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Contrary to what the education policy community in Washington and the policy makers at Capitol Hill think, what Pell Grant program is facing is not a shortfall but a serious funding problem. It is not the usual shortfall where the Congress underfunds one year and fills it up the next. This serious issue has resulted due to a stupendous increase in the program costs from $14 billion in the year 2008 to $32 billion in the year 2011 predominantly due to a higher maximum grant. Other factors that have resulted in the present crisis include enrollment trends in colleges and increase in the number of eligible students.

Earlier this year, the America Recovery and Reinvestment Act ensured that there was an increase in the maximum Pell Grant for the year 2009-10 from $4731 to $5350 by the Congress. While this may be a small amount from the student’s perspective it denoted a need to appropriate $26.8 billion and a separate mandatory funding of $2.7 billion.

The Democratic congressional majority as well as the President are now pushing for a further increase to an amount of $5550 as the maximum grant for the year 2010-11 consequently pushing up the appropriation amount to $20.6 billion with an actual required cost of $27 billion, the shortfall of which will be made up by the unspent stimulus funds amount of $6.5 billion.

Challenge comes in the form of the amount set aside by the Congress that provides only $17.5 billion. This categorically means that right from this summer, the Congress will pass a bill that will amount to a shortfall of $3 billion. Moreover, with the running out of the economic stimulus funds, Congress will have a mammoth task of shelling out a whopping $32 billion in order to provide a maximum grant of $5550 in 2011.

It may seem like the student loan reform legislation’s new Pell Grant funding will be able to take a little pressure off the annual amount of appropriation required. But it is definitely not so. All this proposal can do is to fund the rising grants year after year and provide new Pell Grant funding.
The basic funds for the $30 billion annual appropriation have to be provided by the Congress. This figure is definitely set to grow with each passing year. The program will receive just about $2 billion as a supplement through the SAFRA funding formula for the year 2011.

The basic and urgent cause for concern is therefore the funding crisis that will make it a nigh impossible task for the program to muster up $32 billion annually which can be hardly considered a shortfall. Commitment to the funding program is commendable. However, this will surely not go down well with the budget hawks? They may simply view this fiasco as a funding program that has gone way out of control with no near solution.

To save the program from further crisis and fiasco, it is high time the policy makers put their head together and find a way out of this challenging situation.