Debt Ceiling Deal May Endanger Plan to Double Pell Grants by 2029

• President Joe Biden recently struck a deal with Republicans to raise the nation's debt ceiling and avoid default.
• That deal limits his administration's ability to propose funding increases for the next two years.
• Without the ability to increase spending, experts say raising the maximum Pell Grant award will be a challenge.
• Congress may have to dip into a Pell Grant surplus fund to buoy the financial impact of Pell Grants.

President Joe Biden pledged to double the maximum Pell Grant by 2029, but his recent debt ceiling deal is seemingly at odds with that plan.

Biden's deal struck with House Speaker Kevin McCarthy places spending caps on discretionary spending for fiscal years 2024 and 2025. Factoring in projected inflation over the next two years, the deal will essentially cut government spending on non-defense programs through 2025.

That leaves Biden's plan to double the Pell Grant in a precarious position.

Pell Grants are the primary vehicle the federal government uses to help low-income college students afford higher education. Biden has consistently raised the maximum Pell Grant award each year while he's been in office, usually by raising the amount of discretionary funds designated for the program in appropriations bills.

With this in mind, advocates say that Congress and the White House are going to have to make tough calls on where Pell expansion sits on the long list of priorities.

Does the Debt Ceiling Deal Make It Impossible to Double Pell?

Despite the spending caps, continued Pell expansion isn't a lost cause.

Julie Peller, executive director at Higher Learning Advocates, told BestColleges that Biden can shift his focus to mandatory spending to raise the maximum Pell Grant. This would take congressional action outside of the traditional appropriations bill, so it would still take convincing a split Congress to get it done.

"If they continued to be steadfast in wanting to get that done, there is the non-appropriations option for sure," she said.

Pell Grants use a mix of mandatory and discretionary spending each year. The majority of the program's funds come from discretionary spending, which is laid out in yearly appropriations bills.

Biden and other lawmakers could also choose to raise the Pell in appropriations.

However, doing so would mean he'd have to make cuts to other non-defense programs. Congress could pull funds from transportation programs, for example, but it's unclear if there are any concessions Biden's administration would make in order to strengthen the purchasing power of Pell Grants, Peller said.

"The tradeoffs are many other priorities of the administration," she said.

Rachel Rotunda, director of government relations at the National Association of Student Financial Aid Administrators (NASFAA), told BestColleges that while NASFAA supports doubling the Pell Grant, she wouldn't advocate for cutting other higher education spending to get it done.

"We don't want to have to see those tradeoffs," Rotunda said.

The Biden Administration's Risky Plan B Option

Both Peller and Rotunda shared a "break glass in case of emergency" option that Biden can use to increase the maximum Pell Grant award without needing more funds from Congress.

Each year, Congress sets aside money for the Pell Grant program anticipating that "X" amount of students will qualify for the grant. However, any leftover funds not used go into a surplus account. This fund is intended to be used in case the next year, more students than anticipated qualify for the grant; that way the federal government has the money it needs to pay those grants out.

It's essentially a rainy day fund.

The government doesn't have to wait for it to rain, however, to use these funds.

According to the Congressional Budget Office, the surplus account had $13.8 billion in 2022. If Congress wanted, lawmakers could appropriate the same amount of funds for the Pell Grant program as last year, but raise the maximum Pell Grant award.

The Department of Education (ED) would then use funds from the surplus account to make up the difference.

This comes with a heavy risk, Rotunda said. Running this account dry could leave the Pell Grant program vulnerable if there is a large influx of students who qualify. She said NASFAA would not advocate for using the rainy day fund to subsidize increases to Pell.

"We're always asking to protect that fund," she said.

Potential Changes to How Pell Grants Operate

Peller said rather than appropriating more money to increase the purchasing power of Pell Grants, Biden's administration could instead try to change who receives these grants.

Pell Grants currently aid both middle- and low-income students. By changing the formula for who gets grants and how much money each student receives, Biden could effectively double Pell Grants for those who need the grant most.

There are vehicles to ensure that students with an expected family contribution (EFC) of $0 could get a significantly larger Pell Grant, she said.

Any changes to the formula or to how the government awards these grants would need to go through Congress, Peller said.

How Likely Is Doubling the Pell Grant Now?

While it's clear Biden could still push to double the Pell Grant despite the debt ceiling deal, it remains to be seen whether it's a political battle he's willing to fight.

Peller said there are many reasons to believe this setback is too severe for the president to reach his 2029 goal.

"With the congressional makeup that we currently have, all the president can do is say this is a priority for us," she said. "There's a difference between putting it out there and putting the full weight of the administration behind the proposal."

Additionally, Republican control of the House of Representatives adds another obstacle to this cause.

"Dramatic increases to Pell Grant feel very difficult in this makeup to me," Peller said. "It would be hard to get it through this Congress."

Rotunda is not as pessimistic.

Biden's most recent budget proposal included an $820 raise in the maximum Pell Grant award. It also proposed level-funding other higher education initiatives, which shows the urgency his administration has toward Pell expansion.

"I do think that Pell has clearly been a priority for this administration," she said.