Federal Pell Grant Program of the Higher Education Act: Background, Recent Changes, and Current Legislative Issues
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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
August 4, 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 $36.5 billion
to approximately 8.9 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
FY2009, an estimated 76% of all Pell Grant recipients had a total family income at or below
$30,000.
The Pell Grant program has garnered considerable attention over the past several years in
Congress. Most recently, the Budget Control Act of 2011 (BCA; P.L. 112-25) provided a
combined total of $17 billion in additional mandatory funds for the program in FY2012 and
FY2013. In April 2011, the Department of Defense Full-Year Continuing Appropriations Act of
2011 (P.L. 112-10) provided $23 billion in discretionary appropriations for the program to
effectively maintain a $5,550 total maximum award in the upcoming award year (AY) 2011-2012.
In addition, P.L. 112-10 also amended the HEA by eliminating a provision that allowed for a
student to receive two Pell Grant awards in the same award year. The estimated savings in
mandatory spending related to the elimination of this provision were redirected for future general
use in the program as specified annual mandatory appropriations beginning in FY2012 and
continuing in all subsequent years. 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. Consequently, these factors contributed to annual funding shortfalls in four of the last
five years from FY2007 to FY2011.
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.
Additional mandatory funding provided in the BCA may alleviate the need for additional
substantial discretionary appropriations in FY2012 and FY2013, although additional funding may
still be required in order to maintain the current eligibility parameters of the program in FY2012.
As a long-term strategy, Congress could 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 ............................................................................................................. 2
Student Eligibility ................................................................................................................. 2
Underlying Concepts and Award Rules.................................................................................. 4
Underlying Concepts....................................................................................................... 5
Primary Award Rule...................................................................................................... 13
Institutional Role....................................................................................................................... 16
Characteristics of Recipients ..................................................................................................... 17
Income...................................................................................................................................... 19
Participation Rate...................................................................................................................... 20
Enrollment Status...................................................................................................................... 22
Type and Control ...................................................................................................................... 22
Role of the Pell Grant................................................................................................................ 24
Purchasing Power ............................................................................................................... 25
Pell Grant Recipients and Other Federal Aid ....................................................................... 27
Program Funding ...................................................................................................................... 29
Role of Discretionary Funding ............................................................................................ 29
Increasing Role of Mandatory Funding................................................................................ 29
Summary of Recent Funding (FY2008-FY2021) ................................................................. 30
Discretionary Funding Shortfalls and Surpluses................................................................... 32
Measures to Address Funding Shortfalls.............................................................................. 34
Pre-2002 ....................................................................................................................... 35
Funding Shortfalls From FY2002 to FY2006 ................................................................ 36
Adoption of FY2006 CBO Scoring Rule ....................................................................... 36
Recent Funding Shortfalls and Surpluses (Post-Scoring Rule to FY2010) ...................... 37
Impact of The SAFRA Act on the FY2010 Funding Shortfall ........................................ 37
FY2011 Appropriations ................................................................................................. 38
Current Legislative Issues ......................................................................................................... 39
Program Cost Escalation ..................................................................................................... 39
Large Increase in the Discretionary Base Maximum Award ........................................... 40
Increase in FAFSA Applications and College Enrollments ............................................. 41
Recent Economic Conditions ........................................................................................ 41
Legislative Changes to the Federal Need Analysis Calculation and Award Rules............ 41
Budget Control Act of 2011 and FY2012 Appropriations..................................................... 42
FY2012 Budget Resolution ................................................................................................. 43
Beyond FY2012.................................................................................................................. 43
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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Federal Pell Grant Program of the Higher Education Act
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 AY2011-2012 ................................................ 18
Figure 4. Percentage Change in Pell Grant Recipients, AY2001-2002 to AY2011-2012.............. 19
Figure 5. Percentage of Total Pell Grant Aid Received by Type of Institution,
AY1984-1985 to AY2010-2011 .............................................................................................. 24
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........................... 25
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 ................................. 12
Table 3. Percentage of Eligible Pell Grant Students with a Zero EFC and Automatic Zero
EFC by Dependency Status, AY2007-2008 to AY2010-2011 .................................................. 15
Table 4. Estimated Pell Grant Participation by
Dependency and Total Family Income, AY2007-2008 ............................................................ 20
Table 5. Estimated Distribution of Undergraduates and Pell Grant Recipients by
Enrollment Status, AY2007-2008 ........................................................................................... 22
Table 6. Estimated Distribution of Undergraduates and Pell Grant Recipients by Type and
Control of Enrolling Institution, AY2007-2008 ....................................................................... 23
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 ............................................................................................... 28
Table 8. Pell Grant Appropriations, FY2008 to FY2021............................................................. 31
Table 9. Annual and Cumulative Discretionary Funding Shortfalls in
the Pell Grant Program, FY1973-FY2011............................................................................... 33
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 .................................................................................................. 44
Table A-2. Mandatory Add-On Amounts to the Base Maximum Award (Pre-SAFRA Act),
AY2008-2009 to AY2012-2013 .............................................................................................. 44
Table A-3. Mandatory Appropriations for the Pell Grant Program (Pre-SAFRA Act),
FY2008-FY2017.................................................................................................................... 45
Appendixes
Appendix. Tables on Selected Pell Grant Information Prior to the Enactment of the
SAFRA Act............................................................................................................................ 44
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Federal Pell Grant Program of the Higher Education Act
Contacts
Author Contact Information ...................................................................................................... 45
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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 $36.5 billion
to approximately 8.9 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 FY2010, Pell Grants
constituted approximately 25% 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, the Budget Control Act of 2011 (BCA; P.L. 112-25) provided a
combined total of $17 billion in additional mandatory funds for the program in FY2012 and
FY2013. In April 2011, the Department of Defense Full-Year Continuing Appropriations Act of
2011 (hereafter referred to as the FY2011 Continuing Appropriations Act; P.L. 112-10) provided
$23 billion in discretionary appropriations for the program in FY2011, while effectively
maintaining a $5,550 total maximum award in the upcoming award year (AY) 2011-2012. The
FY2011 Continuing Appropriations Act also amended the HEA by eliminating a provision that
allowed for a student to receive two Pell Grant awards in the same award year. The estimated
savings in mandatory spending related to the elimination of this provision were redirected for
future general use in the program as specified annual mandatory appropriations beginning in
FY2012 and continuing in all subsequent years.
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.3 Additionally, the SAFRA Act provided $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.
1 U.S. Department of Education, unpublished data.
2 Percentage calculated by CRS from data presented in U.S. Department of Education, Fiscal Year 2012 Budget
Summary, p. 48. Total federal aid excludes $17.2 billion in consolidation loans under which borrowers consolidate
prior loans and any federal tax benefits.
3 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
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.
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.4 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.5 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 amount6 that is set in the annual appropriations
process and any additional increases to the discretionary base maximum award funded with
mandatory appropriations7 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 year8 (AY) 2010-
2011, are the following:
4 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.
5 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.
6 The discretionary base maximum award amount is discussed below.
7 Annual increases to the discretionary base maximum award funded with mandatory appropriations are discussed
below.
8 The Pell Grant award year begins July 1 of each year and ends on June 30 of the subsequent year. For example,
AY2011-2012 begins on July 1, 2011, and ends June 30, 2012.
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• 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.9 Absent
such diploma or its equivalent, students must demonstrate an ability to benefit
from postsecondary education by passing an examination approved by ED.
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.10
• 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.11
• 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.12
Specific eligibility requirements for the Pell Grant program include the following:
• Full-time13 and part-time14 undergraduates15 are eligible to receive Pell Grants.
9 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.
10 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.
11 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.
12 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.
13 For the purposes of Pell Grant eligibility, students who are enrolled at least 12 credit hours in a standard semester are
considered full-time.
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
(continued...)
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• 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.
• 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.
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
(...continued)
baccalaureate degree in education.
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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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.
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
(continued...)
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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.
(...continued)
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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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:
MIAY1617 = ($4,900 + $850 ) X (1 + .01) – $4,900
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Federal Pell Grant Program of the Higher Education Act
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 FY2011 Continuing Appropriations
Act (P.L. 112-10).
A significant reduction in the discretionary base maximum award in any award year may result in
a significant reduction or elimination of future increases to the discretionary base maximum grant
amount funded with mandatory appropriations as provided for in the SAFRA Act. The basis for
this implication can be found in the formula prescribed in the SAFRA Act for determining future
increases beginning in FY2014 and detailed in Figure 2 above. 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 a scenario in which the total maximum award amount falls below this amount
in any award year, estimated increases beginning in FY2014 and future years could result in
negative values under the formula, yielding significant reductions when compared to the current
baseline that assumes a $4,860 discretionary base maximum award in each year.
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 AY2011-2012 the qualifying minimum award is $277, or
approximately 5% of $5,550.
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“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 AY2011-2012 the bump award is $277,
or approximately 5% of $5,550.
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 AY2011-2012 is 10% of
$5,550, or $555.
21 In effect, the increase to the qualifying minimum award serves to ensure that the program will not disburse grants in
such small amounts that they would not be a meaningful contribution to supporting students’ educational pursuits.
22 By definition, the effective minimum award for the program would apply to students enrolled on a less-than-half-
time basis. Prior to the SAFRA Act, the amount of the mandatory add-on award was determined in proportion to a
student’s enrollment status, which would have affected the effective minimum award a student would receive.
23 On April 8, 2010, ED issued revised AY2010-11 Federal Pell Grant Payment and Disbursement Schedules to reflect
the provisions included in the SAFRA Act.
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Table 2. Pell Grant Award Amounts, AY1973-1974 and Subsequent Years
Mandatory Add-
On or Increase
to Discretionary
Discretionary
Base Maximum
Authorized
Base
Award Funded
Total
Effective
Maximum
Maximum
with Mandatory
Maximum
Minimum
Award Year
Award
Award
Appropriations
Award
Award
(AY)
($)
($)
($)
($)
($)
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
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
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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)
($)
($)
($)
($)
($)
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 523b
2009-2010 6,000
4,860
490
5,350 609c
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, AY2009-10 Pel Grant End-of-Year Report and the HEA.
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.
b. This amount is the minimum amount of aid awarded to a student attending on a less-than-half-time basis.
c. Table 1in the AY2009-10 Pel Grant End-of-Year Report shows this amount as $976, which is the minimum
award a student attending on a full-time basis would receive. The minimum amount of aid an eligible student
could receive in AY2009-2010 was $609, or 10% of $4,860 plus 25% of $490.
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
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.
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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.
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
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.”
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
(continued...)
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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.
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
(...continued)
beginning in AY2007-2008. 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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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 enrolled prior to July 1, 2011, 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 This provision was eliminated in the FY2011 Continuing Appropriations Act,
effective July 1, 2011.
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
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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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.
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 8,873,000 in AY2010-2011 and
is estimated to grow an additional 540,000 in AY2011-2012 to 9,413,000. Figure 3 illustrates the
changes in the number of Pell Grant recipients from AY1973-1974 to AY2011-2012. It is
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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important to note that myriad factors37 can affect the number of Pell Grant recipients in any given
award year.
Figure 3. Pell Grant Recipients, AY1973-1974 to AY2011-2012
10,000,000
9,000,000
8,000,000
7,000,000
ients
cip
6,000,000
f Re
5,000,000
er o
4,000,000
mb
3,000,000
Nu
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
2011-12
Award Year
Source: U.S. Department of Education, AY2009-10 Pel Grant End-of-Year Report (for AY1973-1974 through
AY2009-2010).
Notes: Data for AY2010-2011 and AY2011-2012 are estimates provided by the U.S. Department of Education
and are subject to change.
(...continued)
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, AY2009-10 Pell Grant End of Year Report, Table 1.
37 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 8.91%. 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 9.5% in AY2010-2011 and 6% in AY2011-2012.38
Figure 4. Percentage Change in Pell Grant Recipients, AY2001-2002 to AY2011-2012
35.00%
ts from
30.00%
ear 25.00%
ecipien
d Y 20.00%
t R
ar
ran
w 15.00%
el G
10.00%
ious A
ev
5.00%
in P
Pr
ge
0.00%
han
-5.00%
20
20
20
20
20
20
20
20
20
20
20
% C
01
02
03
04
05
06
07
08
09
10
11
-20
-20
-20
-20
-20
-20
-20
-20
-20
-20
-20
02
03
04
05
06
07
08
09
10
11
12
Award Year
Source: U.S. Department of Education (ED), AY 2009-10 Pel Grant End-of-Year Report, Table 1, and unpublished
data provided by ED.
Notes: Data for AY2010-2011 and AY2011-2012 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 FY2009 (AY2009-
2010), an estimated 63% of dependent Pell Grant recipients had a total family income39 at or
below $30,000. Independent Pell Grant recipients’ income is generally lower than their dependent
counterparts. In FY2009, an estimated 84% of independent Pell Grant recipients had a total
income at or below $30,000.40
38 Recipient data for AY2010-2011 and AY2011-2012 are estimates and subject to change. Data provided by the U.S.
Department of Education.
39 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.
40 Data in this paragraph taken from page P-26 of U.S. Department of Education, FY2012 Justifications of
Appropriation Estimates to the Congress.
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Federal Pell Grant Program of the Higher Education Act
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
for all students and are typically provided to dependent students from families who have multiple
students enrolled in postsecondary education at the same time.41
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.42 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
41 According to Table 2-A of the AY 2009-10 Pell Grant End-of-Year Report, approximately 153,089 Pell Grant
recipients, or 1.9% of the total recipient population, had a family income above $60,000.
42 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 2009-10 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 AY2009-2010 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.43 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. Furthermore, some students and family
members do not wish to disclose information related to their financial resources, and thus, do not
apply for aid. 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.
43 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 AY2010-2011. Total Pell Grant aid
during this same period increased by approximately $24.8 billion, from $11.7 billion to
$36.5 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 AY2010-2011
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
20
84
86
88
90
92
94
96
98
00
02
04
06
08
10
-85
-87
-89
-91
-93
-95
-97
-99
-01
-03
-05
-07
-09
-11
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. AY2010-2011data were taken from the
FY2012 Justifications of Appropriation Estimates to the Congress.
Additionally, Figure 5 shows that proprietary institutions are expected to receive approximately
25% of the total Pell aid in AY2010-2011 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.44 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
44 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.45 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% 197
197
198
198
198
199
199
200
200
200
3-
7-
1-
5-
9-
3-
7-
1-
5-
9-
74
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.
45 Under section 472 of the HEA, other allowances for the cost of attendance for the purpose of awarding Pell Grant aid
are provided, such as costs associated with transportation and dependent care expenses. These costs are not considered
in this section of the report in order to maintain a comparable trend across institutional sectors. If these costs are
included, the average amount of coverage by the Pell Grant maximum would be less for all types of institutions.
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Federal Pell Grant Program of the Higher Education Act
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).
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?
46 Some analysts believe the purchasing power of the maximum Pell Grant could be measured by its coverage of tuition
and fees only because some 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.
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Federal Pell Grant Program of the Higher Education Act
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.
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.
51 Federal need-based student aid from the HEA is defined here as Pell Grants, Academic Competitiveness Grants
(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
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%
$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.
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
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.
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 FY2011 funds are provided with the purpose of supporting awards made
from July 1, 2011, to June 30, 2012, these funds are available for obligation from October 1,
2010, to September 30, 2012, 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), the
SAFRA Act, the FY2011 Continuing Appropriations Act, and most recently the Budget Control
Act of FY2011 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 or augment discretionary spending. 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. For example, 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. Under the Budget Control Act of FY2011, an
estimated savings of $17 billion from the elimination of subsidized Stafford Loans for graduate
students will be used to augment discretionary spending in the Pell Grant program in FY2012 and
FY2013.
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
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. 109-149 to pay exclusively for
the accumulated funding shortfall through AY2005-2006.
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Federal Pell Grant Program of the Higher Education Act
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
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
The FY2011 Continuing Appropriations Act also provided specified annual mandatory
appropriations for the program for general use beginning in FY2012 through FY2021.59 These
appropriations are paid for with estimated mandatory savings from the elimination of a provision
that allowed for two Pell Grants in one award year. The availability of these mandatory
appropriations is akin to the $13.5 billion in mandatory appropriations provided in the SAFRA
Act and can be used to pay for future discretionary costs associated with the program.
Summary of Recent Funding (FY2008-FY2021)
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.60 Table 8 provides a history of discretionary and mandatory appropriations for the Pell
Grant program from FY2008 to FY2021. It is important to note that some of the advance
mandatory appropriations provided in previous measures were subsequently rescinded in the
SAFRA Act.61 The data in Table 8 are divided into two categories: (1) discretionary
appropriations; and (2) mandatory appropriations effective upon the enactment of the Budget
Control Act of FY2011.
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.
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. 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 Additional annual mandatory appropriations in the amount of $1,145,000,000 are also provided for each succeeding
year beyond FY2021.
60 Table 9 in this report provides a more comprehensive history of the discretionary funding levels in the program since
FY1973.
61 See Table A-3 for a history of mandatory appropriations before the enactment of the SAFRA Act.
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Table 8. Pell Grant Appropriations, FY2008 to FY2021
(dollars in millions)
Discretionary Appropriations
Fiscal
Award
Annual Appropriations
ARRA Funding
Total Discretionary Funding
Year
Year
($M)
($M)
($M)
2008 AY2008-
$14,215 __ $14,215
2009
2009 AY2009-
$17,288 $15,640 $32,928
2010
2010 AY2010-
$17,495 __ $17,495
2011
2011 AY2011-
$22,956 $22,956
2012
Mandatory Appropriations (Post-SAFRA Act)
CCRAA
ARRA
FY2011 Continuing
Budget
Fiscal
Award
Funding
Funding
SAFRA Appropriations Act Control Act
Total Mandatory
Year
Year
($M)
($M)
Act ($M)
($M)
of 2011 ($M) Appropriations ($M)
2008
AY2008-
$2,041a __ __
__
__
$2,041
2009
2009
AY2009-
$2,090 $643 __
__
__
$2,733
2010
2010
AY2010-
__ __
$4,964b __
__ $4,964
2011
2011
AY2011-
__ __
$18,815c __
__ $18,815
2012
2012
AY2012-
__ __
Such
Sumsd
$3,183
$10,000
$13,183 and Such Sums
2013
2013
AY2013-
__
__
Such Sums
__
$7,000
$7,000 and Such Sums
2014
2014
AY2014-
__
__
Such Sums
__
Such Sums
2015
2015
AY2015-
__
__
Such Sums
__
Such Sums
2016
2016
AY2016-
__
__
Such Sums
__
Such Sums
2017
2017
AY2017-
__
__
Such Sums
$1,060
$1,060 and Such Sums
2018
2018
AY2018-
__
__
Such Sums
$1,125
$1,125 and Such Sums
2019
2019
AY2019-
__
__
Such Sums
$1,125
$1,125 and Such Sums
2020
2020
AY2020-
__
__
Such Sums
$1,140
$1,140 and Such Sums
2021
2021
AY2021-
__ __
Such
Sums
$1,145e
$1,145 and Such Sums
2022
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Sources: CRS analysis of the HEA, the SAFRA Act, respective annual appropriations measures, the Budget
Control Act of FY2011, 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 March 2011 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 $5.3 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.
e. Additional annual mandatory appropriations in the amount of $1,145,000,000 are also provided for each
succeeding year beyond FY2021.
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,62 to notify each chamber of
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.63 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.
62 The authorizing statue speaks of entitlements when it describes the award determined for a student based on the
published award schedule.
63 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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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)
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)
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Federal Pell Grant Program of the Higher Education Act
Discretionary
Estimated
Cumulative
Appropriation
Total
Annual Surplus Surplus or
Fiscal Year
Award Year
Level
Expendituresa or (Shortfall)b
(Shortfall)
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
$14,697
($1,036)
($817)
2008
2008-2009
$14,215
$16,069
($1,854)
($2,671)
2009 2009-2010 $32,928f
$26,883
$6,045
$3,374
2010
2010-2011
$17,495
$31,595
($14,100)
($10,726)
2011 2011-2012 $36,456g $31,479 $4,977 ($5,749)
2012 2012-2013 $13,183h
TBD
TBD
$7,434
Sources: (1) U.S. Department of Education (ED), AY2009-10 Federal Pel Grant Program End-of-Year Report; (2)
unpublished data provided by ED; and (3) unpublished data provided by CBO in August 2011.
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, AY2009-10 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 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 $1 billion 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.
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. Includes $13.5 billion in mandatory appropriations that were provided in the SAFRA Act for general use in
the program through FY2012 and $22,956 million in discretionary appropriations provided in the FY2011
Continuing Appropriations Act.
h. The FY2011 Continuing Appropriations Act included $3,183 million in mandatory appropriations for general
use in the program for FY2012. The Budget Control Act of 2011(P.L. 112-25) also provided an additional
$10 billion in mandatory appropriations for general use in the program for FY2012. In effect, these funds
could be used to augment discretionary appropriations in FY2012, and therefore the cumulative funding
shortfal through FY2011 would be eliminated, resulting in a temporary funding surplus pending final FY2012
appropriations action.
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’
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Federal Pell Grant Program of the Higher Education Act
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.64 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.65 FY2002 and subsequent appropriations
legislation have not included such language.
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.66 This
permits ED to use funds from multiple fiscal years’ appropriations to meet one award year’s cost.
64 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.
65 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
appropriated funds could not fully fund the appropriated maximum grant. A schedule of reduced grants would then be
published.
66 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.
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Federal Pell Grant Program of the Higher Education Act
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 scoring67 of the Pell Grant program by CBO. The
rule provides that if the appropriations of new discretionary budget authority68 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
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.
67 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.
68 Budget authority is defined as the broad responsibility conferred by Congress that empowers government agencies to
spend federal funds.
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Federal Pell Grant Program of the Higher Education Act
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 $2.7 billion.69 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; 70
• increase the discretionary base maximum award by $619 to $4,860 in AY2009-
2010; and
• provide for a surplus of funds totaling $3.4 billion71 available for use through
FY2011.72
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. Revised estimates released by CBO in March 2011 showed a
cumulative funding shortfall of $10.7 billion through the end of FY2010.
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 $10.7 billion
discretionary shortfall in FY2010. Any remaining funds will be used to pay discretionary costs in
AY2011-2012.
69 This estimate is current as of April 2011 and includes an annual funding surplus in FY2006 of $219 million.
70 This estimate would have been lower at the time ARRA was enacted in January 2009.
71 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.
72 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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Federal Pell Grant Program of the Higher Education Act
FY2011 Appropriations
Discretionary
The FY2011 Continuing Appropriations Act provided approximately $23 billion in discretionary
appropriations for FY2011, or an increase of $5.5 billion over the FY2010 level of $17.5 billion.
The discretionary base maximum award for AY2011-2012,73 as specified in the law, remains at
$4,860, or 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 is
$5,550, or the same level as AY2010-2011.
Effective July 1, 2011,74 the FY2011 Continuing Appropriations Act would also amend the HEA
by eliminating a provision that allows for a student to receive up to two Pell Grants during a
single award year.75 The President’s FY2012 Budget Request, released in February 2011, also
proposed the elimination of this provision due to its unexpected high costs and the lack of early
evidence to support accelerated completion times by students benefiting from the additional aid.
The elimination of this provision generates savings on both the discretionary and mandatory side
of the Pell Grant funding ledger, although savings from the mandatory portion are re-directed for
future use in the program as specified annual mandatory appropriations. According to ED,
approximately 9% of all Pell Grant recipients benefited from this provision in AY2009-2010.
The FY2011 Continuing Appropriations Act also includes a provision that would prohibit the
application of federal regulations in Title 34 Code of Federal Regulations (CFR) § 690.64(b) that
pertain to the treatment of cross-over payment periods when determining a student’s award
amount in 2011. A cross-over payment period is any period that includes both June 30 and July 1.
For the purposes of awarding Pell Grant aid, this period must be assigned to a specific award
year. Federal regulations issued in October 2009 require institutions to assign the payment period
to the award year in which a student receives the greater payment. Absent this provision, a student
who may have a higher calculated Pell Grant in AY2011-2012 (as compared to AY2010-2011)
due to a change in his or her EFC or other eligibility criteria, would be paid from AY2011-2012
funds, potentially limiting the amount of Pell Grant aid available in future enrollment periods.
The regulatory override would prevent the scenario of a student who is newly limited to only one
Pell Grant award in an award year being enrolled for a 2011 summer term cross-over period
and having the Pell Grant award for the summer term crossover period applied toward the
student’s single AY2011-2012 Pell Grant award amount. In effect, this provision would allow an
eligible student who is enrolled for a summer term during the cross-over period from June 30,
2011, to July 1, 2011, to receive Pell Grant aid for the cross-over period from AY2010-2011
funds.
73 AY2011-2012 will begin on July 1, 2011, and end June 30, 2012.
74 The language in P.L. 112-10 specifically states that this provision shall be effective with respect to the 2011-2012
award year and succeeding award years.
75 This provision was recently enacted in the Higher Education Opportunity Act (HEOA; P.L. 110-315) and became
effective July 1, 2009. The U.S. Department of Education issued final regulations on this provision 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
Mandatory
Under the FY2011 Continuing Appropriations Act, a total of $8.8 billion in specified annual
mandatory appropriations are provided for the Pell Grant program for general use beginning in
FY2012 through FY2021.76 These appropriations are paid for with estimated mandatory savings
from the elimination of the aforementioned provision that allows for two Pell Grants in one award
year.77 The availability of these mandatory appropriations is akin to the $13.5 billion in
mandatory appropriations provided in the SAFRA Act and could be used to pay for future
discretionary costs.
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. This section also presents some
of the possible causes behind the recent increases in program 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)78 through FY2011 (AY2011-
2012). Table 10 shows that the increase in the federal government’s obligations for the Pell Grant
program doubled from AY2007-2008 to AY2009-2010 and increased an additional 23% in
AY2010-2011. Moreover, the total obligations during this same time period totaled $136.4 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 26.9
3.0
29.9
76 Additional annual mandatory appropriations in the amount of $1,145,000,000 would also be provided in each
succeeding year beyond FY2021 under the FY2011 Appropriations Act.
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 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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Cost Associated with
Cost Associated with
Discretionary Award
Mandatory Award
Award Year (AY)
Levels
Levels
Total Program Cost
AY2010-2011 31.6
5.0
36.6
AY2011-2012 31.5
5.3
36.8
Total
120.8 15.6 136.4
Source: Congressional Budget Office (CBO), Federal Pel Grant Program, Discretionary Baseline, Cumulative
Surplus/Shortfall, and Funding Gap, April 2011.
Notes: N/A= not applicable. Estimates of program costs are as of April 2011 and are subject to change.
Most of the factors contributing to the escalation in program costs can be attributed to a
combination of (1) legislative changes that have led to increased benefits for more students; (2)
increases in the number of students enrolling in postsecondary education and applying for Pell
Grant aid; and (3) a weakened economy. The following section examines possible reasons for
increased program costs over the past several years.
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 AY1974-1975.79
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 the FY2011 Continuing Appropriations Act 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,80 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.
79 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.
80 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.
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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 AY2008-2009 increased by 13% compared to AY2007-2008.81 Moreover, in
AY2009-2010 the number of valid applicants increased 18.8% compared to AY2008-2009.
Preliminary data suggest the number of students who have submitted a valid application for a Pell
Grant in AY2010-2011 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.82
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.83 In general,
students may be more aware of federal financial aid as a result of efforts to promote its
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.84
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
81 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.
82 For example, see http://www.ifap.ed.gov/eannouncements/attachments/
111909FAFSAWebPrePresentation1011.ppsx.
83 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.
84 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.
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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.
A provision that allowed a student to receive up to two Pell Grants in a single award year
beginning in AY2009-2010 also had a significant impact on program costs, in part due to the
regulatory interpretation of the provision, as well as unanticipated participation. The FY2011
Continuing Appropriations Act eliminated this provision effective July 1, 2011, resulting in
significant savings for the program.
Budget Control Act of 2011 and FY2012 Appropriations
The Budget Control Act of 2011 (BCA; P.L. 112-25) was recently enacted in August 2011 to
address issues related to the budgetary deficit and debt of the United States government. The
BCA also provided mandatory funding for the Pell Grant program for FY2012 and FY2013. An
additional $10 billion in mandatory funding was provided for general use in FY2012 and an
additional $7 billion in mandatory funding for general use in FY2013, for a total of an additional
$17 billion. Other than providing additional mandatory funding, the BCA does not make any
other changes to the Pell Grant program. The BCA does not specify the discretionary base
maximum award level for AY2012-2013 or AY2013-2014.
The availability of these additional mandatory appropriations is akin to (1) the additional
mandatory appropriations provided in the FY2011 Continuing Appropriations Act as a result of
the elimination of the year-round Pell provision, and (2) the $13.5 billion in mandatory
appropriations provided in the SAFRA Act. That is, these mandatory funds may be used to pay
for future obligations associated with provisions that primarily affect discretionary spending in
the program.
The total discretionary funding required in FY2012 to maintain the program’s current eligibility
parameters, including a maximum award of $4,860 in AY2012-2013, is estimated at $31.7 billion.
The $10 billion mandatory funding provided in the BCA for FY2012 would first be used to pay
for an estimated $2.6 billion discretionary funding shortfall from the previous year, AY2011-
2012, leaving approximately $7.4 billion for use in AY2012-2013, effectively lowering the
amount of discretionary appropriations required in FY2012 from $31.7 billion to $24.3 billion.
Compared to the previous year’s funding level of approximately $23 billion, Congress would
need to provide an additional $1.3 billion to maintain the current award and eligibility parameters
in AY2012-2013.
To fill this gap in the upcoming FY2012 appropriations process, Congress may choose to (1)
reduce costs in the program by changing the current eligibility parameters, (2) seek offsets in
other mandatory programs or savings from mandatory spending in the Pell Grant program, (3)
provide additional funding over the FY2011 level, or (4) a combination of the above. Moreover,
given the restrictive discretionary budgetary caps resulting from the BCA and competing
priorities in the Labor, Health and Human Services (HHS), and Education appropriations,
Congress may choose to provide an amount below the FY2011 level.
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The additional mandatory funding provided for the Pell Grant program in the BCA is offset with
estimated mandatory savings from the elimination of provisions in the William D. Ford Direct
Loan (DL) program. These changes to the DL program would be effective beginning with award
year 2012-2013, which starts July 1, 2012.85
FY2012 Budget Resolution
On April 20, 2011, the House passed House Concurrent Resolution (HCR) 34, also known as the
FY2012 House Budget Resolution. H.Rept. 112-58 provides some details on HCR 34, including
proposals to reform the Pell Grant program in a number of ways. A few selected proposals (as
depicted in H.Rept. 112-58) include
• adopting a sustainable maximum award level,
• rolling back some of the need analysis changes enacted in previous legislation,
and
• setting stricter lifetime time limits on eligibility for Pell Grant aid.
Beyond FY2012
The Pell Grant program, which represents a significant public investment in higher education,
may continue to present funding challenges and difficult policy choices for Congress in future
years based on current eligibility parameters and projected demand. 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.
85 For a description of the DL program and changes proposed in the House and Senate versions of the Budget Control
Act of 2011, 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.
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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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Federal Pell Grant Program of the Higher
Education Act: Background, Recent Changes,
and Current Legislative Issues
Shannon M. Mahan
Specialist in Education Policy
August 4, 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 $36.5 billion
to approximately 8.9 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
FY2009, an estimated 76% of all Pell Grant recipients had a total family income at or below
$30,000.
The Pell Grant program has garnered considerable attention over the past several years in
Congress. Most recently, the Budget Control Act of 2011 (BCA; P.L. 112-25) provided a
combined total of $17 billion in additional mandatory funds for the program in FY2012 and
FY2013. In April 2011, the Department of Defense Full-Year Continuing Appropriations Act of
2011 (P.L. 112-10) provided $23 billion in discretionary appropriations for the program to
effectively maintain a $5,550 total maximum award in the upcoming award year (AY) 2011-2012.
In addition, P.L. 112-10 also amended the HEA by eliminating a provision that allowed for a
student to receive two Pell Grant awards in the same award year. The estimated savings in
mandatory spending related to the elimination of this provision were redirected for future general
use in the program as specified annual mandatory appropriations beginning in FY2012 and
continuing in all subsequent years. 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. Consequently, these factors contributed to annual funding shortfalls in four of the last
five years from FY2007 to FY2011.
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.
Additional mandatory funding provided in the BCA may alleviate the need for additional
substantial discretionary appropriations in FY2012 and FY2013, although additional funding may
still be required in order to maintain the current eligibility parameters of the program in FY2012.
As a long-term strategy, Congress could 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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Contents
Introduction ................................................................................................................................ 1
How the Program Works ............................................................................................................. 2
Student Eligibility ................................................................................................................. 2
Underlying Concepts and Award Rules.................................................................................. 4
Underlying Concepts....................................................................................................... 5
Primary Award Rule...................................................................................................... 13
Institutional Role....................................................................................................................... 16
Characteristics of Recipients ..................................................................................................... 17
Income...................................................................................................................................... 19
Participation Rate...................................................................................................................... 20
Enrollment Status...................................................................................................................... 22
Type and Control ...................................................................................................................... 22
Role of the Pell Grant................................................................................................................ 24
Purchasing Power ............................................................................................................... 25
Pell Grant Recipients and Other Federal Aid ....................................................................... 27
Program Funding ...................................................................................................................... 29
Role of Discretionary Funding ............................................................................................ 29
Increasing Role of Mandatory Funding................................................................................ 29
Summary of Recent Funding (FY2008-FY2021) ................................................................. 30
Discretionary Funding Shortfalls and Surpluses................................................................... 32
Measures to Address Funding Shortfalls.............................................................................. 34
Pre-2002 ....................................................................................................................... 35
Funding Shortfalls From FY2002 to FY2006 ................................................................ 36
Adoption of FY2006 CBO Scoring Rule ....................................................................... 36
Recent Funding Shortfalls and Surpluses (Post-Scoring Rule to FY2010) ...................... 37
Impact of The SAFRA Act on the FY2010 Funding Shortfall ........................................ 37
FY2011 Appropriations ................................................................................................. 38
Current Legislative Issues ......................................................................................................... 39
Program Cost Escalation ..................................................................................................... 39
Large Increase in the Discretionary Base Maximum Award ........................................... 40
Increase in FAFSA Applications and College Enrollments ............................................. 41
Recent Economic Conditions ........................................................................................ 41
Legislative Changes to the Federal Need Analysis Calculation and Award Rules............ 41
Budget Control Act of 2011 and FY2012 Appropriations..................................................... 42
FY2012 Budget Resolution ................................................................................................. 43
Beyond FY2012.................................................................................................................. 43
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 AY2011-2012 ................................................ 18
Figure 4. Percentage Change in Pell Grant Recipients, AY2001-2002 to AY2011-2012.............. 19
Figure 5. Percentage of Total Pell Grant Aid Received by Type of Institution,
AY1984-1985 to AY2010-2011 .............................................................................................. 24
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........................... 25
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 ................................. 12
Table 3. Percentage of Eligible Pell Grant Students with a Zero EFC and Automatic Zero
EFC by Dependency Status, AY2007-2008 to AY2010-2011 .................................................. 15
Table 4. Estimated Pell Grant Participation by
Dependency and Total Family Income, AY2007-2008 ............................................................ 20
Table 5. Estimated Distribution of Undergraduates and Pell Grant Recipients by
Enrollment Status, AY2007-2008 ........................................................................................... 22
Table 6. Estimated Distribution of Undergraduates and Pell Grant Recipients by Type and
Control of Enrolling Institution, AY2007-2008 ....................................................................... 23
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 ............................................................................................... 28
Table 8. Pell Grant Appropriations, FY2008 to FY2021............................................................. 31
Table 9. Annual and Cumulative Discretionary Funding Shortfalls in
the Pell Grant Program, FY1973-FY2011............................................................................... 33
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 .................................................................................................. 44
Table A-2. Mandatory Add-On Amounts to the Base Maximum Award (Pre-SAFRA Act),
AY2008-2009 to AY2012-2013 .............................................................................................. 44
Table A-3. Mandatory Appropriations for the Pell Grant Program (Pre-SAFRA Act),
FY2008-FY2017.................................................................................................................... 45
Appendixes
Appendix. Tables on Selected Pell Grant Information Prior to the Enactment of the
SAFRA Act............................................................................................................................ 44
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Federal Pell Grant Program of the Higher Education Act
Contacts
Author Contact Information ...................................................................................................... 45
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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 $36.5 billion
to approximately 8.9 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 FY2010, Pell Grants
constituted approximately 25% 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, the Budget Control Act of 2011 (BCA; P.L. 112-25) provided a
combined total of $17 billion in additional mandatory funds for the program in FY2012 and
FY2013. In April 2011, the Department of Defense Full-Year Continuing Appropriations Act of
2011 (hereafter referred to as the FY2011 Continuing Appropriations Act; P.L. 112-10) provided
$23 billion in discretionary appropriations for the program in FY2011, while effectively
maintaining a $5,550 total maximum award in the upcoming award year (AY) 2011-2012. The
FY2011 Continuing Appropriations Act also amended the HEA by eliminating a provision that
allowed for a student to receive two Pell Grant awards in the same award year. The estimated
savings in mandatory spending related to the elimination of this provision were redirected for
future general use in the program as specified annual mandatory appropriations beginning in
FY2012 and continuing in all subsequent years.
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.3 Additionally, the SAFRA Act provided $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.
1 U.S. Department of Education, unpublished data.
2 Percentage calculated by CRS from data presented in U.S. Department of Education, Fiscal Year 2012 Budget
Summary, p. 48. Total federal aid excludes $17.2 billion in consolidation loans under which borrowers consolidate
prior loans and any federal tax benefits.
3 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
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.
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.4 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.5 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 amount6 that is set in the annual appropriations
process and any additional increases to the discretionary base maximum award funded with
mandatory appropriations7 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 year8 (AY) 2010-
2011, are the following:
4 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.
5 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.
6 The discretionary base maximum award amount is discussed below.
7 Annual increases to the discretionary base maximum award funded with mandatory appropriations are discussed
below.
8 The Pell Grant award year begins July 1 of each year and ends on June 30 of the subsequent year. For example,
AY2011-2012 begins on July 1, 2011, and ends June 30, 2012.
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• 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.9 Absent
such diploma or its equivalent, students must demonstrate an ability to benefit
from postsecondary education by passing an examination approved by ED.
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.10
• 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.11
• 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.12
Specific eligibility requirements for the Pell Grant program include the following:
• Full-time13 and part-time14 undergraduates15 are eligible to receive Pell Grants.
9 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.
10 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.
11 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.
12 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.
13 For the purposes of Pell Grant eligibility, students who are enrolled at least 12 credit hours in a standard semester are
considered full-time.
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
(continued...)
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Federal Pell Grant Program of the Higher Education Act
• 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.
• 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.
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
(...continued)
baccalaureate degree in education.
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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Federal Pell Grant Program of the Higher Education Act
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.
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
(continued...)
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Federal Pell Grant Program of the Higher Education Act
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.
(...continued)
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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Federal Pell Grant Program of the Higher Education Act
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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Federal Pell Grant Program of the Higher Education Act
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:
MIAY1617 = ($4,900 + $850 ) X (1 + .01) – $4,900
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Federal Pell Grant Program of the Higher Education Act
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 FY2011 Continuing Appropriations
Act (P.L. 112-10).
A significant reduction in the discretionary base maximum award in any award year may result in
a significant reduction or elimination of future increases to the discretionary base maximum grant
amount funded with mandatory appropriations as provided for in the SAFRA Act. The basis for
this implication can be found in the formula prescribed in the SAFRA Act for determining future
increases beginning in FY2014 and detailed in Figure 2 above. 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 a scenario in which the total maximum award amount falls below this amount
in any award year, estimated increases beginning in FY2014 and future years could result in
negative values under the formula, yielding significant reductions when compared to the current
baseline that assumes a $4,860 discretionary base maximum award in each year.
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 AY2011-2012 the qualifying minimum award is $277, or
approximately 5% of $5,550.
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Federal Pell Grant Program of the Higher Education Act
“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 AY2011-2012 the bump award is $277,
or approximately 5% of $5,550.
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 AY2011-2012 is 10% of
$5,550, or $555.
21 In effect, the increase to the qualifying minimum award serves to ensure that the program will not disburse grants in
such small amounts that they would not be a meaningful contribution to supporting students’ educational pursuits.
22 By definition, the effective minimum award for the program would apply to students enrolled on a less-than-half-
time basis. Prior to the SAFRA Act, the amount of the mandatory add-on award was determined in proportion to a
student’s enrollment status, which would have affected the effective minimum award a student would receive.
23 On April 8, 2010, ED issued revised AY2010-11 Federal Pell Grant Payment and Disbursement Schedules to reflect
the provisions included in the SAFRA Act.
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Federal Pell Grant Program of the Higher Education Act
Table 2. Pell Grant Award Amounts, AY1973-1974 and Subsequent Years
Mandatory Add-
On or Increase
to Discretionary
Discretionary
Base Maximum
Authorized
Base
Award Funded
Total
Effective
Maximum
Maximum
with Mandatory
Maximum
Minimum
Award Year
Award
Award
Appropriations
Award
Award
(AY)
($)
($)
($)
($)
($)
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
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
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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)
($)
($)
($)
($)
($)
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 523b
2009-2010 6,000
4,860
490
5,350 609c
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, AY2009-10 Pel Grant End-of-Year Report and the HEA.
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.
b. This amount is the minimum amount of aid awarded to a student attending on a less-than-half-time basis.
c. Table 1in the AY2009-10 Pel Grant End-of-Year Report shows this amount as $976, which is the minimum
award a student attending on a full-time basis would receive. The minimum amount of aid an eligible student
could receive in AY2009-2010 was $609, or 10% of $4,860 plus 25% of $490.
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
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.
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Federal Pell Grant Program of the Higher Education Act
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.
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
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.”
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
(continued...)
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Federal Pell Grant Program of the Higher Education Act
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.
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
(...continued)
beginning in AY2007-2008. 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
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 enrolled prior to July 1, 2011, 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 This provision was eliminated in the FY2011 Continuing Appropriations Act,
effective July 1, 2011.
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
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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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.
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 8,873,000 in AY2010-2011 and
is estimated to grow an additional 540,000 in AY2011-2012 to 9,413,000. Figure 3 illustrates the
changes in the number of Pell Grant recipients from AY1973-1974 to AY2011-2012. It is
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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important to note that myriad factors37 can affect the number of Pell Grant recipients in any given
award year.
Figure 3. Pell Grant Recipients, AY1973-1974 to AY2011-2012
10,000,000
9,000,000
8,000,000
7,000,000
ients
cip
6,000,000
f Re
5,000,000
er o
4,000,000
mb
3,000,000
Nu
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
2011-12
Award Year
Source: U.S. Department of Education, AY2009-10 Pel Grant End-of-Year Report (for AY1973-1974 through
AY2009-2010).
Notes: Data for AY2010-2011 and AY2011-2012 are estimates provided by the U.S. Department of Education
and are subject to change.
(...continued)
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, AY2009-10 Pell Grant End of Year Report, Table 1.
37 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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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 8.91%. 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 9.5% in AY2010-2011 and 6% in AY2011-2012.38
Figure 4. Percentage Change in Pell Grant Recipients, AY2001-2002 to AY2011-2012
35.00%
ts from
30.00%
ear 25.00%
ecipien
d Y 20.00%
t R
ar
ran
w 15.00%
el G
10.00%
ious A
ev
5.00%
in P
Pr
ge
0.00%
han
-5.00%
20
20
20
20
20
20
20
20
20
20
20
% C
01
02
03
04
05
06
07
08
09
10
11
-20
-20
-20
-20
-20
-20
-20
-20
-20
-20
-20
02
03
04
05
06
07
08
09
10
11
12
Award Year
Source: U.S. Department of Education (ED), AY 2009-10 Pel Grant End-of-Year Report, Table 1, and unpublished
data provided by ED.
Notes: Data for AY2010-2011 and AY2011-2012 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 FY2009 (AY2009-
2010), an estimated 63% of dependent Pell Grant recipients had a total family income39 at or
below $30,000. Independent Pell Grant recipients’ income is generally lower than their dependent
counterparts. In FY2009, an estimated 84% of independent Pell Grant recipients had a total
income at or below $30,000.40
38 Recipient data for AY2010-2011 and AY2011-2012 are estimates and subject to change. Data provided by the U.S.
Department of Education.
39 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.
40 Data in this paragraph taken from page P-26 of U.S. Department of Education, FY2012 Justifications of
Appropriation Estimates to the Congress.
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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
for all students and are typically provided to dependent students from families who have multiple
students enrolled in postsecondary education at the same time.41
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.42 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
41 According to Table 2-A of the AY 2009-10 Pell Grant End-of-Year Report, approximately 153,089 Pell Grant
recipients, or 1.9% of the total recipient population, had a family income above $60,000.
42 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 2009-10 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 AY2009-2010 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.43 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. Furthermore, some students and family
members do not wish to disclose information related to their financial resources, and thus, do not
apply for aid. 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.
43 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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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 AY2010-2011. Total Pell Grant aid
during this same period increased by approximately $24.8 billion, from $11.7 billion to
$36.5 billion.
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Figure 5. Percentage of Total Pell Grant Aid Received by Type of Institution,
AY1984-1985 to AY2010-2011
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
20
84
86
88
90
92
94
96
98
00
02
04
06
08
10
-85
-87
-89
-91
-93
-95
-97
-99
-01
-03
-05
-07
-09
-11
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. AY2010-2011data were taken from the
FY2012 Justifications of Appropriation Estimates to the Congress.
Additionally, Figure 5 shows that proprietary institutions are expected to receive approximately
25% of the total Pell aid in AY2010-2011 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.44 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
44 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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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.45 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% 197
197
198
198
198
199
199
200
200
200
3-
7-
1-
5-
9-
3-
7-
1-
5-
9-
74
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.
45 Under section 472 of the HEA, other allowances for the cost of attendance for the purpose of awarding Pell Grant aid
are provided, such as costs associated with transportation and dependent care expenses. These costs are not considered
in this section of the report in order to maintain a comparable trend across institutional sectors. If these costs are
included, the average amount of coverage by the Pell Grant maximum would be less for all types of institutions.
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Federal Pell Grant Program of the Higher Education Act
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).
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?
46 Some analysts believe the purchasing power of the maximum Pell Grant could be measured by its coverage of tuition
and fees only because some 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.
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Federal Pell Grant Program of the Higher Education Act
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.
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.
51 Federal need-based student aid from the HEA is defined here as Pell Grants, Academic Competitiveness Grants
(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
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%
$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.
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
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.
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 FY2011 funds are provided with the purpose of supporting awards made
from July 1, 2011, to June 30, 2012, these funds are available for obligation from October 1,
2010, to September 30, 2012, 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), the
SAFRA Act, the FY2011 Continuing Appropriations Act, and most recently the Budget Control
Act of FY2011 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 or augment discretionary spending. 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. For example, 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. Under the Budget Control Act of FY2011, an
estimated savings of $17 billion from the elimination of subsidized Stafford Loans for graduate
students will be used to augment discretionary spending in the Pell Grant program in FY2012 and
FY2013.
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
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. 109-149 to pay exclusively for
the accumulated funding shortfall through AY2005-2006.
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Federal Pell Grant Program of the Higher Education Act
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
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
The FY2011 Continuing Appropriations Act also provided specified annual mandatory
appropriations for the program for general use beginning in FY2012 through FY2021.59 These
appropriations are paid for with estimated mandatory savings from the elimination of a provision
that allowed for two Pell Grants in one award year. The availability of these mandatory
appropriations is akin to the $13.5 billion in mandatory appropriations provided in the SAFRA
Act and can be used to pay for future discretionary costs associated with the program.
Summary of Recent Funding (FY2008-FY2021)
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.60 Table 8 provides a history of discretionary and mandatory appropriations for the Pell
Grant program from FY2008 to FY2021. It is important to note that some of the advance
mandatory appropriations provided in previous measures were subsequently rescinded in the
SAFRA Act.61 The data in Table 8 are divided into two categories: (1) discretionary
appropriations; and (2) mandatory appropriations effective upon the enactment of the Budget
Control Act of FY2011.
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.
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. 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 Additional annual mandatory appropriations in the amount of $1,145,000,000 are also provided for each succeeding
year beyond FY2021.
60 Table 9 in this report provides a more comprehensive history of the discretionary funding levels in the program since
FY1973.
61 See Table A-3 for a history of mandatory appropriations before the enactment of the SAFRA Act.
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Federal Pell Grant Program of the Higher Education Act
Table 8. Pell Grant Appropriations, FY2008 to FY2021
(dollars in millions)
Discretionary Appropriations
Fiscal
Award
Annual Appropriations
ARRA Funding
Total Discretionary Funding
Year
Year
($M)
($M)
($M)
2008 AY2008-
$14,215 __ $14,215
2009
2009 AY2009-
$17,288 $15,640 $32,928
2010
2010 AY2010-
$17,495 __ $17,495
2011
2011 AY2011-
$22,956 $22,956
2012
Mandatory Appropriations (Post-SAFRA Act)
CCRAA
ARRA
FY2011 Continuing
Budget
Fiscal
Award
Funding
Funding
SAFRA Appropriations Act Control Act
Total Mandatory
Year
Year
($M)
($M)
Act ($M)
($M)
of 2011 ($M) Appropriations ($M)
2008
AY2008-
$2,041a __ __
__
__
$2,041
2009
2009
AY2009-
$2,090 $643 __
__
__
$2,733
2010
2010
AY2010-
__ __
$4,964b __
__ $4,964
2011
2011
AY2011-
__ __
$18,815c __
__ $18,815
2012
2012
AY2012-
__ __
Such
Sumsd
$3,183
$10,000
$13,183 and Such Sums
2013
2013
AY2013-
__
__
Such Sums
__
$7,000
$7,000 and Such Sums
2014
2014
AY2014-
__
__
Such Sums
__
Such Sums
2015
2015
AY2015-
__
__
Such Sums
__
Such Sums
2016
2016
AY2016-
__
__
Such Sums
__
Such Sums
2017
2017
AY2017-
__
__
Such Sums
$1,060
$1,060 and Such Sums
2018
2018
AY2018-
__
__
Such Sums
$1,125
$1,125 and Such Sums
2019
2019
AY2019-
__
__
Such Sums
$1,125
$1,125 and Such Sums
2020
2020
AY2020-
__
__
Such Sums
$1,140
$1,140 and Such Sums
2021
2021
AY2021-
__ __
Such
Sums
$1,145e
$1,145 and Such Sums
2022
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Federal Pell Grant Program of the Higher Education Act
Sources: CRS analysis of the HEA, the SAFRA Act, respective annual appropriations measures, the Budget
Control Act of FY2011, 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 March 2011 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 $5.3 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.
e. Additional annual mandatory appropriations in the amount of $1,145,000,000 are also provided for each
succeeding year beyond FY2021.
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,62 to notify each chamber of
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.63 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.
62 The authorizing statue speaks of entitlements when it describes the award determined for a student based on the
published award schedule.
63 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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Federal Pell Grant Program of the Higher Education Act
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)
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)
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Federal Pell Grant Program of the Higher Education Act
Discretionary
Estimated
Cumulative
Appropriation
Total
Annual Surplus Surplus or
Fiscal Year
Award Year
Level
Expendituresa or (Shortfall)b
(Shortfall)
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
$14,697
($1,036)
($817)
2008
2008-2009
$14,215
$16,069
($1,854)
($2,671)
2009 2009-2010 $32,928f
$26,883
$6,045
$3,374
2010
2010-2011
$17,495
$31,595
($14,100)
($10,726)
2011 2011-2012 $36,456g $31,479 $4,977 ($5,749)
2012 2012-2013 $13,183h
TBD
TBD
$7,434
Sources: (1) U.S. Department of Education (ED), AY2009-10 Federal Pel Grant Program End-of-Year Report; (2)
unpublished data provided by ED; and (3) unpublished data provided by CBO in August 2011.
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, AY2009-10 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 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 $1 billion 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.
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. Includes $13.5 billion in mandatory appropriations that were provided in the SAFRA Act for general use in
the program through FY2012 and $22,956 million in discretionary appropriations provided in the FY2011
Continuing Appropriations Act.
h. The FY2011 Continuing Appropriations Act included $3,183 million in mandatory appropriations for general
use in the program for FY2012. The Budget Control Act of 2011(P.L. 112-25) also provided an additional
$10 billion in mandatory appropriations for general use in the program for FY2012. In effect, these funds
could be used to augment discretionary appropriations in FY2012, and therefore the cumulative funding
shortfal through FY2011 would be eliminated, resulting in a temporary funding surplus pending final FY2012
appropriations action.
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’
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Federal Pell Grant Program of the Higher Education Act
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.64 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.65 FY2002 and subsequent appropriations
legislation have not included such language.
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.66 This
permits ED to use funds from multiple fiscal years’ appropriations to meet one award year’s cost.
64 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.
65 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
appropriated funds could not fully fund the appropriated maximum grant. A schedule of reduced grants would then be
published.
66 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.
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Federal Pell Grant Program of the Higher Education Act
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 scoring67 of the Pell Grant program by CBO. The
rule provides that if the appropriations of new discretionary budget authority68 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
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.
67 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.
68 Budget authority is defined as the broad responsibility conferred by Congress that empowers government agencies to
spend federal funds.
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Federal Pell Grant Program of the Higher Education Act
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 $2.7 billion.69 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; 70
• increase the discretionary base maximum award by $619 to $4,860 in AY2009-
2010; and
• provide for a surplus of funds totaling $3.4 billion71 available for use through
FY2011.72
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. Revised estimates released by CBO in March 2011 showed a
cumulative funding shortfall of $10.7 billion through the end of FY2010.
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 $10.7 billion
discretionary shortfall in FY2010. Any remaining funds will be used to pay discretionary costs in
AY2011-2012.
69 This estimate is current as of April 2011 and includes an annual funding surplus in FY2006 of $219 million.
70 This estimate would have been lower at the time ARRA was enacted in January 2009.
71 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.
72 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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Federal Pell Grant Program of the Higher Education Act
FY2011 Appropriations
Discretionary
The FY2011 Continuing Appropriations Act provided approximately $23 billion in discretionary
appropriations for FY2011, or an increase of $5.5 billion over the FY2010 level of $17.5 billion.
The discretionary base maximum award for AY2011-2012,73 as specified in the law, remains at
$4,860, or 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 is
$5,550, or the same level as AY2010-2011.
Effective July 1, 2011,74 the FY2011 Continuing Appropriations Act would also amend the HEA
by eliminating a provision that allows for a student to receive up to two Pell Grants during a
single award year.75 The President’s FY2012 Budget Request, released in February 2011, also
proposed the elimination of this provision due to its unexpected high costs and the lack of early
evidence to support accelerated completion times by students benefiting from the additional aid.
The elimination of this provision generates savings on both the discretionary and mandatory side
of the Pell Grant funding ledger, although savings from the mandatory portion are re-directed for
future use in the program as specified annual mandatory appropriations. According to ED,
approximately 9% of all Pell Grant recipients benefited from this provision in AY2009-2010.
The FY2011 Continuing Appropriations Act also includes a provision that would prohibit the
application of federal regulations in Title 34 Code of Federal Regulations (CFR) § 690.64(b) that
pertain to the treatment of cross-over payment periods when determining a student’s award
amount in 2011. A cross-over payment period is any period that includes both June 30 and July 1.
For the purposes of awarding Pell Grant aid, this period must be assigned to a specific award
year. Federal regulations issued in October 2009 require institutions to assign the payment period
to the award year in which a student receives the greater payment. Absent this provision, a student
who may have a higher calculated Pell Grant in AY2011-2012 (as compared to AY2010-2011)
due to a change in his or her EFC or other eligibility criteria, would be paid from AY2011-2012
funds, potentially limiting the amount of Pell Grant aid available in future enrollment periods.
The regulatory override would prevent the scenario of a student who is newly limited to only one
Pell Grant award in an award year being enrolled for a 2011 summer term cross-over period
and having the Pell Grant award for the summer term crossover period applied toward the
student’s single AY2011-2012 Pell Grant award amount. In effect, this provision would allow an
eligible student who is enrolled for a summer term during the cross-over period from June 30,
2011, to July 1, 2011, to receive Pell Grant aid for the cross-over period from AY2010-2011
funds.
73 AY2011-2012 will begin on July 1, 2011, and end June 30, 2012.
74 The language in P.L. 112-10 specifically states that this provision shall be effective with respect to the 2011-2012
award year and succeeding award years.
75 This provision was recently enacted in the Higher Education Opportunity Act (HEOA; P.L. 110-315) and became
effective July 1, 2009. The U.S. Department of Education issued final regulations on this provision 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
Mandatory
Under the FY2011 Continuing Appropriations Act, a total of $8.8 billion in specified annual
mandatory appropriations are provided for the Pell Grant program for general use beginning in
FY2012 through FY2021.76 These appropriations are paid for with estimated mandatory savings
from the elimination of the aforementioned provision that allows for two Pell Grants in one award
year.77 The availability of these mandatory appropriations is akin to the $13.5 billion in
mandatory appropriations provided in the SAFRA Act and could be used to pay for future
discretionary costs.
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. This section also presents some
of the possible causes behind the recent increases in program 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)78 through FY2011 (AY2011-
2012). Table 10 shows that the increase in the federal government’s obligations for the Pell Grant
program doubled from AY2007-2008 to AY2009-2010 and increased an additional 23% in
AY2010-2011. Moreover, the total obligations during this same time period totaled $136.4 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 26.9
3.0
29.9
76 Additional annual mandatory appropriations in the amount of $1,145,000,000 would also be provided in each
succeeding year beyond FY2021 under the FY2011 Appropriations Act.
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 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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Federal Pell Grant Program of the Higher Education Act
Cost Associated with
Cost Associated with
Discretionary Award
Mandatory Award
Award Year (AY)
Levels
Levels
Total Program Cost
AY2010-2011 31.6
5.0
36.6
AY2011-2012 31.5
5.3
36.8
Total
120.8 15.6 136.4
Source: Congressional Budget Office (CBO), Federal Pel Grant Program, Discretionary Baseline, Cumulative
Surplus/Shortfall, and Funding Gap, April 2011.
Notes: N/A= not applicable. Estimates of program costs are as of April 2011 and are subject to change.
Most of the factors contributing to the escalation in program costs can be attributed to a
combination of (1) legislative changes that have led to increased benefits for more students; (2)
increases in the number of students enrolling in postsecondary education and applying for Pell
Grant aid; and (3) a weakened economy. The following section examines possible reasons for
increased program costs over the past several years.
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 AY1974-1975.79
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 the FY2011 Continuing Appropriations Act 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,80 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.
79 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.
80 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.
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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 AY2008-2009 increased by 13% compared to AY2007-2008.81 Moreover, in
AY2009-2010 the number of valid applicants increased 18.8% compared to AY2008-2009.
Preliminary data suggest the number of students who have submitted a valid application for a Pell
Grant in AY2010-2011 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.82
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.83 In general,
students may be more aware of federal financial aid as a result of efforts to promote its
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.84
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
81 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.
82 For example, see http://www.ifap.ed.gov/eannouncements/attachments/
111909FAFSAWebPrePresentation1011.ppsx.
83 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.
84 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.
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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.
A provision that allowed a student to receive up to two Pell Grants in a single award year
beginning in AY2009-2010 also had a significant impact on program costs, in part due to the
regulatory interpretation of the provision, as well as unanticipated participation. The FY2011
Continuing Appropriations Act eliminated this provision effective July 1, 2011, resulting in
significant savings for the program.
Budget Control Act of 2011 and FY2012 Appropriations
The Budget Control Act of 2011 (BCA; P.L. 112-25) was recently enacted in August 2011 to
address issues related to the budgetary deficit and debt of the United States government. The
BCA also provided mandatory funding for the Pell Grant program for FY2012 and FY2013. An
additional $10 billion in mandatory funding was provided for general use in FY2012 and an
additional $7 billion in mandatory funding for general use in FY2013, for a total of an additional
$17 billion. Other than providing additional mandatory funding, the BCA does not make any
other changes to the Pell Grant program. The BCA does not specify the discretionary base
maximum award level for AY2012-2013 or AY2013-2014.
The availability of these additional mandatory appropriations is akin to (1) the additional
mandatory appropriations provided in the FY2011 Continuing Appropriations Act as a result of
the elimination of the year-round Pell provision, and (2) the $13.5 billion in mandatory
appropriations provided in the SAFRA Act. That is, these mandatory funds may be used to pay
for future obligations associated with provisions that primarily affect discretionary spending in
the program.
The total discretionary funding required in FY2012 to maintain the program’s current eligibility
parameters, including a maximum award of $4,860 in AY2012-2013, is estimated at $31.7 billion.
The $10 billion mandatory funding provided in the BCA for FY2012 would first be used to pay
for an estimated $2.6 billion discretionary funding shortfall from the previous year, AY2011-
2012, leaving approximately $7.4 billion for use in AY2012-2013, effectively lowering the
amount of discretionary appropriations required in FY2012 from $31.7 billion to $24.3 billion.
Compared to the previous year’s funding level of approximately $23 billion, Congress would
need to provide an additional $1.3 billion to maintain the current award and eligibility parameters
in AY2012-2013.
To fill this gap in the upcoming FY2012 appropriations process, Congress may choose to (1)
reduce costs in the program by changing the current eligibility parameters, (2) seek offsets in
other mandatory programs or savings from mandatory spending in the Pell Grant program, (3)
provide additional funding over the FY2011 level, or (4) a combination of the above. Moreover,
given the restrictive discretionary budgetary caps resulting from the BCA and competing
priorities in the Labor, Health and Human Services (HHS), and Education appropriations,
Congress may choose to provide an amount below the FY2011 level.
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The additional mandatory funding provided for the Pell Grant program in the BCA is offset with
estimated mandatory savings from the elimination of provisions in the William D. Ford Direct
Loan (DL) program. These changes to the DL program would be effective beginning with award
year 2012-2013, which starts July 1, 2012.85
FY2012 Budget Resolution
On April 20, 2011, the House passed House Concurrent Resolution (HCR) 34, also known as the
FY2012 House Budget Resolution. H.Rept. 112-58 provides some details on HCR 34, including
proposals to reform the Pell Grant program in a number of ways. A few selected proposals (as
depicted in H.Rept. 112-58) include
• adopting a sustainable maximum award level,
• rolling back some of the need analysis changes enacted in previous legislation,
and
• setting stricter lifetime time limits on eligibility for Pell Grant aid.
Beyond FY2012
The Pell Grant program, which represents a significant public investment in higher education,
may continue to present funding challenges and difficult policy choices for Congress in future
years based on current eligibility parameters and projected demand. 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.
85 For a description of the DL program and changes proposed in the House and Senate versions of the Budget Control
Act of 2011, 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.
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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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