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Pell Grant program's deficit is largest ever

3-year, $18B shortfall attributed to bigger grants and rush to attend college as jobs grow scarce.

WASHINGTON - The Pell Grant program for needy college students is facing a massive shortfall as the country's bleak job market drives people back to school.

An administration official said in an interview that the program will cost $18 billion more over the next three years than Congress and the White House had anticipated.

The official, who was not authorized to speak publicly about the budget, spoke on condition of anonymity.

"The administration is working with Congress to fill the gap, and we are committed to making sure the U.S. has an educated workforce able to fill the jobs of the 21st century," the official said.

The red ink won't affect students, but it will affect the federal government, which must find a way to come up with the additional money.

Shortfalls and surpluses are common in the Pell Grant program, which forms the foundation for federal college aid. Anyone who is eligible gets a grant, making it difficult to anticipate how many people will apply. But the looming shortfall is the largest in the 36-year history of the program.

Pell Grants typically go to families earning less than $40,000. The grants went to 6.3 million students last year.

Lawmakers had approved a 13 percent increase in the maximum grant as part of President Obama's economic stimulus law. That boosted this year's grant by $600 to $5,350, a huge increase since the maximum grant has grown less than 6 percent a year on average.

The chairman of the House Education and Labor Committee, Rep. George Miller (D., Calif.), said lawmakers will work to make sure the program is funded, "as we do every year."

Miller saw a silver lining in the shortfall.

"In this difficult economy, it is good news that more people are going back to school to get the skills they need for in-demand jobs," he said. "We want to make sure we are doing everything we can to help them in this effort."

White House Budget Director Peter Orszag and Education Secretary Arne Duncan met with Miller and other committee chairmen last week to discuss the shortfall.

The surge in college-going is no surprise, said Terry Hartle, lobbyist for the American Council on Education, the leading higher-education group in Washington.

"College enrollment goes up when the economy goes down; it's been that way ever since the Great Depression," Hartle said.

As for the size of this shortfall, Hartle said two factors were at work: The economy is pushing people back into classrooms, and the big boost in the maximum grant has made more families eligible.

Whenever the grant amount increases, the program's eligibility formula changes, letting more middle-income families into the program.

Hartle said the bottom line will not change for students or their families.

"The good news is, they will get every dime they have been promised," he said. "It's bad news for the government, because they have to come up with an additional $18 billion."