Students are facing a $2.7 billion funding shortfall in a key program that allows low-income students to attend college.
Current estimates show that the federal Pell Grant program will have a $2.7 billion shortfall later this year.
Why It Matters
While President Donald Trump‘s efforts to restructure the Education Department is not set to impact federal Pell Grants and student loans, there could still be financial strife ahead for those who rely on the federal grants.
Pell Grants, which have a maximum value of $7,395, help roughly 40 percent of students attend college. The grants, which are different from student loans, allow low-income families to send their children to college without necessarily taking on debt.
What To Know
In a new projection for the Pell Grant program, the Congressional Budget Office said there’s a $2.7 billion funding gap for the 2025 year.
In recent years, the number of Pell Grant recipients has declined. While 9.4 million students earned Pell Grants in the 2011-12 school year, only 6.4 million were awarded the grant in 2023-24.
However, after the new FAFSA (Free Application for Federal Student Aid) launched in 2023, more students are eligible for the grant, causing the funding crisis.
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek that for many students, Pell Grants are the financial determining factor in attending a university.
“Any decision to reduce or outright eliminate funding would result in substantially fewer students going and could potentially have ripple effects on industries that require more employees with higher skill sets,” he said.
So far, more than 9.3 million 2024-25 FAFSA applicants are eligible for a Pell Grant. This could cause problems regarding the federal government’s ability to pay out the grants to all qualifying students.
College enrollment is also up compared to recent years, when the COVID-19 pandemic saw more high school graduates opt of higher education. Based on estimates from the National Student Clearinghouse Research Center, freshmen enrollment rose by 5.5 percent this fall.
Many students rely on financial aid to attend college, with roughly 75 percent of all undergraduates getting some sort of assistance, whether federally or from their college, according to the National Center for Education Statistics.
What People Are Saying
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “The good news for higher education is the losses in enrollment during the pandemic are finally evaporating, and many colleges are seeing gains on their previous record number of freshmen starting their next chapter of education. The bad news is this equates to the Pell Grant funding of the last few years being insufficient in covering everyone who would qualify. If enrollment of those eligible for these grants continues to grow, it could lead to a further deficit.”
Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek: “The shortfall happened because the number of applicants was underestimated. For years, college enrollment was declining, and Pell Grant funding is based on projections of how many students will apply. But now, freshman enrollment has unexpectedly jumped, and the new, simplified FAFSA has made it easier for students to apply, so way more people are qualifying than expected.”
What Happens Next
If students decide to attend college without the Pell Grant funding, they’ll likely face higher debt.
“This could result in students relying more on a mix of public and private loans to cover the cost of college, potentially increasing financial strain long after graduation,” Thompson said. “Long term, this could make higher education less affordable and increase student debt burdens.”
The post College Students Could Lose Funding Aid Amid $2.7 Billion Shortfall appeared first on Newsweek.
