Federal Pell Grant Program of the Higher Education Act: Background and Reauthorization

Publication Date: March 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Education

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Abstract:

The Federal Pell Grant program, authorized by the Higher Education Act (HEA), is the single largest source of grant aid for postsecondary education attendance funded by the federal government, estimated to provide nearly $13.1 billion in FY2004 to about 5.3 million undergraduate students. For FY2004, the maximum Pell Grant is funded at $4,050. With the expiration of the HEA, the 108th Congress is likely to debate what changes may be needed in the Pell Grant program as part of its consideration of HEA reauthorization.

Pell Grants are need-based aid intended to be the foundation for all federal student aid awarded to undergraduates (eligibility is limited to undergraduates). There is no absolute income threshold that determines who is eligible and who is ineligible for Pell Grants. Nevertheless, Pell Grant recipients are primarily lowincome. In FY1999, an estimated over 90% of Pell Grant recipients considered to be dependent upon their parents had total parental income below $40,000. Of Pell Grant recipients considered to be independent of their parents, over 90% had total income below $30,000.

Among the issues that may be debated by the Congress during the HEA reauthorization process is the extent to which the Pell Grant program continues to act as the foundation for all federal need-based aid for undergraduates. Concern has been raised about the diminished role that the Pell Grant may be playing. For example, need-based aid recipients are as likely to borrow subsidized loans under the Federal Stafford Loan program as they are to receive Pell Grants. This overarching issue may trigger consideration of various steps to increase the amount of Pell Grant aid flowing to the neediest students. This might include deliberation over raising the Pell Grant minimum award (those with the smallest grants are the least needy of Pell recipients), converting the program into an entitlement possibly with higher annual maximum grants, and concentrating Pell Grant assistance on needy undergraduates in their initial years of enrollment (so-called "front loading") which may result in substantially higher grants in those years. Converting the program to an entitlement is also seen by some as a response to the periodic uncertainty about the adequacy of the annual appropriation to meet program costs and resulting funding shortfalls.

Other issues that may engage the Congress include deciding the degree to which, if any, the size of students' Pell Grants should be sensitive to institutions' tuition charges, and whether some element of academic merit should be introduced into the process of determining Pell eligibility and level of Pell assistance.

This report will be updated to reflect major legislative action to reauthorize the Pell Grant program.