New CBO Projection: Pell Grant Program Faces Budget Shortfall
By NASFAA Policy & Federal Relations Staff
The Congressional Budget Office (CBO) in late January released new projections for the Pell Grant program, indicating a possible funding shortfall in fiscal year (FY) 2025 of about $2.7 billion that would apply to the 2025-26 school year. By the end of FY 2026, the budget shortfall would be nearly $10 billion.
This new analysis follows CBO’s June 2024 estimates that predicted the Pell Grant program would not face a budget shortfall until FY 2029. CBO’s June estimate was based on potential declines in college enrollment due to issues with the 2024-25 FAFSA rollout, which could have resulted in nearly a million fewer students being expected to receive a Pell Grant.
However, recent data from the National Student Clearinghouse Research Center (NSCRC) found that freshmen enrollment this fall increased 5.5% when compared to the previous year, with total postsecondary enrollment up 4.5%. NSCRC also found that college enrollment has surpassed pre-COVID levels by .4%.
With more students enrolling in college for the 2025-26 school year than originally anticipated, CBO’s new projections seem to account for this enrollment increase.
The Pell Grant program is uniquely funded in that it relies on both mandatory (set in law) and discretionary (subject to Congress’ annual appropriations process) funding streams.
NASFAA continues to advocate for the Pell Grant program to be shifted to full mandatory funding as a way to eliminate the uncertainty that comes with the appropriations process every year.
Publication Date: 2/7/2025
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