pell Grant recipients, ultimately resulting in a displacement of
aid to middle- and high-income students?
Pell Grant Recipients and Other Federal Aid
One measure of the role that the Pell Grant plays as the foundation award is the extent to which
undergraduates who received federal need-based student aid from the HEA51 were Pell recipients.
46 Some analysts believe the purchasing power of the maximum Pell Grant could be measured by its coverage of tuition
and fees only because students can choose to live off campus and some living expenses, which are included as part of
the student’s COA, will be incurred by the student whether or not the student chooses to attend a postsecondary
institution.
47 The Pell Grant maximum award’s coverage of average published tuition and fees for different types of institutions in
AY2009-2010 was calculated by CRS using 2009 College Board data available at http://www.collegeboard.com/press/
releases/208962.html.
48 Increases in published tuition and fees do not necessarily correspond to increases in the amounts students pay, which
are dependent on myriad factors including tuition reductions/discounting and the amount of grant and scholarship aid
they receive from all sources (College Board, Trends in College Pricing, 2009, http://www.trends-collegeboard.com/
college_pricing/1_4_over_time_constant_dollars.html).
49 The economics of tuition and fees in higher education is complex and beyond the scope of this report.
50 A frequently cited study of longitudinal data released in 2005 by economists at the University of Oregon suggested
there is little evidence that increases in Pell Grants are positively linked to increases for in-state tuition at public
universities. The study did conclude, however, that increases in Pell Grants appear to be matched nearly one for one by
increases in list (and net) tuition at private universities and for out-of-state tuition charges at public universities. See
http://www.uoregon.edu/~lsingell/Pell_Bennett.pdf. Overall, research on the correlation between the increase in federal
student aid and the rate of increase in tuition and fees at institutions of higher education is generally viewed as
inconclusive.
51 Federal need-based student aid from the HEA is defined here as Pell Grants, Academic Competitiveness Grants
(continued...)
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Federal Pell Grant Program of the Higher Education Act
AY2007-2008 NPSAS data suggest that Pell Grants alone may not have constituted the primary
foundation for these students. In AY2007-2008, approximately 58% of undergraduate federal
need-based aid recipients received Pell Grants, whereas a slightly higher portion (67%) of
undergraduate need-based aid recipients borrowed Stafford Subsidized Loans.52
Another approach to delineating the role of Pell Grants is to explore the extent to which Pell
recipients, as a group, relied solely on the grant to meet college costs without having to secure
other federal aid, particularly loans with their repayment obligation. In AY2007-2008, only 12.9%
of Pell recipients relied on a Pell Grant as their only source of aid and many participated in other
federal student aid programs, sometimes at a high rate. Among the other types of federal need-
based student aid available to students, Pell recipients were most likely to also borrow Subsidized
Stafford Loans (over 59.6% of Pell recipients received these loans—with an average amount of
$3,366).
Table 7 shows the average percentage of Pell Grant recipients’ cost of attendance covered by
their Pell Grant award, their loans from the Federal Family Education Loan (FFEL) program and
William D. Ford Federal Direct Loan (DL) program, and their total aid package in AY2007-2008,
by total family income. This table allows one to examine the extent to which Pell Grants and
other aid received helped Pell Grant recipients meet their cost of attendance. Table 7 shows, for
example, that among all Pell Grant recipients, aid from FFEL and DL loans covered, on average,
25.2% of the cost of attendance for these recipients—which is higher than the average coverage
by Pell Grant aid alone.53 In addition, Table 7 illustrates that, in general, as family income for
Pell Grant recipients increases, so does the percentage of COA covered by FFEL and DL loans.
Table 7. Pell Grant Aid, FFEL and DL Federal Loans, and Total Aid as Average
Percentages of Cost of Attendance for Undergraduate Students Who Received a
Pell Grant, by Total Family Income
(AY2007-2008)
FFEL and DL
Pell Grant Aid
Loansa as a
Total Aidb as a
as a Percentage
Percentage of
Percentage of
of COA
COA
COA
Al Pel Grant Recipients
19.0%
25.2%
60.2%
Total Family Income (Dependent)c
Less than $20,000
26.8%
17.6%
63.9%
$20,000 to $29,000
23.6%
21.0%
66.7%
$30,000 to $49,000
15.3%
22.9%
63.0%
(...continued)
(ACG), Science and Mathematics Access to Retain Talent (SMART) Grants, Federal Supplemental Educational
Opportunity Grants (FSEOG), Federal Perkins Loans, Federal Work-Study earnings, and Stafford Subsidized Loans.
52 Further, approximately 47% of federal need-based aid recipients secured Stafford Unsubsidized Loans. For more
information on Stafford Unsubsidized Loans, see CRS Report R40122, Federal Student Loans Made Under the
Federal Family Education Loan Program and the William D. Ford Federal Direct Loan Program: Terms and
Conditions for Borrowers, by David P. Smole.
53 When one controls for only Pell Grant recipients who benefited from a FFEL or DL loan, the average coverage
increases to 40.4%.
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Federal Pell Grant Program of the Higher Education Act
FFEL and DL
Pell Grant Aid
Loansa as a
Total Aidb as a
as a Percentage
Percentage of
Percentage of
of COA
COA
COA
$50,000 or more
8.7%
27.1%
63.2%
Total Family Income (Independent)d
Less than $20,000
20.2%
28.8%
59.3%
$20,000 to $29,000
20.7%
25.5%
55.0%
$30,000 to $49,000
13.8%
28.7%
51.7%
$50,000 or more
N/A
N/A
N/A
Source: CRS estimates from 2007-2008 NPSAS.
Notes: N/A=Reporting standards not met in NPSAS for accurate analysis.
a. This column also includes Pel Grant recipients who may not have benefited from any FFEL and DL program
loans in the 2007-2008 academic year. FFEL or DL loans are defined as Stafford loans, PLUS loans, or both.
b. Total aid includes all federal, state, institutional, and private financial aid received by the student in the form
of grants, loans, work-study assistance, or other types of aid.
c. Includes income of dependent student and parents.
d. Includes income of independent student and spouse.
The overall price of education has an impact on the extent to which Pell Grant recipients secure
Stafford Loans. For Pell Grant recipients attending public two-year institutions, where the
average cost of attendance is typically lower than at public four-year institutions, and particularly
lower than at private four-year institutions, the propensity for borrowing was much less than for
Pell Grant recipients as a whole. For AY2007-2008, 26% of Pell Grant recipients at public two-
year institutions borrowed Subsidized Stafford Loans, and 12% borrowed Unsubsidized Stafford
Loans.54 For Pell Grant recipients attending for-profit institutions, which include less-than-two-
year, two-year, and four-year institutions, the propensity to borrow was much higher. For
AY2007, 92% of Pell Grant recipients borrowed Stafford Subsidized Loans at for-profit
institutions, and 83% borrowed Unsubsidized Stafford Loans.
Program Funding
This section reviews the latest program funding trends, explores the concept of discretionary
funding shortfalls in the program, and provides a historic look at previous funding surpluses and
shortfalls. Additionally, this section provides insight into how funding shortfalls in the program
have been addressed in the past and explores the potential implications of the SAFRA Act on the
estimated FY2010 funding shortfall.
54 To some extent, the lower rate of Stafford borrowing at public two-year institutions may be due to the requirement
that students be enrolled at least half-time to borrow Stafford loans since a higher percentage of students enrolled in
two-year IHEs are part-time students than students enrolled in public and private four-year IHEs.
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Federal Pell Grant Program of the Higher Education Act
Role of Discretionary Funding
Annual discretionary appropriation bills provide the largest portion of funding for the Pell Grant
program, and this funding typically remains available for use for two fiscal years. An annual
appropriation is usually available for obligation on October 1 of the fiscal year in which the
appropriation is made and remains available for obligation through September 30 of the following
fiscal year.55 Thus, while FY2010 funds are provided with the purpose of supporting awards made
from July 1, 2010, to June 30, 2011, these funds are available for obligation from October 1,
2009, to September 30, 2011, and may support multiple award years. As mentioned earlier,
annual discretionary appropriation bills also establish the base discretionary maximum grant for
each applicable award year.
Increasing Role of Mandatory Funding
The CCRAA, the ARRA, the Technical Amendments to the HEA of 2009 (P.L. 111-39), and, most
recently, the SAFRA Act amended the HEA to provide mandatory funding for the Pell Grant
program. These additional mandatory appropriations were provided to primarily fund annual
increases to the discretionary base maximum award amounts. Prior to the CCRAA, mandatory
funding had been provided for the Pell Grant program in previous years, but usually for a specific
purpose (e.g., to supplement discretionary funding to pay for accumulated funding shortfalls)
other than increasing the maximum grant award amount.56
From a budgetary perspective, the recent increases in mandatory appropriations for the program
have been offset largely by enacted provisions that have resulted in estimated savings from the
federal loan programs, which are classified as mandatory programs. Most recently, the SAFRA
Act amended the HEA to terminate the authority for new loans to be made or insured under the
FFEL program after June 30, 2010. Part of the estimated savings from this change in the federal
loan programs was used to provide $13.5 billion in mandatory appropriations for general use in
the program from FY2011 through the end of FY2012.
The SAFRA Act also established indefinite mandatory appropriations for the program to provide
for increases to the discretionary base maximum award amount in FY2010 and beyond. Under
this category of funding, the amount of mandatory appropriations provided for the program for
each year is not specified and will equal the amount necessary to fully fund the increase in each
year. Prior to the SAFRA Act, mandatory appropriation amounts were specified from FY2008 to
FY2017 under the CCRAA to fund mandatory add-on amounts in each year. In addition, a
requirement for the Secretary of Education to reduce or increase the add-on amounts for any year
the appropriated amount was insufficient or exceeded the expected cost of the add-on amount was
also included in the CCRAA. This requirement was included to ensure that the costs associated
with the mandatory add-on would align with the appropriated amounts in the HEA.57 The SAFRA
55 The annual appropriation for the Pell Grant program is available immediately upon enactment at any point on or after
October 1. In the event the annual appropriation is not enacted at the beginning of the fiscal year, a continuing
resolution typically provides prorated funding for the program until an appropriation measure is enacted.
56 For example, mandatory funding in the amount of $4.3 billion was provided in P.L. 109-49 to pay exclusively for the
accumulated funding shortfall through AY2005-2006.
57 Several issues surfaced regarding this requirement, including the ability and timing of ED to accurately measure such
insufficiency or surplus of funds given the operational and administrative requirements under other provisions in the
HEA.
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Federal Pell Grant Program of the Higher Education Act
Act eliminated the specific mandatory appropriation amounts for FY2010 and all subsequent
years, but the requirement for the Secretary to adjust the increases funded with mandatory
appropriations each year remains in the HEA.58
Summary of Recent Funding (FY2008-FY2018)
As the federal government’s single largest source of grant aid for postsecondary education, the
Pell Grant program has garnered considerable attention over the past several years in Congress,
resulting in significant increases in both discretionary and mandatory funding. An appropriate
timeline for summarizing recent funding increases could commence with FY2008, since it marks
the first year in which significant mandatory funding was provided for the program under the
CCRAA.59 Table 8 summarizes the history of discretionary and mandatory appropriations for the
Pell Grant program from FY2008 to FY2018. It is important to note that some of the advance
mandatory appropriations provided in previous measures were subsequently rescinded in the
SAFRA Act.60 The data in Table 8 are divided into two categories: (1) discretionary
appropriations; and (2) mandatory appropriations (inclusive of any rescissions to prior advance
appropriations) effective upon the enactment of the SAFRA Act.
Table 8. Pell Grant Appropriations, FY2008 to FY2018
(dollars in millions)
Discretionary Appropriations
Total
Annual
ARRA Funding
Discretionary
Fiscal Year
Award Year
Appropriations($M)
($M)
Funding ($M)
2008 AY2008-2009 $14,215
__
$14,215
2009 AY2009-2010 $17,288
$15,640 $32,928
2010 AY2010-2011 $17,495
__
$17,495
2011 AY2011-2012 $23,162
$23,162
Total Discretionary Appropriations
$72,160 $15,640 $87,800
(FY2008 to FY2011)
58 Although the SAFRA Act did not eliminate this requirement, it remains effective only for AY2008-2009 and
AY2009-2010 because specific appropriation amounts remain in the HEA for FY2008 and FY2009 to fund the add-on
awards associated with these years. Beginning with FY2010, “such sums as necessary” to fund the increases to the
discretionary base award are provided and the requirement would not apply. A reduction or increase in the mandatory
add-on award for AY2008-2009 or AY2009-2010 is unlikely since most awards have already been disbursed for these
years. It is possible that beginning in FY2010, ED could use the mandatory funds provided as “such sums” to fund add-
on awards from prior years.
59 Table 9 in this report provides a more comprehensive history of the discretionary funding levels in the program since
FY1973.
60 See Table A-3 for a history of mandatory appropriations before the enactment of the SAFRA Act.
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Mandatory Appropriations (Post-SAFRA Act)
CCRAA
ARRA
SAFRA Act
Total Mandatory
Fiscal Year
Award Year
Funding ($M)
Funding ($M)
($M)
Appropriations($M)
2008 AY2008-2009 $2,041a __
__
$2,041
2009 AY2009-2010 $2,090 $643
__
$2,733
2010 AY2010-2011 __
__
$4,988b $4,988
2011 AY2011-2012 __
__
$18,188c $18,188
2012 AY2012-2013 __
__ Such
Sumsd Such
Sums
2013
AY2013-2014
__
__
Such Sums
Such Sums
2014
AY2014-2015
__
__
Such Sums
Such Sums
2015
AY2015-2016
__
__
Such Sums
Such Sums
2016
AY2016-2017
__
__
Such Sums
Such Sums
2017
AY2017-2018
__
__
Such Sums
Such Sums
2018
AY2018-2019
__
__
Such Sums
Such Sums
Total Mandatory
$27,950 +
Appropriations
$4,131 $643 $23,176 +
Such Sums
Such Sums
(FY2008 to FY2018)
Sources: CRS analysis of the HEA, the SAFRA Act, respective annual appropriations measures, and unpublished
information from the U.S. Department of Education.
a. Includes $11 million for the elimination of the tuition sensitivity rule in AY2007-2008.
b. This amount is an estimate as of December 2010 and represents the total appropriations required to
increase the discretionary maximum award of $4,860 by $690 to $5,550 in AY2010-2011. This amount also
includes $472 million required to fund the mandatory add-on of $490 in AY2009-2010. Estimate is subject
to change.
c. Includes $13.5 billion in mandatory appropriations for general use in the program for FY2011 through the
end of FY2012, as provided in the SAFRA Act. The remaining $4.7 billion is an estimate of the amount of
appropriations required to increase the discretionary base maximum grant by $690 in AY2011-2012 and is
subject to change.
d. “Such Sums” means the amount of mandatory appropriations that may be necessary to fully fund the
increase to the discretionary base maximum award at levels specified in the HEA for a given year.
Discretionary Funding Shortfalls and Surpluses
The annual discretionary appropriation level and base maximum Pell Grant level are determined
well in advance of the award year they are intended to support and are based on estimates of
program costs at that time. The annual appropriation is determined on the basis of estimates of the
program costs that are likely to be incurred at the chosen discretionary base maximum grant. To
the extent those estimates of future program costs are inaccurate, the annual appropriation may be
too much or too little. The HEA requires the Secretary of Education, when he has determined that
the appropriated funds are insufficient to satisfy all Pell entitlements,61 to notify each chamber of
61 The authorizing statue speaks of entitlements when it describes the award determined for a student based on the
published award schedule.
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Congress of the funding shortfall, identifying how much more funding is needed to meet those
entitlements.
Table 9 provides a history of annual discretionary appropriations, estimated expenditures, and
estimated annual shortfall or surplus levels from FY1973 to FY2011. Beginning with FY1990,
the estimated cumulative funding shortfall or surplus is also provided. The annual funding
shortfall or surplus differs from the cumulative shortfall or surplus, which may accumulate over
multiple award years.62 It is also important to note that Congress may have provided a reduced
appropriation level in a given year when a funding surplus was available for use from the
previous year. Conversely, Congress may have provided additional appropriations in a given year
to pay for an estimated funding shortfall from the previous year.
Table 9. Annual and Cumulative Discretionary Funding Shortfalls in
the Pell Grant Program, FY1973-FY2011
(dollars in millions)
Discretionary
Estimated
Cumulative
Appropriation
Total
Annual Surplus Surplus or
Fiscal Year
Award Year
Level
Expendituresa or (Shortfall)b
(Shortfall)
1973
1973-1974
$122
$48
$74
N/A
1974
1974-1975
$475
$358
$117
N/A
1975
1975-1976
$840
$926
($86)
N/A
1976
1976-1977
$1,326
$1,475
($149)
N/A
1977
1977-1978
$1,904
$1,524
$380
N/A
1978
1978-1979
$2,160
$1,541
$619
N/A
1979
1979-1980
$2,431
$2,357
$74
N/A
1980
1980-1981
$2,157
$2,387
($230)
N/A
1981
1981-1982
$2,604
$2,300
$304
N/A
1982
1982-1983
$2,419
$2,421
($2)
N/A
1983
1983-1984
$2,419
$2,797
($378)
N/A
1984
1984-1985
$2,800
$3,053
($253)
N/A
1985
1985-1986
$3,862
$3,597
$265
N/A
1986
1986-1987
$3,580
$3,460
$120
N/A
1987
1987-1988
$4,187
$3,754
$433
N/A
1988
1988-1989
$4,260
$4,476
($216)
N/A
1989
1989-1990
$4,484
$4,770
($75)
—
1990
1990-1991
$4,804
$4,904
($231)
($306)
1991
1991-1992
$5,376
$5,772
($396)
($702)
62 In general, the annual surplus or shortfall is a measure of the difference between one year’s appropriation, which is
typically provided for a particular award year, and the estimated expenditures for that particular award year. The
cumulative surplus is a measure that, in addition to including the annual surplus or shortfall, takes into account the prior
year’s surplus or shortfall amount.
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Discretionary
Estimated
Cumulative
Appropriation
Total
Annual Surplus Surplus or
Fiscal Year
Award Year
Level
Expendituresa or (Shortfall)b
(Shortfall)
1992
1992-1993
$5,503
$6,156
$18
($684)
1993
1993-1994
$6,462
$5,621
$460
($224)
1994
1994-1995
$6,637
$5,504
$808
$584
1995
1995-1996
$6,147
$5,466
$716
$1,300
1996
1996-1997
$4,914
$5,784
($870)
$429
1997
1997-1998
$5,919
$6,315
($396)
$33
1998
1998-1999
$7,345
$7,236
$109
$142
1999
1999-2000
$7,704
$7,233
$471
$613
2000
2000-2001
$7,640
$7,996
($356)
$256
2001
2001-2002
$8,756
$9,985
($1,229)
($908)
2002 2002-2003 $11,314c $11,653
($339) ($1,247)
2003
2003-2004
$11,365
$12,713
($1,348)
($2,595)
2004
2004-2005
$12,007
$13,152
($1,145)
($3,740)
2005
2005-2006
$12,365
$12,695
($330)
($4,070)d
2006 2006-2007 $17,345e
$12,826
$219
$219
2007
2007-2008
$13,661
$14,704
($1,043)
($824)
2008
2008-2009
$14,215
$16,062
($1,847)
($2,671)
2009 2009-2010 $32,928f
$25,437
$7,491
$4,820
2010
2010-2011
$17,495
$28,459
($10,565)
($6,144)
2011 2011-2012 $13,500g —
$7,356
$7,356
2011 2011-2012 $23,162 $30,518
$0
$0
Sources: (1) U.S. Department of Education (ED), 2008-09 Federal Pell Grant Program End-of-Year Report; (2)
unpublished data provided by ED; and (3) unpublished data provided by CBO.
Notes: N/A= Not available. Data on the cumulative shortfal or surplus prior to AY1989-1990 could not be
verified and therefore are not provided. Prior to 1980, the program was cal ed the Basic Educational
Opportunity Grant (BEOG) Program.
a. The estimated total expenditure totals for AY1973-1974 through AY1988-1989 are taken from the U.S.
Department of Education, AY2008-09 Federal Pel Grant Program End-of-Year Report and do not include
administrative cost al owance payments to institutions. The expenditure totals for AY1989-1990 to
AY2005-2006 are taken from unpublished data provided by ED and reflect administrative cost al owance
payments to institutions. Estimates of al data after AY2005-2006 are from unpublished data provided by
CBO and also include administrative cost allowance payments to institutions. All estimates of expenditures
are subject to change.
b. The annual shortfal or surplus amount reflects account transfers and other adjustments and may not equal
the difference between the annual appropriation and estimated total expenditures in each year.
c. Includes $1billion in supplemental discretionary funding to pay for the FY2001cumulative shortfall.
d. In FY2006, the cumulative shortfall was estimated at $4.3 billion, but the actual shortfall as of this report
totals approximately $4.1 billion. Any excess funds were returned to U.S. Department of Treasury.
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e. Includes $4.3 billion in mandatory funding provided in FY2006 to exclusively supplement the discretionary
funding necessary to retire the cumulative funding shortfal through AY2005-2006. The discretionary
appropriation for FY2006 was $13,045 million.
f.
Includes approximately $15.7 billion in supplemental discretionary appropriations provided in the ARRA.
g. $13.5 billion in mandatory appropriations were provided in the SAFRA Act for general use in the program
through FY2012. A portion of these funds will be used to pay off the discretionary funding shortfall of
$6.1 billion in AY2010-2011; the remaining $7.4 billion will be used to supplant required discretionary
appropriations in FY2011.
Measures to Address Funding Shortfalls
Over the years, federal policymakers and Congress have taken a variety of measures to address
the vexing issues associated with funding shortfalls in the Pell Grant program. Funding shortfalls
in the Pell Grant program have, on infrequent occasions in the past, led to reductions in students’
awards, recipient caps, or the need for supplemental appropriations, or to stagnating award levels
from award year to award year.
For the most part, funding shortfalls in the program have been accepted as common occurrences,
but the measures employed to deal with them have varied. The relative size of the estimated
funding shortfall in any given year is of particular interest to Congress, officials at ED, and
student aid advocacy groups.
It is important to note again that the Pell Grant program is often referred to as a “quasi-
entitlement” and has been operated as an appropriated entitlement given the infrequency of
reductions in students’ awards or imposed recipient caps since the 1990s. Most recent funding
shortfalls in the Pell Grant program have not directly impacted eligible students’ awards. This
section provides a brief chronological history of the measures adopted to address funding
shortfalls in the program.
Pre-2002
From the inception of the program in 1972 until the enactment of the Higher Education
Amendments of 1992 (P.L. 102-325), the Secretary of Education had statutory authority under the
HEA to reduce awards to respond to a shortfall in appropriated funds.63 Reductions were made in
awards in eight years using this authority (the last in AY1990-1991). After this HEA authority
was repealed, appropriations legislation for FY1994-FY2001 continued to provide the Secretary
with reduction authority, but that authority was not used.64 FY2002 and subsequent appropriations
legislation have not included such language.
63 Some form of authority to reduce awards was available to the Secretary between the inception of the program in
1972 and the 1992 amendments. Immediately prior to its repeal in 1992, the HEA provision permitted reduction in
awards only within certain limits. No award could be reduced for students whose expected family contribution (EFC)
was $200 or less (i.e., the awards for the neediest students would be protected). A schedule of reductions for other
awards had to use a “single linear reduction formula” that applied uniformly. No award could be made to a student
whose initial award was reduced to less than $100 under the reduction formula. The original language creating the
Basic Educational Opportunity Grants (BEOG), the predecessor to Pell Grants, in the Education Amendments of 1972
allowed for payments on a pro rata reduced basis and specified a minimum grant of $50 whenever the program was less
than fully funded.
64 The appropriations legislation during this time period required the Secretary to reduce awards using fixed or variable
percentages, or using a fixed dollar reduction, if, prior to issuing the payment schedules, he or she determined that
(continued...)
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The Secretary can respond to a shortfall in Pell Grant funding by allocating funds from the most
recently enacted appropriation to pay for obligations incurred in previous award years.65 This
permits ED to use funds from multiple fiscal years’ appropriations to meet one award year’s cost.
Funding Shortfalls From FY2002 to FY2006
During the period between FY2002 and FY2006, a very large funding shortfall accumulated,
culminating at $4.1 billion in AY2005-2006. In short, the funding shortfall was a result of
unexpected and significant growth in the number of Pell Grant applicants, driven primarily by a
weakened economy, and a sustained misalignment between program cost estimates and annual
appropriations. The accumulated shortfalls during this time period, however, did not result in a
reduction of awards for any eligible student. The maximum grant level, on the other hand,
remained stagnant at $4,050 from AY2003-2004 through AY2006-2007.
Congress responded to the accumulated shortfall in FY2006 by providing $4.3 billion in
mandatory appropriations to eliminate the shortfall that had accumulated through AY2005-2006.
These mandatory funds were appropriated in the FY2006 appropriations legislation for Labor,
Health and Human Services, and Education (P.L. 109-149). Refer to Table 9 for more
information on the annual funding and expenditure levels that led to the $4.1 billion shortfall at
the end of AY2005-2006.
Adoption of FY2006 CBO Scoring Rule
In addition to eliminating the AY2005-2006 funding shortfall, Congress took steps in FY2006 to
limit the possibility of large accumulated funding shortfalls in the future. H.Con.Res. 95
established a permanent rule that applies to the scoring66 of the Pell Grant program by CBO. The
rule provides that if the appropriations of new discretionary budget authority67 enacted for the
program are insufficient to cover the full costs in the upcoming year—including any funding
surplus or shortfall from prior years—the budget authority counted against the bill for the
program will be equal to the adjusted full cost (i.e., total need). The rule also states that the
budget authority for the program will be based on the maximum appropriated award amount and
any changes to the eligibility criteria.
Prior to the implementation of the FY2006 scoring rule, CBO accounted for budget authority in
the Pell Grant program according to the level provided in each appropriation bill. While this
(...continued)
appropriated funds could not fully fund the appropriated maximum grant. A schedule of reduced grants would then be
published.
65 This response to the shortfall is only feasible if ED determines enough funds are available from the most recently
enacted appropriation to meet obligations from multiple award years. A series of legal opinions at ED and other
agencies in the 1990s provides the basis for the authority to use funds in an annual appropriation for multiple award
years. In general, absent specific language in an annual appropriations measure limiting funds to a specific award year
or purpose, the Secretary may use such funds for any award year during the period of availability specified in an
appropriations measure.
66 CBO “keeps score” for Congress by monitoring the results of congressional action on individual authorization,
appropriation, and revenue bills against budget authority and outlay targets that are specified in the concurrent
resolutions.
67 Budget authority is defined as the broad responsibility conferred by Congress that empowers government agencies to
spend federal funds.
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approach is typical for most discretionary programs, the Pell Grant program is unique since it
operates like an entitlement program and annual appropriations can be used to fund multiple
award years. Prior to the adoption of the scoring rule, Congress could choose to fund new
programs or increase the funding of existing programs subject to discretionary appropriations
while providing less funding than required for the Pell Grant program. While the scoring rule
cannot fully account for the challenges of estimating the cost of the program, it does constrain the
accumulation of the funding shortfall by requiring Congress to annually reconcile previous years’
appropriation levels with updated estimates of previous years’ program obligations.
Recent Funding Shortfalls and Surpluses (Post-Scoring Rule to FY2010)
During the period from FY2006 to FY2010, the program experienced a mix of accumulated
funding shortfalls and surpluses. From FY2006 to FY2008, CBO estimates that the program’s
cumulative funding shortfall culminated at $2.6 billion.68 In FY2009, ARRA and the FY2009
Omnibus Appropriations Act (P.L. 111-8) provided a combined discretionary funding level of
$32.9 billion. These funds were used to
• retire the accumulated $2.6 billion funding shortfall in FY2008; 69
• increase the discretionary base maximum award by $619 to $4,860 in AY2009-
2010; and
• provide for a surplus of funds totaling $4.8 billion70 available for use through
FY2011.71
In December 2009, the Consolidated Appropriations Act of FY2010 (P.L. 111-117) provided
$17.5 billion in discretionary funds based on estimates of program costs for AY2010-2011 and the
funding surplus in FY2009 as of March 2009. Between March 2009 and March 2010, however,
the number of students applying for a Pell Grant in AY2009-2010 increased beyond historic
trends as overall economic conditions continued to weaken and college enrollments increased. In
March 2010, CBO published revised estimates of the program costs for AY2009-2010 and
AY2010-2011, which incorporated the new economic trends and application growth not captured
in the previous year’s estimates. Consequently, the revised estimates provided by CBO as of
March 2010, prior the enactment of the SAFRA Act, revealed an estimated cumulative shortfall in
FY2010 at $6.1 billion.
68 This estimate is current as of March 2010 and includes an annual funding surplus in FY2006 of $219 million.
69 This estimate would have been lower at the time ARRA was enacted in January 2009.
70 The estimated surplus resulting from ARRA and the FY2009 Omnibus Appropriations Act was estimated by CBO to
be substantially higher at the time of enactment of these bills in January 2009 and March 2009, respectively. Since
students did not begin applying for a Pell Grant in AY2009-2010 until early January 2009, the substantial growth in the
number of applicants was not captured until after these spending measures were enacted.
71 ARRA provided $15.6 billion in discretionary appropriations for use through the end of FY2011. House Conf.
Report 111-004, which accompanied ARRA, states that $15.6 billion was provided for a $500 increase in the
discretionary base maximum award for two years, but does not indicate the assumed base levels to which the $500
increase would be added. In effect, by extending the period of availability of funds to the end of FY2011, ARRA
created a surplus of funds that would offset the costs of maintaining a $4,860 discretionary base award in AY2010-
2011. The Explanatory Statement in the Congressional Record of February 23, 2009, which was issued in lieu of a
conference report for the FY2009 Omnibus Appropriations Act, states that, combined with the funds provided in
ARRA, the funds provided in the FY2009 Omnibus Appropriations Act will increase the discretionary maximum grant
by $619 in AY2009-2010.
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Impact of The SAFRA Act on the FY2010 Funding Shortfall
As discussed earlier, the SAFRA Act provided $13.5 billion in mandatory appropriations for
general use in the Pell Grant program. These mandatory appropriations are available for use from
October 1, 2010, to September 30, 2012 and will be used to eliminate the estimated $6.1 billion
discretionary shortfall in FY2010, leaving an estimated surplus of mandatory funds in the amount
of $7.4 billion that will be used to supplant required discretionary funding in FY2011.
FY2011 Appropriations
Discretionary
In December 2010, the Continuing Appropriations and Surface Transportation Extensions Act of
2011 (CASTEA; P.L. 111-322) provided $23.2 billion in discretionary appropriations for FY2011,
or an increase of $5.7 billion over FY2010. CASTEA, however, is set to expire on March 4, 2011.
The discretionary base maximum award for AY2011-2012,72 as specified in CASTEA, would
remain at $4,860, the same level as AY2010-2011. When combined with the additional increase to
the discretionary base maximum grant amount funded with mandatory appropriations provided in
the SAFRA Act, the total maximum grant amount a student would be eligible for in AY2011-2012
under CASTEA is $5,550, or the same level as AY2010-2011.
The program cost associated with a discretionary base maximum of $4,860 is currently estimated
at $30.5 billion,73 but a portion of the $13.5 billion in mandatory funds appropriated in the
SAFRA Act for general use in FY2011 will be used to pay for the costs associated with the
discretionary base maximum award in AY2011-2012. Therefore, the $23.2 billion in CASTEA is
sufficient to fully fund the discretionary base maximum award in AY2011-2012, based on current
estimates.
On February 19, 2011, the House passed H.R. 1, the Full-Year Continuing Appropriations Act of
2011. H.R. 1 would provide $17.5 billion in discretionary appropriations for the Pell Grant
program in FY2011 to fund a discretionary base maximum grant amount of $4,015 in AY2011-
2012. When combined with the additional increase to the discretionary base maximum grant
amount funded with mandatory appropriations provided for in the SAFRA Act, the total
maximum grant amount a student would be eligible for in AY2011-2012 under H.R. 1 is $4,705.
The program cost associated with a discretionary base maximum of $4,015 is currently estimated
at $24.8 billion.74 As discussed above, when the portion of mandatory funds provided for in the
SAFRA Act in FY2011 is included as a discretionary funding source, the $17.5 billion in H.R. 1
is sufficient to fully fund the discretionary base maximum award of $4,015 in AY2011-2012. H.R.
1 would maintain the current FY2010 discretionary funding level of $17.5 billion in FY2011, but
it would reduce the total maximum grant award amount by $845 in AY2011-2012, as compared to
the current level of $5,550 in AY2010-2011 and the level specified in CASTEA for AY2011-
2012.
72 AY2011-2012 will begin on July 1, 2011, and end June 30, 2012.
73 Estimated by the Congressional Budget Office (CBO) as of March 2010; subject to change in March 2011.
74 Ibid.
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Mandatory
Under CASTEA, the amount of mandatory appropriations required in FY2011 to increase the
discretionary maximum award of $4,860 by $690 to $5,550 is estimated at $5.2 billion.75 Under
H.R. 1, the amount of mandatory appropriations required in FY2011 to increase the discretionary
maximum award of $4,015 by $690 to $4,705 is estimated at $5.1 billion.76 These mandatory
appropriations are indefinite and are not subject to annual appropriations.
H.R. 1, however, if enacted by Congress may result in additional mandatory savings as
determined by CBO under budgetary scoring procedures.77 As a result of the significant reduction
in the discretionary base maximum award in AY2011-2012, as specified in H.R. 1, future
increases to the discretionary base maximum grant amount funded with mandatory appropriations
as provided for in the SAFRA Act would be eliminated beginning in FY2014. CBO currently
estimates78 that H.R. 1 would result in additional mandatory savings in the Pell Grant program of
approximately $66.4 billion from FY2011 to FY2021, of which $66.3 billion is attributed to the
FY2014 through FY2021 budget window.
The basis for these changes can be found in the formula prescribed in the SAFRA Act for
determining future increases beginning in FY2014 and detailed in Figure 2 of this report. In
short, the formula prescribed in the SAFRA Act assumes the total maximum award amount, when
adjusted for inflation, will not decrease below the discretionary base maximum award amount of
$4,860 in any year beginning in FY2014. Under H.R. 1, the base discretionary maximum grant of
$4,015 beginning in FY2011 would be assumed for all future years under CBO scoring rules,
resulting in a total maximum award amount below $4,860 in FY2014. Consequently, all estimated
increases beginning in FY2014 and future years would result in negative values under the
formula, yielding significant savings79 when compared to the current baseline. Any future
increases to the discretionary base maximum award funded with mandatory appropriations may
require offsets in other mandatory programs.
Current Legislative Issues
This section provides brief overviews of issues that may be considered by Congress as it
deliberates on the Pell Grant program. Most of these issues focus on the potential challenges in
funding the program, both in the short-term and in the long-term. For instance, should the
program continue to be funded with both discretionary and mandatory funding, or should it be
reclassified as an entitlement? Also, what are some of the possible causes behind the recent
75 As estimated by the Congressional Budget Office in January 2011. Subject to change in March 2011.
76 Ibid.
77 Provisions included in appropriations acts that affect mandatory spending programs are commonly called “changes
in mandatory program spending,” or CHIMPS. CHIMPS may reduce or increase mandatory outlays in the current fiscal
year or future fiscal years. CHIMPS are used more frequently in other federal programs, such as certain agricultural
programs. For more information, see CRS Report R41245, Reductions in Mandatory Agriculture Program Spending,
by Jim Monke and Megan Stubbs.
78 As of January 2011; subject to change in March 2011.
79 In general, CHIMPS generate savings in mandatory spending that can be used to offset increases in discretionary
spending in most cases, but typically for only the fiscal year in which the change is enacted, regardless of the impact on
future outlays. Therefore, under H.R. 1 the savings that are scored beyond FY2011 may not be available to offset
additional discretionary spending in FY2011.
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increases in program costs, and how do recent legislative changes potentially affect the future
funding challenges of the program?
Entitlement
The FY2010 and FY2011 President’s budget requests proposed to reclassify all funding for the
Federal Pell Grant program as mandatory, rather than primarily discretionary, and to index the
value of future Pell Grants to the changes in the CPI-U, plus 1 percentage point. Congress did not
formally consider the reclassification of the program in the FY2010 appropriations process and
continued to fund the program primarily through annual discretionary appropriations. The
SAFRA Act, as discussed, did provide partial indefinite mandatory appropriations beginning in
FY2010 and includes an increase to future total maximum awards for FY2014 through FY2017 as
determined, in part, by changes in the CPI-U.
Interest in making the Federal Pell Grant program a full mandatory entitlement is a recurring
theme, although Congress has not seriously considered the issue for a number of years. During
action on the Higher Education Amendments of 1992, the House and Senate authorizing
committees approved versions of a reauthorized HEA that would have made the program an
entitlement. These provisions were not enacted.80
Proponents of reclassification argue that full entitlement status would end the ostensible
uncertainty among students, their families, and higher education institutions about the level of
support the program will provide each year. Moreover, mandatory funding would preclude the
annual funding shortfalls that appropriations committees and officials at ED must address during
the budget process, allowing them to focus on other priorities and initiatives that are funded
through annual discretionary appropriations. Additionally, advocates of reclassification may stress
that permanent funding of the Pell Grant program would ensure that the neediest students
continue to receive federal student aid in the foreseeable future when Congress may choose to
reduce discretionary spending. Finally, some point out that since the program currently functions
as a quasi-entitlement, and given the increasing role of mandatory appropriations in contributing
to its overall funding, reclassification of the program would be a practical move.
Concerns about the consequences of making the Pell Grant an entitlement have centered on
several issues. First, there has been a focus on the budgetary treatment of a reclassification, and
the cost associated with moving the program from the discretionary ledger to the mandatory
ledger under current “Pay-as-you go” (PAYGO) budgetary rules. In general, PAYGO rules specify
that an entitlement program can be created or expanded only if other entitlement programs are cut
or if taxes and fees are raised, except in emergencies. Under PAYGO rules, substantial savings
from other entitlement programs or increased revenues would be required to initially reclassify
the program from discretionary to mandatory. Furthermore, Pell Grant funding or award levels
could be reduced in the future in order to expand other entitlement programs. Conversely, other
entitlement programs could be reduced to expand the Pell Grant program when even minor
changes are made to the federal need analysis formula, eligibility requirements, or award rules.81
80 H.R. 3553 and S. 1150 (102nd Congress), in earlier forms before amendments, would have reclassified the Pell Grant
Program as an entitlement beginning in FY1997.
81 After the enactment of the SAFRA Act of 2010, any changes to the federal need analysis formula, eligibility
requirements, or award rules for the program could have PAYGO implications because the increase to the discretionary
base maximum award funded with mandatory appropriations in each year will be funded with indefinite mandatory
(continued...)
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It is important to note that the enforcement of PAYGO rules can vary.82 Second, some analysts
have also pointed to (or questioned) the willingness of appropriations committees to cede the
oversight of the spending for the Pell Grant program. Finally, some have posed questions about
the potential long-term effects a mandatory Pell Grant may have on college costs.
Program Cost Escalation
The program has experienced significant increases in program costs over the past several years.
Table 10 provides a summary of Pell Grant program costs, including costs funded with both
mandatory and discretionary funds, from FY2007 (AY2007-2008)83 through FY2011 (AY2011-
2012). Table 10 shows that the increase in the federal government’s obligations for the Pell Grant
program more than doubled from AY2007-2008 to AY2011-2012. Moreover, the total obligations
during this same time period totaled $129.2 billion.
Table 10. Pell Grant Program Costs, AY2007-2008 to AY2011-2012
(dollars in billions)
Cost Associated with
Cost Associated with
Discretionary Award
Mandatory Award
Award Year (AY)
Levels
Levels
Total Program Cost
AY2007-2008 14.7
N/A
14.7
AY2008-2009 16.1
2.3
18.4
AY2009-2010 25.4
3.0
28.4
AY2010-2011 28.5
4.7
33.2
AY2011-2012 30.5
4.7
35.2
Total
115.2 14.7 129.9
Sources: Congressional Budget Office (CBO), Federal Pel Grant Program: Estimated Discretionary Cumulative
Surplus/Shortfall and Mandatory Funding Gap, March 2010.
Notes: N/A= not applicable.
Estimates of program costs are as of March 2010 and will be updated by CBO in March 2011.
Most of the factors contributing to the escalation in program costs can be attributed to enacted
legislation and regulatory efforts aimed at increasing the number of recipients, the total maximum
award amount, and the number of students applying for federal student aid. Some variables that
play a key role in determining the cost of the program, however, have been difficult to forecast
and have not aligned with historical trends over the past several years, resulting in unanticipated
additional program costs. The following section explores possible reasons for increased program
costs over the past several years.
(...continued)
appropriations.
82 Furthermore, it is important to highlight the difference between statutory PAYGO provisions and adopted PAYGO
rules. For more information on PAYGO procedures, see CRS Report RL34300, Pay-As-You-Go Procedures for Budget
Enforcement, by Robert Keith.
83 AY2007-2008 is used as the base year in this section since it was the last year the program was funded exclusively
with discretionary appropriations.
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Large Increase in the Discretionary Base Maximum Award
As discussed earlier, ARRA and the FY2009 Omnibus Appropriations Act established a $619
increase ($4,241 to $4,860) in the discretionary base maximum Pell Grant award from AY2008-
2009 to AY2009-2010, which represented the largest one-year increase in the base maximum
award in the history of the program. Prior to the enactment of the ARRA, the largest one-year
increase to the base maximum Pell Grant award was $598, from $452 to $1,050 between
AY1973-1974 and AY1974-1975.84
Funding provided by ARRA was treated as a temporary supplement to existing appropriations in
many federal programs. In the Pell Grant program, ARRA provided temporary supplemental
funding to increase the discretionary base maximum award, but also established a de facto floor
of $4,860 for the discretionary base maximum award in future years. The Consolidated
Appropriations Act of FY2010 and CASTEA also specified a discretionary base maximum award
of $4,860 for AY2010-2011 and AY2011-2012, respectively.
An increase to the discretionary base maximum award in AY2011-2012 is estimated to cost, in
general,85 between $500 million and $700 million per $100 increase. Moreover, an increase to the
discretionary base maximum award in any year may result in additional residual baseline costs
that must be absorbed in future years, absent a reduction to the discretionary maximum grant or
other changes to program eligibility.
Increase in FAFSA Applications and College Enrollments
According to data provided by ED, the number of students who submitted a valid application for
a Pell Grant in AY2009-2010 increased by 19%, as compared to the same time period last year for
AY2008-2009.86 Furthermore, preliminary data suggest the number of students who have
submitted a valid application for a Pell Grant in AY2010-2011 (through December 2010), which
commenced July 1, 2010, has increased by 8.5% over the same time period last year for AY2009-
2010.
Recent efforts by ED and Congress to simplify the web-based version of the Free Application for
Federal Student Aid (FAFSA) may be a factor contributing to increased FAFSA applications.87
Additionally, the coordination between ED and the U.S. Department of Labor to notify
Unemployment Insurance (UI) beneficiaries of their potential eligibility to receive a Pell Grant
may also be a contributing factor to increased enrollments and FAFSA applications.88 In general,
students may be more aware of federal financial aid as a result of efforts to promote its
84 In inflation-adjusted dollars, the $598 increase between AY1973-1974 and AY1974-1975 would have represented a
substantially larger increase than the $619 increase between AY2008-2009 and AY2009-2010.
85 Estimates for the costs associated with a $100 increase to the discretionary base maximum award vary from award
year to award year because of different eligibility parameters and other technical assumptions. The range listed here is
current for AY2011-2012 as of March 2010 and was provided by CBO.
86 In recent years, CBO and ED assumed applicant growth in the program would not exceed 10% to 15% over the
previous year when projecting estimated demand in the program. In most years, however, the overall Pell Grant
applicant growth rate is projected at 3% to 8% based on historical averages.
87 For example, see http://www.ifap.ed.gov/eannouncements/attachments/
111909FAFSAWebPrePresentation1011.ppsx.
88 See Training and Employment Guidance Letter No. 21-08, issued by the U.S. Department of Labor on May 8, 2009,
http://wdr.doleta.gov/directives/attach/TEGL/TEGL21-08acc.pdf.
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availability and the overall benefits of higher education. All of these factors, when considered
collectively, can have a measurable impact on the costs of the program.
Recent Economic Conditions
Recent economic trends may also be a contributing factor to increased Pell Grant costs. For
example, students may choose to enroll in college and attend at a higher intensity since the
opportunity costs of forgoing employment in a weak job market are much less. More importantly,
displaced workers may find it necessary to return to college to gain new technical and vocational
skills to compete in the changing job market. The financial resources of some families may also
be substantially less in the current economic conditions, given higher unemployment figures,
stagnant wages, and a period of weakened investment markets. Furthermore, guidance issued by
ED in April and May 2009 encourages financial aid administrators to use their professional
judgment authority, pursuant to section 479A of the HEA, to make adjustments, on the basis of
adequate documentation and on a case-by-case basis, to address circumstances not reflected in the
FAFSA of a recently unemployed individual.89
Legislative Changes to the Federal Need Analysis Calculation and
Award Rules
Recent legislative changes to the federal need analysis calculation and Pell Grant award rules
have, for the most part, benefited students and expanded eligibility for the Pell Grant program.
Typically, when changes to the federal need analysis calculation and program award rules are
enacted under authorizing legislation, the additional discretionary costs in the program are paid
for in subsequent annual appropriations. Recent legislative changes to the need analysis
calculation that have resulted in higher discretionary costs include, but are not limited to, (1)
expansion of the automatic zero EFC qualification in both the HERA and CCRAA; (2) the
increase in the income protection allowance levels for all students in the HERA and the CCRAA;
(3) the elimination of certain untaxed income and benefits in the CCRAA; and (4) a variety of
exclusions and benefits regarding the treatment of veterans education benefits, and military
benefits and allowances enacted under the HEOA. Other legislative changes, such as “year-
round” Pell Grants, may also have contributed to the increase in program costs.
Funding Beyond FY2011
The continuation of a base maximum award of $4,860 funded with annual discretionary
appropriations could present funding challenges and difficult policy choices for Congress in
future years.90 Congress may choose to further evaluate, particularly within a fiscal environment
that currently projects increased deficits, the effectiveness of and relative need for varied public
investments in light of many competing priorities. CBO, for instance, currently estimates the
average annual discretionary cost of the program for a $4,860 base maximum award over the next
89 See Dear Colleague Letters GEN-09-04 and GEN-09-05 at http://ifap.ed.gov/dpcletters/attachments/GEN0904.pdf
and http://ifap.ed.gov/dpcletters/attachments/GEN0905.pdf, respectively.
90 Although there is no statutory requirement for Congress to provide a specific discretionary base maximum award in
any award year, any future reductions or increases to the discretionary base maximum award of $4,860 established in
AY2010-2011 could have potential PAYGO implications as a result of eliminating the authorized maximum award
levels in the SAFRA Act.
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10 years (FY2011 to FY2020) at approximately $32 billion.91 By comparison, the average annual
cost of the program over the previous 10 years (FY2002 to FY2010) is estimated at $16.5
billion.92 Additionally, further efforts to simplify the FAFSA could have the intended consequence
of increasing application rates, while at the same time expanding eligibility for Pell Grants by
changing the federal need analysis calculation,93 leading to additional increases in future program
costs.
91 As of April 2010; unpublished data from CBO.
92 As of April 2010; costs for AY2009-2010 and AY2010-2011 are estimates.
93 For more information on some of the changes to the need analysis calculation that the House of Representatives
considered in 2009, refer to CRS Report R40742, The Student Aid and Fiscal Responsibility Act of 2009, coordinated
by David P. Smole.
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Appendix. Tables on Selected Pell Grant
Information Prior to the Enactment of the
SAFRA Act
Table A-1. Authorized Maximum Pell Grant Award Amounts (Pre-SAFRA Act),
AY2009-2010 Through AY2014-2015
Fiscal Year
Award Year
Authorized Maximum Award
FY2009 AY2009-2010 $6,000
FY2010 AY2010-2011 $6,400
FY2011 AY2011-2012 $6,800
FY2012 AY2012-2013 $7,200
FY2013 AY2013-2014 $7,600
FY2014 AY2014-2015 $8,000
Source: HEA.
Table A-2. Mandatory Add-On Amounts to the Base Maximum Award
(Pre-SAFRA Act), AY2008-2009 to AY2012-2013
Award Year
Mandatory Add-On Amount
AY2008-2009 $490
AY2009-2010 $490
AY2010-2011 $690
AY2011-2012 $690
AY2012-2013 $1,090
Source: HEA.
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Table A-3. Mandatory Appropriations for the Pell Grant Program (Pre-SAFRA Act),
FY2008-FY2017
(dollars in millions)
FY2009
Technical
CCRAA
ARRA
Amendments
Total Mandatory
Fiscal Year
Award Year
Funding
Funding
to the HEA
Appropriations
FY2008 AY2008-2009 $2,041
__
__
$2,041
FY2009 AY2009-2010 $2,090 $643
__
$2,733
FY2010 AY2010-2011 $3,030 $831
__
$3,861
FY2011 AY2011-2012 $3,090
__
__
$3,090
FY2012 AY2012-2013 $5,050
__
__
$5,050
FY2013 AY2013-2014 $105
__
$153
$258
FY2014 AY2014-2015 $4,305
__
__
$4,305
FY2015 AY2015-2016 $4,400
__
$52
$4,452
FY2016 AY2016-2017 $4,600
__
__
$4,600
FY2017 AY2017-2018 $4,900
__
__
$4,900
Total Mandatory
Appropriations
$33,611 $1,474
$205
$35,290
(FY2008 to FY2017)
Source: CRS analysis of the HEA prior to the enactment of the SAFRA Act.
Author Contact Information
Shannon M. Mahan
Specialist in Education Policy
smahan@crs.loc.gov, 7-7759
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