Pell Grants to Shrink: Most Students Will Get Less

Overview of the "One Big, Beautiful Bill" and Its Impact on Pell Grants

Starting July 1, 2026, a major shift will take place in how Pell Grants are calculated and distributed to students. This change is part of the “One Big, Beautiful Bill,” which aims to redefine eligibility criteria and adjust the formula used to determine grant amounts. The bill will affect most students, particularly those who rely on federal financial aid for their education.

The Pell Grant program is the largest source of federal aid for students with significant financial need. It helps thousands of students afford college by providing funds based on their family’s financial situation. However, the new changes will alter how this financial need is assessed and, consequently, how much money students receive.

Key Changes to the Pell Grant Formula

One of the most notable changes involves the calculation of the Student Aid Index (SAI), which is used to determine how much a student can reasonably be expected to contribute toward their education costs. The SAI is calculated by adding up a family's income and assets and then subtracting the minimum amount needed for living expenses based on the family size.

Under the new rules, families with small farms, businesses, and commercial fisheries will have these assets excluded from the SAI calculation. This means that such families will likely see a lower SAI, which could result in higher Pell Grant amounts. This exemption was previously removed under the FAFSA Simplification Act, which took effect for the 2024-25 school year.

Another significant change is that students who have received full-ride scholarships or enough non-federal grants to cover their full cost of attendance will no longer be eligible for Pell Grants. This rule applies regardless of the student's income level, ensuring that those who already have substantial financial support do not receive additional federal aid.

Closing Loopholes for High-Income Families

Currently, students are ineligible for Pell Grants if their SAI exceeds the maximum grant amount. However, there were exceptions for certain high-income families, such as single parents with an Adjusted Gross Income (AGI) below 325% of the poverty guideline or married parents with AGI below 275%. These loopholes allowed some families to transfer income into assets, reducing their reported income and increasing their Pell Grant eligibility.

The “One Big, Beautiful Bill” eliminates these exceptions, creating a stricter standard. Students will now be ineligible for Pell Grants if their SAI is twice or more than the maximum Pell Grant amount. This change aims to ensure that only those with the greatest financial need receive aid.

Including Foreign Income in the SAI Calculation

The final major change requires families to include foreign income when calculating their SAI. This means that any income earned outside the United States must be considered in determining the student’s financial need. For some families, this could increase their SAI, resulting in smaller Pell Grant amounts.

These updates to the Pell Grant program reflect a broader effort to refine the way financial aid is distributed. While some groups may benefit from the changes—such as families with small businesses or farms—others may face reduced eligibility or lower award amounts. As the implementation date approaches, students and families should stay informed about how these changes might impact their financial aid packages.