The House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies (LHHS) has unveiled its spending bill for fiscal year 2027 (FY27). This bill introduces significant changes to student financial aid, including a modest increase in Pell Grants and the elimination of subsidized federal student loans. These modifications could have far-reaching implications for college affordability and student debt.
The proposed budget reduces the overall funding for the US Department of Education by 10%, amounting to an $8 billion cut. This reduction primarily affects K-12 education programs, Federal Work Study, and education research. Despite these cuts, the bill allocates additional funds to address the Pell Grant shortfall and slightly increases the maximum award.
Pell Grant Adjustments and Funding Challenges
The bill raises the maximum Pell Grant award to $7,445a $50 increase from the previous year. It also adds over $15 billion in mandatory spending to tackle the Pell Grant shortfall. The National College Attainment Network (NCAN) and its members have been advocating for a $200 increase in the maximum award to address the declining purchasing power of Pell Grants, which has stagnated for three years.
However, the bill funds this Pell Grant investment by permanently eliminating subsidized federal student loans, a move expected to save approximately $16 billion over the next decade. This approach has raised concerns, as 84% of Pell recipients rely on loans to finance their education. Kim Cook, NCAN CEO, expressed gratitude for the progress in Pell Grant funding but criticized the elimination of subsidized loans, stating, “You can’t help students afford college by taking away loans they need to stay enrolled.”
Impact of Eliminating Subsidized Loans
The elimination of subsidized federal student loans is a resurrected proposal from last year’s reconciliation bill. According to an NCAN analysis, this policy could increase student debt by an average of $6,000 per student. The estimate is conservative, as it only considers the impact on students who graduate in four years. Research indicates that 21.5% of students take more than four years to complete a bachelor’s degree, suggesting that the true cost of eliminating subsidized loans will be higher for many graduates.
If enacted, the bill would stop issuing new subsidized student loans after July 1, 2027. Current borrowers would remain eligible for subsidized loans until the end of their programs. Undergraduates would then be eligible to borrow the same amount in unsubsidized loans. This change, combined with other upcoming modifications to the federal student loan program, such as loan proration for part-time students and new lifetime borrowing limits, could exacerbate affordability challenges, particularly for low-income students.
Additional Student Aid Priorities and Next Steps
The House LHHS appropriations bill also addresses other key NCAN funding priorities. It provides level funding for the administration of the Office of Federal Student Aid (FSA), which is working to improve the Free Application for Federal Student Aid (FAFSA) user experience. The bill includes a marginal increase for both TRIO ($1.2 billion) and GEAR UP ($394 million) programs.
However, the bill cuts Federal Work Study by 26% to $908 millionthe Supplemental Educational Opportunity Grant by 40% to $546 millionand includes a moderate decrease in funding for AmeriCorps. These cuts, though significant, are less severe than the Trump Administration’s proposed eliminations of these programs.
Following the Subcommittee markup on Friday, the full House Appropriations Committee is scheduled to review the bill on June 9th. As lawmakers consider how to address the Pell Grant shortfall, NCAN urges Congress to fully fund the Pell Grant program and deliver on the promise of expanded eligibility for the 7.2 million students who depend on the grant each year.
