The Higher Education Act (HEA) of 1965 established the Federal Pell Grant Program. Originally titled the Basic Education Opportunity Grant, according to the Department of Education, the Pell grants currently provide "need-based grants to low-income undergraduate and certain post baccalaureate students to promote access to postsecondary education."
Senator Obama's proposed Higher Education Opportunity Through Pell Grant Expansion Act would have increased the maximum amount of the Pell Grant from $4,050 to $5,100 for academic year 2005-2006. The increase prior to this proposed legislation was a $50 increase for the 2003-2004 academic year.
The Higher Education Opportunity Through Pell Grant Expansion Act also proposed an escalator to adjust for inflation. The Act permitted the Secretary of Education to adjust the maximum amount every two years to account for the percentage increase in the Consumer Price Index (CPI) for All Urban Consumers. The CPI measures the price of goods and services households pay and is often used to show changes in the cost of living.
Part of the basis for these changes to the Pell Grant, as stated in the Act, were that over 90 percent of the recipients came from households with an income less than $40,000 per year. Plus, the amount of the grants had not kept pace with inflation and the cost of tuition. When compared to the maximum Pell Grant awards of 1975-1976, the grants in 2004 were $700 less in real terms than in 1975.
While Senator Obama's proposal did not get referred out of Committee for full consideration by the Senate, recent actions by President Obama resulted in changes to Pell Grants. The 2009 American Recovery and Reinvestment Act, signed into law in March 2009, included increases in Pell Grants to $5,350 for the 2009-10 school year, the largest increase since the program began. The Pell Grants will increase again to $5,550 for the 2010-11 school year.