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CBO Report: Pell Grants on Solid Footing

February 07, 2013

 

​The Congressional Budget Office (CBO) yesterday released detailed estimates on funding for the federal Pell Grant and student loan programs. The estimates represented very good news about the overall health of Pell Grant funding and showed some positive trends in student borrowing.

Specifically, CBO calculates that Pell Grants will be fully funded at their maximum award level for both the current fiscal year (FY 2013) and next fiscal year (FY 2014) without the need for increased funding.

Previous estimates had said that while Pell would be fully funded for this year, in FY 2014 it would encounter a shortfall of nearly $6 billion, which likely would have prompted congressional efforts to cut or substantially alter the program. What’s more, the estimated shortfall for years beyond FY 2014 has decreased from approximately $5 billion annually to approximately $2 billion annually (relative to a total program cost of just over $35 billion in FY 2015).

While congressional cuts to the program remain a possibility, the CBO estimates reduce a great deal of the pressure to do so and provide a greater degree of stability for the program’s future.

The news is less dramatic on student loans, but the CBO estimates that borrowing will be down in coming years compared to previous estimates. Federal loan volume overall will be roughly $7 billion less than estimated for FY 2013 and about $6 billion less than estimated for FY 2014. This is driven primarily by a decrease in the number of subsidized Stafford and parent PLUS loans being made.

The CBO prepares an annual estimate of program costs, and these estimates (generally released in January and again in March) were slightly delayed this year due to continuing uncertainty in the federal funding process. The estimates are significant because they are used by congressional committees to determine a program’s funding needs.

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