Mandatory Spending

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

Eliminate 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 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2023–
Change in Mandatory Outlays -1.3 -4.9 -5.1 -5.2 -5.4 -5.5 -5.7 -5.8 -6.0 -6.1 -21.9 - 51.1
Change in Discretionary Spending                        
  Budget authority -0.1 -0.2 -0.2 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.9 -1.6
  Outlays * -0.2 -0.2 -0.2 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 -0.8 -1.5

This option would take effect in July 2023.

The estimates for this option are relative to the Congressional Budget Office's May 2022 baseline, which does not reflect the effects of the Administration's recent proposed changes to student loans.

* = between -$50 million and zero.

The Federal Pell Grant Program is the largest source of federal grant aid to low-income students for undergraduate education. Eligibility for Pell grants is chiefly determined by an individual's student aid index (SAI)—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.

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 eliminate the mandatory add-on component of Pell grant funding. The reduction in discretionary outlays is caused by a small overall decline in postsecondary enrollment and in the number of Pell grant recipients, due to the lower award amount.