The Perilous State of Pell Grants
The passage of the OB3 made significant changes to who is eligible for a Pell Grant and how much these students can receive.
The new law impacts all students, i.e., rising high school seniors and current college students.
Let’s examine the changes that go into effect on July 1, 2026 and then look forward to what might come next.
Note: The FAFSA application that opens on October 1, 2025 is for the 2026-27 school year. The changes are not retroactive and should have no impact on awards for the 2025-26 school year.
Pell Grant Expansion
The new law allows Pell funds to be used for short-term, accredited job training programs.
Programs authorized to receive Higher Education Act Title IV are required to offer training between 150 to 599 course hours to be eligible.
Students who have already earned a bachelor’s degree can receive Pell funds for additional training.
Income Excluded and Included
The new law restored the exemption for small businesses and familiy farms that was eliminated by the FAFSA Simplification ACT.
Foreign income must bereported and will be included in the Student Aid Index (SAI) calculation.
Pell Grant Eligibility
Under the new law students whose Student Aid Index (SAI) is equal to or greater than twice the Pell award amount are ineligible.
Students who receive state, local, and institutional or outside scholarships that exceed their total cost of attendance (COA) are also ineligible for a Pell award. This will be especially harmful to students who rely upon the overage refund to cover their needs that aren’t included in the COA.
These last two changes will be most harmful to current college students, who have previously received the overage amount to use as needed. These students have a year to make adjustments to their budgets.
What’s Next?
Earlier versions of the bill included a $1500 to almost $1700 reduction to the maximum award amount. An adjustment to the maximum would have a ripple effect to lower award amounts
Don’t be surprised if this considered again.
