Pell Grant Program Faces $100 Billion Shortfall Over Next Decade

The federal Pell Grant program — the single largest source of college aid for low-income students — will be running in the red by the end of this fiscal year and faces a cumulative shortfall exceeding $100 billion over the next decade, according to the Congressional Budget Office's February 2026 baseline projections.

The Numbers

Pell Grant costs have surged from $21 billion in 2021 to a projected $35 billion in 2026. Annual funding, however, sits below $24 billion. That gap produces an estimated $11.5 billion deficit in 2026 alone when one-time infusions are excluded, Inside Higher Ed reported.

If Congress holds nominal funding flat — a politically likely scenario given deficit-hawkish sentiment — CBO projects the annual shortfall balloons to $14 billion by 2036, with the cumulative gap reaching $132 billion.

What Drove the Crisis

Three forces converged. First, the FAFSA Simplification Act expanded eligibility, pulling more students into the program. Second, inflation has pushed the maximum award higher through automatic indexing. Third, a 2025 decision to forward-fund grants — giving researchers lump sums rather than staged payments — consumed reserves faster than expected.

The program's mandatory spending structure means awards continue regardless of whether the account has money. But when reserves hit zero, Congress must either appropriate new funds, reduce the maximum award, or tighten eligibility. None of those options are painless.

What Grant Seekers and Institutions Should Watch

Universities that rely heavily on Pell-eligible students face enrollment risk if Congress scales back the maximum award. Financial aid offices should model scenarios now. Students filing FAFSA for 2027-2028 may face a different landscape than today's.

For organizations that fund college-access programs, Granted can surface foundation and state grants that supplement Pell — a hedge worth building before the federal math forces Congress's hand.