CBO Budget Estimate Shows Extended Timeline for Pell Grant Surplus

The much anticipated Pell Grant Program baseline projections from the Congressional Budget Office (CBO) show that, assuming Congress continues to appropriate at least $22.475 billion for the Pell Grant program, the existing funding surplus that has accumulated over the past decade will be available longer than expected. This surplus can help fund the program until FY 2029.

The projections, which were released as part the CBO’s ten-year budget and economic outlook, are critical to the annual congressional budget and appropriations process. 

The Pell Grant program is a unique federal program because it is primarily funded through annual appropriations but programmatically functions like an entitlement program. From the funding perspective, CBO estimates the cost of how many students will receive Pell Grants in a fiscal year and shares that projection with the House and Senate Appropriations Committees so they can provide the funding needed in the education funding bill. From the student’s perspective, a Pell Grant is awarded based on the need analysis formula after filling out the FAFSA, regardless of the amount of program funding provided by Congress, as if it were an entitlement.

Current funding for the program in FY 2024 is $23.635 billion, while the current cost estimate is $24.452 billion. Over the last 10 years, the Pell Grant program has carried a surplus because fewer students received Pell Grants than estimated. The surplus going into FY 2025 is an accumulated $11.412 billion. The recent expansion of the program and changes in need analysis from the FAFSA Simplification and FUTURE Acts were expected to consume the existing surplus in FY 2025 and FY 2026, causing some budget watchers to raise concerns about the future of funding the Pell Grant Program.

However, CBO’s new estimate projects about 500,000 fewer Pell Grant recipients for FY 2024 than it did in last year’s estimates, and projects slower rates of increase in recipients over the next 10 years. CBO’s estimate is also 1.5 million recipients lower than the Office of Management and Budget’s estimate for the Pell Grant program in the president’s FY 2025 budget.

While the continued accumulation of the Pell Grant surplus is good news for the funding health of the program, the details of the projections reflect the concern about low-income students not pursuing higher education that are evident from both the downturn in FAFSA completions and the anticipated enrollment decreases due to the botched implementation of the new form this year.

For more information, please contact:
Stephanie Giesecke