Looming Pell Grant Shortfall Could Impact Students’ Ability to Cover College Costs

The federal Pell Grant program faces a looming $2.7 million budget shortfall, according to a January report from the Congressional Budget Office.

Established in 1972, the Pell Grant gives undergraduates from low- and middle-income backgrounds up to $7,395 per academic year to pay for college. Unlike with a student loan, students don’t need to repay their Pell Grant award. Roughly 7 million students receive Pell Grants each year, according to the National College Attainment Network.

If the funding gap remains unaddressed, the government may need to cut program costs. That could mean reducing the number of students or programs that are Pell-eligible, lowering the amount of Pell dollars that individuals can receive — or both, says Michele Zampini, senior director of college affordability at The Institute for College Access and Success (TICAS).

Students' financial aid packages could be impacted as early as 2026, and effects could worsen each year that the shortfall continues, Zampini says.

Even in the Pell Grant’s current state, many students still face an affordability gap between the amount of financial aid they receive and the total price tag of their education. Regardless of your Pell eligibility or future government action, it’s always a good idea to consider additional strategies to pay for college.

How Pell Grant funding works — and why it’s short

The Pell has a complex funding model, Zampini explains. Like Social Security or Medicare, it’s an “entitlement program,” which means all students who are eligible for the Pell Grant receive it. Unlike Social Security or Medicare, it doesn’t rely solely on automatic mandatory funding; instead, the Pell is funded by a mix of mandatory and discretionary funding. Congress must appropriate discretionary funding annually, based on enrollment projections for the following year.

This can lead to a funding gap if a greater number of Pell-eligible students enroll than expected, Zampini says. College enrollment in the current 2024-25 year grew by nearly five percent from the year before, and FAFSA formula changes led to the number of Pell-eligible students increasing by 12.6%, according to an Urban Institute study.

To ensure the Pell is well-funded and stable for the long haul, more than 100 college access organizations are asking lawmakers to move it to a fully mandatory spending model.

However, it’s not clear how the current Trump administration and Republican-majority Congress will respond. Already, President Donald Trump has promised to overhaul federal student lending, close the Education Department and limit Public Service Loan Forgiveness.

“I don't see this administration or this Congress moving Pell to mandatory spending. I think that puts Pell at risk, puts students at risk and ultimately puts the educational aspirations of low-income students into question,” says Wil Del Pilar, senior vice president of Ed Trust, an organization that works to dismantle racial and economic barriers to education access.

The Pell Grant last faced a shortfall in 2011, which prompted Congress to cut program costs by more than $50 billion over the following decade, according to TICAS. As a result, students could no longer use Pell funds for summer courses, the lifetime Pell limit shrank from 18 semesters to 12 semesters and millions of students immediately lost their Pell eligibility.

Other ways to pay for college

The Pell Grant is a valuable way to pay for college, but it doesn’t have to be your only source of funding. Maximize your financial aid package with these additional options.

Submit the FAFSA

The first step in any financial aid journey: file your Free Application for Federal Student Aid (FAFSA) each year.

In addition to unlocking the Pell Grant, the FAFSA can also open the door to work-study opportunities, flexible federal student loans, and even some private and state-based scholarships and grants.

Look for state-based grants

Most states offer financial aid in the form of grants, scholarships and free or reduced tuition programs at public institutions. If there’s a Pell shortage, some states may step up their aid to fill in the funding gaps for students. State financial aid programs are run independently of the federal government, so they make their own budgetary decisions, Zampini says.

To access state aid, submit the FAFSA, then check if your state has a supplemental financial aid application on the National Association of Student Financial Aid Administrators’ state aid database.

Apply for scholarships

Search for scholarships with databases like the Labor Department’s CareerOneStop, contact local religious and community organizations and reach out to your college’s financial aid office for ideas.

To maximize your scholarship awards, you must remain diligent and plan ahead. In many cases, scholarships require students to reapply every year, Del Pilar says.

Negotiate with your college’s financial aid office

Try to negotiate with college financial aid officers, especially if you have special circumstances during the year you’re applying to college, Del Pilar suggests. Ask about your eligibility for grants and additional aid. You may need to explain your family’s financial situation and provide documentation.

Choose an affordable school

Choosing an affordable school can go a long way toward a degree that doesn’t saddle you with long-term student debt. Consider community colleges and in-state public schools to save thousands of dollars on tuition, compared with private or out-of-state colleges.

Borrow only what you need — and prioritize federal over private loans

Lastly, if you have any funding gaps in your college education that you can’t cover with “gift aid” (like grants, scholarship and work-study), you may need to turn to student loans.