Tough Economy Squeezes Pell Grant Program

An unexpected surge in college enrollment has created an $18 billion shortfall in the Pell Grant program, the biggest in its history.

An administration official told The Associated Press the program will cost $18 billion more than Congress and the White House had anticipated over the next three years. The official, who was not authorized to speak publicly about the budget, spoke on condition of anonymity.

"The administration is working with Congress to fill the gap, and we are committed to making sure the U.S. has an educated work force able to fill the jobs of the 21st century," said the official.

The red ink probably won't affect students and parents, but it will affect the federal government, which must find a way to come up with the extra dollars.

Shortfalls and surpluses are common in the Pell Grant program, which forms the foundation for federal college aid. Anyone who is eligible gets a grant, making it difficult for the government to anticipate how many people will apply. Pell Grants typically go to families earning less than $40,000, and about 6.3 million students received Pell Grants last year.

Yet the looming shortfall is the largest in the 36-year history of the program, which has an entire budget of about $18 billion.

Two factors led to the shortfall, said Terry Hartle, lobbyist for the American Council on Education, the leading higher education group in Washington.

First, the bleak job market is driving people back to school. "College enrollment goes up when the economy goes down; it's been that way ever since the Great Depression," Hartle said.

Second, Congress boosted the amount of the Pell Grant this year, which made more families eligible for aid. The program's eligibility formula changes, letting more middle-income families into the program, whenever the grant amount increases.

Lawmakers approved a 13 percent increase in the maximum grant as part of President Barack Obama's economic stimulus law. That boosted this year's Pell Grant by about $600 to $5,350. It was a huge increase; the maximum grant has grown on average by less than 6 percent a year.

The chairman of the House Education and Labor Committee, Rep. George Miller, D-Calif., said lawmakers will work together to make sure the program is funded "as we do every year."

Miller sees a silver lining in the shortfall.

"In this difficult economy, it is good news that more people are going back to school to get the skills they need for in-demand jobs," he said. "We want to make sure we are doing everything we can to help them in this effort."

White House Budget Director Peter Orszag and Education Secretary Arne Duncan had a meeting with Miller and other committee chairmen about the shortfall last week.

The Pell Grant program faced a smaller shortfall, about $6 billion, last year.

Hartle said the bottom line will not change for students or their families.

"The good news is, they will get every dime they have been promised," he said. "It's bad news for the government because they have to come up with an additional $18 billion. And given the federal budget deficit, how you do that is likely to prove something of a challenge."

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  • by Uncle Buck Location: ENC on Dec 15, 2009 at 07:14 AM
    Do away with the Pell Grant (Free Money) and make it a low interest loan. If the student graduates then he will be able to repay it becasue he is making more money than someone who did not attend college (according to government figures)
  • by ace Location: plymouth on Dec 15, 2009 at 07:09 AM
    Everyone is worried about free money. What about the idiot that gets a pell grant and as soon as his books are paid for he/she sells them and spends the money on everything but school related items? This money comes from tax payers and alot of it comes from parents of kids that cannot get it so they are hit twice, send money to some kid not related to them and send their own kid to school. If they do not graduate then they should have to pay the money back. At the very least make the students accountable for the "FREE" money.
  • by Anonymous on Dec 12, 2009 at 06:11 AM
    I have never seen a pell grant that covers full expenses... a refund check usually comes from many forms of financial aid including multiple grants and loans, not just the pell.
  • by full time student & employee Location: Grifton on Dec 10, 2009 at 06:14 AM
    I agree. I work full time and go to school at night. I can't get pells because I make too much!!! I have to get loans. It is crazy. I may make money but I have bills too. It's almost like if I didn't have a job I would get more help. How am I supposed to further my education with no help
  • by Renee Location: Washington on Dec 10, 2009 at 04:25 AM
    I know a lot of people at local colleges get aid money. I don't think you should get it if you have a criminal background with misdemeanors and def felonies! You should also be drug tested every semester. Also, so many people get it and spend the left over money on personal items. This should not be the case. The left over should go back in the pot for other students to help with there schooling. I know tons of people who get it and live off of the money when they get there refund check. There SHOULD NOT be a refund!!! This would cut out some of the budget concerns and give a few other people a chance to get it. You should also not be able to get more than one kind of financial help ie. a person should not get pell grants and scholarships and money from local Job Links. You should get one or the other and that is it.

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