Mandatory Spending

Function 500 - Education, Training, Employment, and Social Services

Eliminate or Reduce the Add-On to Pell Grants, Which Is Funded With Mandatory Spending

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021–
Change in Outlays  
  Eliminate mandatory add-on funding -1.4 -5.4 -5.7 -6.0 -6.2 -6.4 -6.5 -6.6 -6.6 -6.6 -24.6 -57.2
  Reduce mandatory add-on funding -0.7 -2.7 -2.9 -3.0 -3.1 -3.2 -3.3 -3.3 -3.3 -3.3 -12.4 -28.9

This option would take effect in July 2021.

The Federal Pell Grant Program is the largest source of federal grant aid to low-income students for undergraduate education. A student’s Pell grant eligibility is chiefly determined on the basis of his or her expected family contribution (EFC)—the amount, calculated using a formula established under federal law, that the federal government expects a family to pay toward the student’s postsecondary education expenses. Students with an EFC exceeding 90 percent of the maximum grant are ineligible for a grant.

Funding for the Pell grant program has both discretionary and mandatory components. The maximum award funded by the discretionary component is set in each fiscal year’s appropriation act. There are two mandatory components. One is funding from the Higher Education Act that is dedicated to supporting the discretionary program. The other mandatory component is known as add-on funding, which under current law increases the maximum award by $1,060.

This option would reduce the maximum award in the Pell grant program. There are two alternatives under the option. One would eliminate the mandatory add-on component of Pell grant funding. The other would reduce the mandatory add-on component by half.