Analysis: Pell Grant Awards Grew Under New Federal Financial Aid Formula
By Maria Carrasco, NASFAA Staff Reporter
A preliminary analysis indicates that more students are receiving the federal Pell Grant because of expanded eligibility through the new Student Aid Index (SAI) formula.
The preliminary analysis, conducted by the Urban Institute, examined student financial aid data for the first quarter of the 2024-25 academic year – which was marked by the tumultuous launch of the 2024-25 application under new changes from the FAFSA Simplification Act and FUTURE Act.
Specifically, the analysis examined federal Title IV grant and loan volume data reported by institutions between July 1 and September 30, 2024. Under this data, the Urban Institute found that all institutional sectors had gains in the number of Pell Grant recipients, with Pell recipients increasing by 17% for public two-year colleges, 15% for public four-year institutions, and 14% for private nonprofit four-year institutions.
The analysis did note that the data is still preliminary since institutions may adjust this data for roughly two years after the initial submission.
The Urban Institute’s analysis found that the average Pell Grant award increased by $96, or 3.6%. This is notable, the analysis noted, since the maximum Pell Grant award did not increase from fall 2023 to fall 2024. This suggests that the “typical” student’s financial need calculated by the SAI formula increased, or more students enrolled full time, or both.
This analysis also examined student lending of Direct Subsidized undergraduate loans from the first quarter, July 1 to September 30, 2024.
The Urban Institute found that Direct Subsidized undergraduate loans declined by 2% compared to the first quarter of 2023-24. This decline was most concentrated among students enrolled in four-year public institutions. However, the number of Direct Subsidized undergraduate loan recipients did increase for students enrolled in for-profit institutions, the analysis noted.
The increase in Pell Grant recipients and awards, along with increases in student enrollment and trends of federal student loan lending, indicate the need for federal and state policymakers to track the effects of the new SAI formula under FAFSA simplification.
“Specifically, research evidence suggests that providing grant aid can lead to increases in student persistence and attainment and may reduce students’ borrowing,” the analysis reads. “By tracking the number of Pell Grant and undergraduate loan recipients, we can better understand how the bipartisan FAFSA Simplification Act is changing college financing.”
This analysis comes as the Congressional Budget Office in January released projections of a possible funding shortfall for the Pell Grant program in fiscal year (FY) 2025 of about $2.7 billion, which would apply to the 2025-26 school year. By the end of FY 2026, the budget shortfall would be nearly $10 billion.
NASFAA, with the Student Aid Alliance, recently sent a letter to the top congressional appropriators, calling on the lawmakers to protect the Pell Grant program and to address this estimated shortfall in the FY 2026 budget.
Publication Date: 4/3/2025
Ann Q | 4/11/2025 12:36:02 PM
I agree with Christina G. We had many at our campus, as well. We call them Pellionaires. This is a gross misuse of taxpayer funds and is contrary to the intent of the program. I am quite surprised that there is not more being said about it.
Christina G | 4/3/2025 10:40:58 AM
Unfortunately, some of these Pell grants went to students with no financial need, now that the eligibility is based solely on income, excluding assets. That's a loophole that needs to be addressed.
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