The Higher Education Act of 1965 established the first program for federal college grants. The Act, signed by then-President Lyndon B. Johnson on November 8, 1965, began the Educational Opportunity Grant program, the precursor to the Pell Grant program. The Educational Opportunity grants provided up to $1,000 for needy students to go to college. The Higher Education Act of 1965 also introduced the federal work-study program, where the federal government provides money in exchange for the student working a job on campus.
Although the Higher Education Act of 1965 laid the groundwork for the federal work-study and grant programs, its subsequent reauthorization in 1972 substantially expanded these programs. The Nixon administration proposed Basic Educational Opportunity Grants to replace both work-study and the original Educational Opportunity Grants and Congress decided to adopt Basic Educational Opportunity Grants (BEOG) as a foundation for all other types of federal student aid. The initial authorization of the BEOG was at a maximum of $1,400. The intention of the BEOG was to support low-income students and went only to the students in most need.
The reauthorization of the Higher Education Access act was in 1980 and the BEOG were renamed "Pell Grants," in honor of U.S. Senator Claiborne Pell of Rhode Island. In 1986, Congress introduced a number of new student loan programs, marking a shift from grant-based aid to loan-based aid that is still present in 2010. The 1992 amendments to the Higher Education Access act simplified the process of applying for federal grants; the amendments created the Free Application for Federal Student Aid (FAFSA) and created a single formula for establishing a student's need for Pell Grants.
The College Cost Reduction and Access Act of 2007 (CCRA) overhauled the federal student aid program. In addition to cutting loan interest rates, the Act increased the maximum Pell Grant from $4,310 in 2007-08 to $5,400 in 2012-13, the largest increase in Pell Grant in several years. The CCRA also authorized TEACH grants, intended to provide federal grants to students who are studying to become teachers. These grants provide up to $4,000 per year in exchange for a commitment to teach in a high-need specialty, like bilingual education or special education, after graduation.
The purchasing power of the Pell Grants has eroded considerably over time. In fiscal year 1976, the first year the grants received funding at their authorized level, the $1,400 grant covered 72 percent of the cost of attendance at a typical four-year public college. In the 2008-09 academic year, the maximum Pell Grant covered just 33 percent of the cost of attendance. The CCRA will slightly raise the maximum Pell Grant award amount. In addition to the Pell Grants, students may also be eligible for Academic Competitiveness Grants or Federal Supplemental Educational Opportunity Grants, which supplement Pell Grants for the students in most need.