Biden Budget Bill Aims to Boost Pell Grants

With free community college off the table, the president is seeking to raise the maximum award of Pell Grants by up to 8.5%.

November 3, 2021 · Updated on November 10, 2021

Biden Budget Bill Aims to Boost Pell Grants
Higher Ed Policy
Photo by Chip Somodevilla / Staff / Getty Images News / Getty Images

  • Pell Grants help nearly 7 million Americans each year pay for higher education.
  • President Joe Biden has proposed changes to the Pell Grant system as part of his Build Back Better Plan.
  • This comes after free community college was cut from the framework after it failed to gain the support of moderate Democrats.

The expansion of Pell Grants is the new higher education headliner of President Joe Biden's Build Back Better plan.

Free community college for all was previously an important component of Biden's domestic legislative agenda and was wrapped up in an immense spending package currently being negotiated in Congress. However, after that policy failed to earn the necessary support from moderate Democratic senators, the focus has now shifted to Pell Grants. The government subsidies are paid out to students with financial needs, helping to make post-secondary education affordable for nearly 7 million students each year.

Under the Build Back Better framework being negotiated in the Senate, those same students would be eligible for more money paid out each semester.

However, that's not the only proposed change for the program. Here's what students need to know.

Raising the Ceiling of Pell Grants

Currently, the maximum Pell Grant for the 2021-2022 award year is $6,495, according to the U.S. Department of Education. The minimum is $650.

The Build Back Better plan would raise the maximum award by $550 to $7,045, which is an 8.5% increase.

The change would take effect next year and last until at least 2026, according to the current version of the Build Back Better Act, which is still under negotiation.

Biden's plan also aims to increase awards for students who receive means-tested benefits through the federal government — including Medicaid, Supplemental Security Income, and Supplemental Nutrition Assistance Program (SNAP) benefits. Per the bill, students who benefit from those or similar programs will automatically have a student aid index equal to $1,500 for the applicant.

Student aid index is slated to replace the expected family contribution on the Free Application for Federal Student Aid (FAFSA) starting in July 2023. It is used to calculate how much student aid someone can receive.

This change also applies to an applicant whose parents or guardians have received means-tested benefits within the past 24 months.

Pell Grant Eligibility Expanded to DACA Students

The Build Back Better plan doesn't change Pell Grant eligibility requirements for most U.S. students, but it does expand eligibility to one major demographic: Students under the Deferred Action on Childhood Arrivals (DACA) program. These are people who arrived in the U.S. undocumented as children and who now receive renewable deferred action from deportation every two years.

Currently, DACA recipients are not eligible for Pell Grants.

Currently, the maximum Pell Grant for the 2021-2022 award year is $6,495, according to the U.S. Department of Education. The minimum is $650. The Build Back Better plan would raise the maximum award amount by $550 to $7,045, which is an 8.5% increase.

There are reportedly more than 427,000 undocumented students in the higher education system, according to the Presidents' Alliance on Higher Education and Immigration. The organization estimated that approximately 181,000 of them either hold or are eligible for DACA.

Dems Dial Back Investment in Higher Education

With an estimated 6.8 million students receiving Pell Grants annually, the raising of the Pell Grant maximum is sure to have a large financial impact on the Education Department. Currently, the department budgets just under $30 billion per year for Pell Grants.

Because the change only impacts the maximum grant award, it's unclear just how much this budget will have to grow in the coming years.

While many will celebrate the increase, it's still not as heavy an investment as Biden first put forth in the initial framework of his Build Back Better plan. He originally pledged to increase the maximum Pell Grant award by $1,400.

"The $550 increase in the maximum Pell Grant is a meaningful expansion that will help millions of students and their families," the American Council for Education said in a statement. "However, the impact will be nothing like the effect that the administration intended with its [initial] proposal."

Bidenalso called for an $85 billion investment in the program, but he will fall far short of that goal. Even if every current and now-eligible Pell Grant recipient were to benefit from the new maximum, that would only add approximately $4 billion to the Pell Grant budget. In reality, not all students will qualify for the new max.

Moreover, many advocacy groups have called for a maximum Pell Grant increase far beyond the $550 now put forward.

The National Association of Student Financial Aid Administrators (NASFAA), for example, issued a statement Monday calling for a doubling of the maximum Pell Grant from $6,495 to $13,000 each year. That was what Biden originally promised on the campaign trail.

"Doubling the Pell Grant represents a sustainable, front-end, and long-term solution to college access and affordability issues and is the simplest, most predictable method of expanding Pell Grant eligibility further into the middle class," NASFAA President Justin Draeger said in a statement. "At a time when Americans are searching for simple, easy-to-understand solutions to college affordability, expanding this existing program makes the most sense."