This post was updated December 16th.
The House and Senate have reached an agreement on fiscal year 2012 funding for the U.S. Department of Education as part of an omnibus spending bill that covers multiple federal agencies. Many education supporters have been waiting to see how Congress will fund the Pell Grant program for fiscal year 2012 (which will support grants in the 2012-13 academic year) given that the House and the Senate had previously proposed very different plans for the program. Although both chambers proposed maintaining the current maximum grant of $5,550, a House draft would have made nearly a dozen changes to eligibility rules that reduced the cost of the program, while the Senate proposed redirecting money spent on student loan subsidies to Pell Grants.
The final bill includes the Senate’s student loan changes and a handful of the eligibility rules sought by the House. Specifically, the student loan provision, which would charge borrowers with subsidized Stafford loan interest during the six-month repayment grace period, would save $400 million that could be spent on Pell Grants in fiscal year 2012. Pell Grant eligibility changes in the final bill reduce the income allowable to qualify an applicant for a maximum grant under the “automatic zero” expected family contribution calculation; require Pell Grant recipients to have a high school diploma, a GED, or have been homeschooled; reduce the number of years a student can use Pell Grants from nine to six years; and require that a student be eligible for 10 percent of the maximum grant instead of 5 percent to receive the minimum grant.
Offical estimates of the omnibus appropriations bill show that the cost reductions from eligibility changes and the redirected student loan subsidies reduce the necessary total appropriation to maintan the maximum Pell Grant. Accounting for eligiblity changes and the reallocated savings from student loan changes and a reduction in the cost of the entitlement portion of the Pell Grant program, Congress needed to appropriate $22.8 billion to maintain the $5,550 maximum grant. That is slightly less than the $23.0 billion appropriated in 2011.
Of course, that isn’t the total cost of the program for fiscal year 2012. The Budget Control Act (the debt ceiling negotiation) provides a supplemental $10 billion for the program. A separate entitlement formula (one that doesn’t require annual appropriations) will kick in another $5.2 billion. The bill also redirects $612 million to the 2012 grant from student loan subsidy cuts and future savings under the entitlement portion of the Pell Grant program. After $2.5 billion is deducted to repay a shortfall in last year's grant, the Pell Grant program will cost about $36.1 billion in fiscal year 2012.
The attached table details the final cost estimate for fiscal year 2012 funding for the Pell Grant program.