Overview
Today, the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies (LHHS) released its spending bill for fiscal year 2027 (FY27). Overall, this bill cuts the budget for the US Department of Education by 10%, or $8 billion, with most of the cuts coming from K-12 education programs. It provides funding to address the Pell Grant shortfall and a small increase in the maximum award while eliminating subsidized federal students. This is the first step in what will be a lengthy funding process for finalizing the FY27 federal budget.
Marginal Pell Increase
The bill raises the maximum Pell Grant award to $7,445, an increase of $50, and adds more than $15 billion in mandatory spending to address the Pell shortfall. The National College Attainment Network (NCAN) and its members have been advocating to plug the shortfall and provide a $200 increase in the maximum award. Both solutions are necessary to address the declining purchasing power of Pell that has resulted from three years of stagnating funding. Unfortunately, the bill pays for the Pell investment by eliminating subsidized student loans – a change that saves approximately $16 billion over the next ten years – and applying all of those savings to cover the cost of the Pell program in FY27. This approach could forbode more extreme funding cuts in the future as Congress strives to find additional savings to cover the cost of the Pell shortfall.
“We are grateful to see continued progress in keeping up with the funding needs of Pell, but you can't help students afford college by taking away the loans they need to stay enrolled,” said Kim Cook, NCAN CEO.
This appropriations bill builds on the Trump Administration’s budget proposal, released in April, which level funded the maximum Pell Grant and provided $10.5 billion to address the shortfall. Both the House appropriations bill released today, and the Trump Administration’s FY27 budget request demonstrate the bipartisan support that exists for the Pell Grant program.
Eliminates Subsidized Loans
The bill also resurrects a proposal from last year’s reconciliation bill to eliminate subsidized federal student loans. This policy would increase student debt by $6,000 per student on average, according to an NCAN analysis. NCAN’s estimate is conservative because it examines the impact of the loss of loan subsidies on students who graduated in four years. Research suggests that 21.5% of students who complete a bachelor's degree do so in more than four years, meaning the true cost of eliminating subsidized loans will be higher for a significant share of graduates. Many students who do not complete a degree would also be saddled with increased debt.
If enacted, the bill would eliminate new subsidized student loans after July 1, 2027. Those currently borrowing would remain eligible to receive subsidized loans until the end of their program. The bill states that in place of subsidized loans, undergraduates would be eligible to borrow the same amount in unsubsidized loans.
While the elimination of subsidized loans was not included in the final reconciliation bill enacted July 4, 2025, that bill cut more than $300 billion over 10 years from federal student loans. Starting July 1, 2026, students will face a series of significant changes to the federal student loan program, including loan proration for part-time students, a new lifetime borrowing limit of $257,500, annual caps of $20,000 annually or $65,000 in total on Parent PLUS loans per dependent student, and repayment plan options that may increase monthly loans repayments. Taken together, the elimination of subsidized loans would likely increase reliance on private borrowing and compound existing affordability challenges, especially for students from low-income backgrounds.
Additional Student Aid Priorities
The House LHHS appropriations bill also addresses other key NCAN funding priorities by providing:
Unfortunately, the bill cuts Federal Work Study by 26% to $908 million, the Supplemental Educational Opportunity Grant by 40% to $546 million, and includes a moderate decrease in funding for AmeriCorps. The bill rejects the Trump Administration’s more draconian proposed cuts to these programs and its proposal to eliminate the Corporation for National and Community Service entirely, included in the FY27 budget request.
Next Steps
Following the Subcommittee markup on Friday, the full House Appropriations Committee is scheduled to markup the bill on June 9th. As lawmakers consider how to address the Pell Grant shortfall, NCAN urges Congress to fully fund the Pell Grant program and deliver on the promise of expanded eligibility for the 7.2 million students who depend on the grant each year. We will continue to monitor the FY27 appropriations process and provide updates as things progress.