It is important to note that Pell Grants for the 2024-25 and 2025-26 school year are adequately funded. The Pell Grant program is forward funded, meaning that funding left over from FY24 and FY25, and if needed, FY26, can be used to fund the program in future years. Students and families should not be concerned that Pell Grants included in financial aid offers this year will not be honored, or that grants students are currently receiving will be at risk.
The Congressional Budget Office (CBO) published an updated cost projection earlier this year, which predicts a Pell shortfall of $2.7 billion by the end of FY25. In other words, the obligations of the program will exceed the amount available to spend – or, the total amount of funding needed to fund Pell eligible students is greater than the amount of funding available. This is largely due to the expanded Pell eligibility, resulting from the Free Application for Federal Student Aid (FAFSA) Simplification Act, signed by President Trump during his first term.
In contrast to most education programs where Congress provides a certain amount of funding per year that can be spent, Pell Grants are funded through a combination of mandatory and discretionary spending but allocated to students based on a formula and maximum award that are written into (separate) statutes. As a result, the program sometimes ends the year with more funding than is needed to cover its obligations and sometimes with less. If more students draw down Pell Grants than Congress anticipated, the program will run a shortfall. If the opposite occurs, the program is said to be running a surplus. In recent years, Pell has operated with a surplus.
The reconciliation bill, enacted on July 4, 2025, addressed the Pell shortfall for fiscal year 2026.
The final bill also rejected multiple proposals in the House bill that changed the annual credit requirement for receiving a maximum Pell Grant to 30 credits and prohibited students attending less than half time from receiving a Pell Grant.
The bill also provides for a workforce Pell program that allows students enrolled in short-term programs. Here is a summary of the changes to Pell and the Student Aid Index Calculation:
Provision
Current Law
House Reconciliation Bill
Senate Reconciliation Bill
Final Bill
Pell Grants and SAI Calculation
Enrollment requirements
Requires at least 12 credits per semester for full-time and six credits for half time enrollment for Pell
Requires at least 30 credits per year for full-time and eliminates eligibility for less than half-time for Pell
No change from current law
No change from current law
Consideration of high assets, low-income in Pell eligibility calculation
Allows students with a low adjusted gross income (AGI), based on the poverty table, to receive Pell, regardless of their SAI.
Excludes students whose SAI is greater than or equal to twice the maximum Pell Grant from eligibility
Excludes students whose SAI is greater than or equal to twice the maximum Pell Grant from eligibility
Excludes students whose SAI is greater than or equal to twice the maximum Pell Grant from eligibility
Workforce Pell program
Pell not available for <15 week programs
Establishes a Workforce Pell program: Students enrolled less than half-time are eligible; program duration must fall between eight-15 weeks; completion rate must be at least 70%; financial need verification required.
Establishes a Workforce Pell program: Program must be eight-15 weeks, have 70% completion/job placement rate, and prepare students for high-demand careers. No simultaneous Workforce and regular Pell.
Same as Senate, plus excludes for-profit or unaccredited programs.
Pell shortfall
N/A
Provides $10.5 billion over the next three fiscal years
Provides $10.5 billion in the next fiscal year
Provides $10.5 billion in the next fiscal year
Consideration of additional grant funding in Pell eligibility determination
Additional grants do not impact Pell eligibility.
No change
Excludes students whose grants equal or exceed their cost of attendance from Pell eligibility
Same as Senate
Consideration of foreign income in Pell eligibility determination
Considers foreign income as untaxed income, not part of AGI
Includes foreign income as part of AGI
Includes foreign income as part of AGI
Includes foreign income as part of AGI
Treatment of small business and farm assets
Requires small business/farm assets in SAI calculation
Exempts small business/farm assets from SAI calculation
Same as House
Same as Senate, plus includes fishing businesses
Federal student aid eligibility for certain non-citizens
N/A
Eliminates eligibility for many non-citizens with I-94 designations
Same as House, except allows for Ukraine and Afghanistan supplemental categories
