No Pell Shortfall For 2014

WASHINGTON — Reports of the Pell Grant’s imminent peril have been exaggerated, according to a Congressional Budget Office report released Wednesday. The federal student aid program, previously thought to face a $5.7 billion shortfall in 2014, now has another year on sound financial footing. While there still is a shortfall in 2015, it is much smaller than expected.

The new report, part of the Congressional Budget Office’s annual preliminary estimates of the cost of various federal programs, could transform the student aid debate in Washington in the upcoming year. Over the past two years, the Pell Grant has been under perpetual budget pressures. In order to maintain the maximum grant, Congress has ended subsidized loans for graduate students; eliminated the grace period for undergraduates’ unsubsidized loans; and made eligibility changes that have forced thousands of students out of the program.

It’s still unclear how those changes transformed a shortfall into a surplus. But there is a surplus: At the end of fiscal year 2013, the program will have $9.2 billion left over. Congress could fund the program at current annual appropriation levels — right now, the total program cost is $36 billion, with $23 billion from annual appropriations — for 2014 and meet the program’s needs, said Jason Delisle, director of the Federal Education Budget Project at the New America Foundation. The shortfall for 2015 is only $2 billion — much smaller than the $8.7 billion previously projected. (Note: This paragraph has been updated with additional budget analysis on the shortfall in 2015.)

In September, the Education Department reported that the Pell Grant program cost $6.5 billion less than expected in the 2011-12 fiscal year, and $2.2 billion less than in 2010-11. That decrease, driven both by eligibility cuts and by a drop in spending on students at for-profit colleges, also came as a surprise to many observers.

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