— “I want to make sure that college is more affordable,” Biden said during his State of the Union address last week. “Let’s continue increasing the Pell Grants to working- and middle-class families.” — So far, Biden has signed into law increases to the maximum Pell Grant totaling $900. — But Biden’s push to continue increasing the maximum Pell Grant award is about to run into a much different funding outlook in the coming months and years. — An expected shortfall in the Pell Grant program in the coming year — or at least in the next few years — could send lawmakers scrambling to find new money to shore up the program and avoid benefit cuts, much less be able to debate further increases to the program. — Congress for years has chipped in the same amount of annual discretionary funding into the Pell Grant program. But the costs of the program vary from year-to-year, depending in large part on how many students apply. — For more than the past decade, Congress has funded the program in excess of the cost of providing Pell Grants, creating a surplus. Heading into the beginning of the 2024 fiscal year — last October — the Congressional Budget Office’s official estimate projected a $12 billion surplus in the program. — The surplus in the program, as well as a separate stream of mandatory funding, has enabled Congress to continue to boost benefits for Pell Grant recipients in recent years — even as appropriators have level-funded the program in annual discretionary appropriations. — The immediate funding issues for the Pell Grant program were averted to some degree by Congress’ decision two weeks ago to block a tweak to the new FAFSA formula that would’ve made more students eligible for Pell Grants. The continuing resolution that Congress passed last year included language that effectively reversed the expansion of Pell benefits to hundreds of thousands of students. Republicans said the move would have blown a $7 billion hole in the program’s budget. — But outside forecasts and informal estimates circulating on the Hill suggest that even with last week’s changes, the surplus funding in the Pell program has largely evaporated and the program could be facing a shortfall as soon as this coming year. The Committee for a Responsible Federal Budget estimated that the Pell program is facing a $35 billion to $95 billion ten-year shortfall and that reserves in the program “will be exhausted by 2026 or sooner.” — Both Democratic and Republican aides tell Morning Education that they’re worried about a dwindling surplus in the program and expect they’ll have to act as soon as this coming fiscal year to avoid a shortfall in the coming year. One challenge for appropriators is finding money in the Labor-HHS-Education appropriations bill that is already constrained by the 2023 debt ceiling deal caps. — Flashback: The last time the Pell Grant program faced a significant shortfall, lawmakers took a hatchet to federal student aid programs — nixing year-round Pell Grants, ending subsidized loans for graduate students, and ending a path to Pell funding for students without a high school diploma. Some of those benefits were restored in subsequent years though some cuts — including subsidies for graduate students — were made permanent. — What to watch: Biden’s budget today will provide the administration’s projection of the status of Pell Grant program funding — and the depth of any shortfall in the program. That’ll be the first major hint at where Pell Grant funding is headed. But congressional appropriators will have to contend with the official estimate from the Congressional Budget Office that’s due out later this year. IT’S MONDAY, MARCH 11. WELCOME TO MORNING EDUCATION. Please send tips and feedback to the POLITICO education team: Mackenzie Wilkes (mwilkes@politico.com), Juan Perez Jr. (jperez@politico.com) and Bianca Quilantan (bquilantan@politico.com). Follow us: @Morning_Edu and @POLITICOPro.
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