[ad_1]
On July 4, President Trump signed into law a massive legislative package that makes major changes to federal higher education policy. This piece examines how the proposal would impact the Pell Grant program.
Pell Program & Eligibility Changes
The Pell Grant program, which helps more than seven million low-and moderate-income students attend college each year, is the federal government’s most effective and popular investment in college affordability. Thankfully, the new law does not include the major Pell cuts originally proposed by the House.
Instead, the law makes smaller modifications limiting some students’ Pell eligibility and expands Pell eligibility to very-short-term job training programs; these changes are likely a mixed bag for students and will require careful implementation and oversight. The law also invests stopgap money to prevent a looming program funding shortfall.
The law’s tweaks to the federal financial aid formula, which all go into effect on July 1, 2026, include a provision that renders a student ineligible for a Pell award if they are receiving other non-Title IV grant aid (e.g., aid from non-federal sources, including states, colleges, or private scholarship providers) that, taken together, equals or exceeds the student’s full cost of attendance (tuition, fees, and all other related expenses). This will deny otherwise-eligible students the benefit to which they’re entitled based on their Student Aid Index (SAI) and is likely to mostly affect student athletes who receive full-ride scholarships. (The SAI is an index number based on the data a student submits in their FAFSA that colleges and universities use to determine a student’s financial situation and their financial aid eligibility.) Many of these students still have high financial need and will struggle to cover costs without these funds.
The new law also cuts off Pell eligibility for students with an SAI that equals or exceeds twice the amount of the maximum Pell award. This will likely affect only a small number of students and is intended to target those whose AGI is low compared to their non-income assets, which results in a higher SAI than their AGI alone would show.
While the Pell program is indeed intended to serve students with high financial need, by re-opening the financial aid formula to make these tweaks, lawmakers have made a major policy decision with little regard for potential unintended consequences, including creating administrative burden that may outweigh any possible incremental benefits to taxpayers.
Additional program tweaks include:
- Effective July 1, 2026, the law includes foreign income in the calculation of a student’s Pell eligibility.
- Effective July 1, 2026, the law exempts assets from family farms, small businesses, and family-owned commercial fisheries from the SAI calculation. This is a re-instatement of an exemption for family farms and small businesses that existed prior to the passage of the FAFSA Simplification Act; fisheries are included for the first time.
Money to Address Looming Pell Funding Shortfall
The law adds $10.5 billion in mandatory funding for the Pell Grant program for FY2026 to avert a looming funding shortfall. While this funding is welcome, the program is likely to face a shortfall again soon if lawmakers do not make additional investments. The program was already facing a funding gap before lawmakers expanded it to cover short-term programs; this program expansion is likely to further strain the program’s funding.
This ongoing risk is due to the program’s unique and complex funding structure, which leads to an inevitable annual mismatch between how much the program costs and how much funding is available. When the program faces a funding shortfall, students are at risk of losing critical financial aid.
Ultimately, the only way to fully eliminate this annual uncertainty is to shift the Pell program to be funded entirely on the mandatory side of the budget. This shift would eliminate the need for annual appropriations and provide for automatic adjustments in program funding based on changes in participation.
Expansion of Pell Eligibility to Very-Short-Term Programs
The law expands Pell Grant eligibility to very-short-term job training programs. Until now, Pell Grants could only be used at programs that provide at least 600 clock hours/15 weeks of instruction. Starting July 1, 2026, students enrolled in programs between 150-599 clock hours/8-15 weeks will be eligible for Pell Grants. Providers must be accredited and authorized to receive Title IV funds (as in the existing Pell program). However, the law includes no data reporting requirements, which could impede state and federal efforts to regulate program eligibility and outcomes.
The law also allows students who have already obtained a bachelor’s degree to use funds for these very-short-term programs. Students with bachelor’s degrees cannot use Pell funds for other types of programs. It remains to be seen how this mismatch will play out.
While we hope to see positive outcomes for students, this program expansion comes with many risks. The expansion was made without sufficient evidence demonstrating that these programs are a sound investment—and without sufficient funding to cover the expansion over time. Before authorizing such an expansion, we have long urged lawmakers to ensure the existing program is on solid financial footing.
As we discussed in a piece earlier this year, we’ll be closely monitoring the implementation and oversight of this program expansion. Alarmingly, Congress gave the Education Department a short implementation timeframe. Given the Administration’s ongoing actions to gut the Department and slash its staff, we are concerned that the Department is ill-equipped to properly roll this program out and to ensure adherence to quality measures, especially more complex measures based on wage gains. States will need to step up to fill the void to ensure their students are protected.
[ad_2]
