US Student Aid at Risk as $17 Billion Pell Grant Shortfall Looms After Midterms

The US Congress faces a projected $16.9 billion Pell Grant funding shortfall across fiscal years 2026 and 2027. With the 3 November midterm elections approaching, a potential shift in congressional control could influence negotiations over student aid and federal education spending.

The Congressional Budget Office (CBO) estimates a shortfall of $5.4 billion to $5.5 billion for fiscal year 2026 and a further $11.5 billion for fiscal year 2027. These figures are projections, not confirmed cuts to student grants.

Midterms Could Reshape Student Aid Policy

Republicans currently control both chambers of Congress. The midterms will see all 435 House seats and 35 Senate seats contested, potentially changing the balance of power. Jon Fansmith, senior vice president for government relations and national engagement at the American Council on Education, told the National Association of Student Financial Aid Administrators (NASFAA) that Democrats were widely expected in Washington to regain control of the House.

The Senate contest is less straightforward. Fansmith said Democrats would need to win four of six contested races in Ohio, Texas, Iowa, Alaska, Michigan, and New Hampshire to take control. A divided Congress could complicate education spending negotiations. Democratic control of either chamber would increase the party's influence over budget discussions and oversight of the Trump administration, but would not automatically change student aid funding.

Frederick Hess, senior fellow and director of education policy studies at the American Enterprise Institute, told NASFAA that Democrats could prioritise scrutiny of the administration's efforts to change the Department of Education. He considered major changes to student aid policy unlikely over the following two years.

House Proposal Could Cut Other Student Aid

Pell Grants provide need-based assistance to eligible higher education students and generally do not have to be repaid. The House Appropriations Committee's fiscal year 2027 proposal would provide about $15 billion in additional mandatory funding to address the shortfall. It would also increase the maximum Pell Grant award by $50, from $7,395 to $7,445.

However, the proposal would eliminate funding for new Direct Subsidised Loans for undergraduate students from 1 July 2027, subject to protections for certain continuing students. It would also reduce Federal Work-Study funding to $908 million and Federal Supplemental Educational Opportunity Grant funding to $546 million. These remain proposed funding levels, not enacted changes.

Unlike Pell Grants, subsidised federal loans must be repaid. The government generally covers interest while eligible borrowers study at least half-time and during certain deferment periods. Ending access to new subsidised loans could therefore increase borrowing costs for some students.

Nalia Medina, NASFAA's assistant director of government relations, told the association that funding one critical programme should not come at the expense of other need-based assistance. NASFAA has called for the Pell Grant shortfall to be addressed without reducing the maximum award and has advocated stronger funding for campus-based aid.

Congress Faces Competing Funding Priorities

Federal student aid programmes are operating under a continuing resolution that maintains fiscal year 2026 funding levels through 11 December while Congress works on fiscal year 2027 spending. The Trump administration's fiscal year 2027 budget request sought an additional $10.5 billion in discretionary Pell Grant funding compared with fiscal year 2025 levels, while keeping the maximum award at $7,395. The request does not guarantee that Congress will approve the funding.

The House proposal takes a different approach by pairing additional Pell funding with reductions to other assistance programmes and changes to subsidised loan access. Lawmakers must decide whether to approve additional Pell funding, how to support other need-based programmes, and what compromises to include in a final spending agreement.

Other Education Disputes Could Add Pressure

The midterms could also affect disputes over the Department of Education's definition of a professional degree and federal student loan limits introduced under the One Big Beautiful Bill Act. The professional-degree definition faces legal challenges, while disagreements over loan limits and repayment arrangements could lead to efforts to change how parts of the legislation are implemented.

Fansmith told NASFAA that lawmakers from both parties had become increasingly aware of potential problems arising from the legislation's reconciliation process. A divided Congress could create opportunities for bipartisan technical changes, even if broader reforms remain difficult. Committee leadership could also shift. Senator Bill Cassidy, the Republican chair of the Senate Health, Education, Labor and Pensions Committee, will not return to the Senate after losing his primary in May. The leadership change could influence which education policies receive attention.

For students who rely on federal assistance, the projected Pell Grant shortfall leaves Congress facing difficult choices over how to sustain need-based funding without reducing support elsewhere. The midterms could reshape the negotiations, but the outcome will depend on the funding Congress approves and the compromises lawmakers reach.