The Obama Pell Grant Expansion: Critical Points

Written by Michael Bennet

The Obama Pell Grant expansion was originally signed into law in the spring of 2010 under the guise of the Student Aid and Fiscal Responsibility Act, or SAFRA. This piece of legislation brought about a significant expansion of the Pell Grant program, allowing hundreds of thousands of additional students to receive the Pell Grant for the 2010-2011 school year.

It also increased the maximum award amounts across the board, as well as putting forth an increased maximum Pell Grant amount, one that will rise on an annual basis over the next 10 years or so.

SAFRA is often associated with President Obama because not only did it expand the Pell Grant program, something that Obama’s administration strongly endorsed, it also drastically changed the student loan market by eliminating the FFELP federal student loan program that existed for several decades.

While it remains to be seen how exactly SAFRA will change the financial aid landscape over time, we can confirm that it should benefit students who wish to receive Pell Grant aid over the next few years or so.

Here are some specific measures that the Obama Pell Grant expansion put into law:

  • Raised maximum Pell Grant amount from 5,350 dollars to 5,550 dollars
  • Scheduled maximum award amounts to increase according to the Consumer Price Index plus one percent beginning in 2014
  • Increasing the maximum EFC cutoff threshold to 5,273 from 4,617
  • Will inject over 36 billion dollars into the Pell Grant program over the next ten years

Problems Going Forward

While SAFRA took affect for the 2010-2011 school year, there may be an issue with some of the major provisions it has stipulated for going forward due to a recent shortfall in funding for the Pell Grant program. Congress is planning on making a vote at some point over the next few months in order to rectify this situation, and as it stands now, they are planning to revoke some of the capital injection that SAFRA initially promised, so that this gap in funding can be reclaimed.

The amount of funding that could possibly be cut is estimated to be at around 5.7 billion dollars, as this is the figure that the program must come up with in order to maintain its current level of funding.

While it remains to be seen how this is all going to play out, it is safe to say that if this passes through Congress then students should expect several major changes to their Pell Grant awards starting in the 2011-2012 school year. The most drastic change will come by way of lower award amounts, with the maximum Pell Grant amount estimated to drop over eight hundred dollars, from 5,550 to 4,705 dollars for the 2011-2012 academic year.

Overall cutbacks such as these are a definite lose-lose situation for most students who count on receiving the Pell Grant to pay for college, and in the end I hope Congress smartens up, and begins to realize that students are already having a difficult time paying for school without any further challenges.

Update. Please view this post about the 2011-2012 Pell Grant cuts to learn more about the impact this Congressional vote has had on the Pell Grant program.