SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Pathways to an 
Affordable Education Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Increasing the Federal Pell Grant and adding a cost of living 
                            adjustment.
Sec. 3. Funding the Federal Pell Grant program through mandatory 
                            appropriations.
Sec. 4. Mandatory Federal Pell Grant increases.
Sec. 5. Federal Pell Grant duration limit.
Sec. 6. Restoration of eligibility for year-round Federal Pell Grants.
Sec. 7. Expansion of Pell Grant exclusion from gross income.
Sec. 8. Federal Pell Grant early communication.
Sec. 9. Contribution from adjusted available income.

SEC. 2. INCREASING THE FEDERAL PELL GRANT AND ADDING A COST OF LIVING 
              ADJUSTMENT.

    (a) In General.--Section 401(b)(2)(A) of the Higher Education Act 
of 1965 (20 U.S.C. 1070a(b)(2)(A)) is amended by striking clauses (i) 
and (ii) and inserting the following:
                            ``(i)(I) for award year 2017-2018, $9,139; 
                        and
                            ``(II) for award year 2018-2019 and each 
                        subsequent award year, the amount of the 
                        maximum Federal Pell Grant determined under 
                        this clause for the immediately preceding award 
                        year, increased by a percentage equal to the 
                        estimated percentage increase, if any, in the 
                        Consumer Price Index (as determined by the 
                        Secretary, using the definition in section 
                        478(f)) for the most recent calendar year 
                        ending prior to the beginning of that award 
                        year; plus
                            ``(ii) any additional amount specified for 
                        the maximum Federal Pell Grant in the last 
                        enacted appropriation Act applicable to that 
                        award year, less''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to Federal Pell Grants awarded under section 401 of 
the Higher Education Act of 1965 (20 U.S.C. 1070a) for award year 2017-
2018 and each succeeding award year.

SEC. 3. FUNDING THE FEDERAL PELL GRANT PROGRAM THROUGH MANDATORY 
              APPROPRIATIONS.

    (a) In General.--Section 401(b) of the Higher Education Act of 1965 
(20 U.S.C. 1070a(b)) is amended--
            (1) in paragraph (2), by adding at the end the following:
            ``(C)(i) For fiscal year 2017 and each succeeding fiscal 
        year, there are appropriated, out of any money in the Treasury 
        not otherwise appropriated, such sums as may be necessary to 
        provide, in combination with any amounts separately 
        appropriated under subparagraph (A)(ii), Federal Pell Grants 
        under this section in the amount specified in subparagraph (A) 
        to all eligible students.
            ``(ii) The amounts made available by clause (i) for any 
        fiscal year shall be available beginning on October 1 of that 
        fiscal year, and shall remain available through September 30 of 
        the succeeding fiscal year.''; and
            (2) by striking paragraph (7).
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to Federal Pell Grants awarded under section 401 of 
the Higher Education Act of 1965 (20 U.S.C. 1070a) for award year 2017-
2018 and each succeeding award year.

SEC. 4. MANDATORY FEDERAL PELL GRANT INCREASES.

    (a) Increases.--Section 401(b) of the Higher Education Act of 1965 
(20 U.S.C. 1070a(b)) (as amended by this Act) is further amended--
            (1) in paragraph (2)--
                    (A) by striking ``(2)'' and all that follows 
                through ``The amount of the Federal Pell Grant'' and 
                inserting ``(2)(A) The amount of the Federal Pell 
                Grant'';
                    (B) by moving the margins of subparagraph (A) two 
                ems to the left; and
                    (C) in subparagraph (A)--
                            (i) by redesignating clause (iii) as clause 
                        (iv); and
                            (ii) by inserting after clause (ii) the 
                        following new clause (iii):
                    ``(iii) the amount of the increase calculated under 
                paragraph (7), less''; and
            (2) by adding at the end the following new paragraph:
    ``(7)(A) The amount of the maximum Federal Pell Grant for which an 
eligible student is eligible during an award year, as specified in 
paragraph (2)(A) for that award year, shall be increased by the 
difference between--
            ``(i) the average total cost of attendance for first-time, 
        full-time undergraduate students in the United States at public 
        2-year institutions for students living on-campus, as 
        determined by the National Center for Education Statistics, for 
        the last academic year preceding the beginning of the fiscal 
        year for which the increase is made; and
            ``(ii) the amount of the maximum Federal Pell Grant for 
        which a student is eligible during an award year, as specified 
        in paragraph (2)(A) for that award year.
    ``(B) For purposes of subparagraph (A), an eligible student is an 
otherwise eligible student who has a negative or zero estimated family 
contribution.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to Federal Pell Grants awarded under section 401 of 
the Higher Education Act of 1965 (20 U.S.C. 1070a) for award year 2017-
2018 and each succeeding award year.

SEC. 5. FEDERAL PELL GRANT DURATION LIMIT.

    (a) In General.--Section 401(c)(5) of the Higher Education Act of 
1965 (20 U.S.C. 1070a(c)(5)) is amended by striking ``12 semesters'' 
and inserting ``15 semesters'' each place the term appears.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to Federal Pell Grants awarded under section 401 of 
the Higher Education Act of 1965 (20 U.S.C. 1070a) for award year 2017-
2018 and each succeeding award year.

SEC. 6. RESTORATION OF ELIGIBILITY FOR YEAR-ROUND FEDERAL PELL GRANTS.

    (a) In General.--Section 401(b) of the Higher Education Act of 1965 
(20 U.S.C. 1070a(b)) (as amended by this Act) is further amended by 
adding at the end the following:
            ``(8) Year-round federal pell grant students.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection, the Secretary shall 
                award, to an eligible student who meets the 
                requirements in subparagraph (B) who has received a 
                Federal Pell Grant for an award year and is enrolled in 
                a program of study for one or more additional payment 
                periods during the same award year that are not 
                otherwise covered by the student's Federal Pell Grant, 
                an additional Federal Pell Grant for the additional 
                payment periods.
                    ``(B) Eligibility.--In order to be eligible to 
                receive the additional Federal Pell Grant for an award 
                year that is described in subparagraph (A), a student 
                shall, in addition to meeting all eligibility 
                requirements for the receipt of a Federal Pell Grant--
                            ``(i) be enrolled on at least a half-time 
                        basis for a period of more than one academic 
                        year, or more than 2 semesters or the 
                        equivalent of 2 semesters, during a single 
                        award year; and
                            ``(ii) be enrolled in a program of 
                        instruction at an institution of higher 
                        education for which the institution awards an 
                        associate or baccalaureate degree or a 
                        certificate.
                    ``(C) Amounts.--In the case of a student receiving 
                more than one Federal Pell Grant in a single award year 
                under subparagraph (A), the total amount of the Federal 
                Pell Grants awarded to such student for the award year 
                shall not exceed an amount equal to 150 percent of the 
                amount of the maximum Federal Pell Grant for which such 
                student is eligible, as specified in paragraph (2)(A) 
                for that award year.
                    ``(D) Inclusion in duration limit.--Any period of 
                study covered by a Federal Pell Grant awarded under 
                subparagraph (A) shall be included in determining a 
                student's duration limit under subsection (c)(5).
            ``(9) Crossover period.--In any case where an eligible 
        student is receiving a Federal Pell Grant for a payment period 
        that spans 2 award years, the Secretary shall allow the 
        eligible institution in which the student is enrolled to 
        determine the award year to which the additional period shall 
        be assigned.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on July 1, 2017.

SEC. 7. EXPANSION OF PELL GRANT EXCLUSION FROM GROSS INCOME.

    (a) In General.--Paragraph (1) of section 117(b) of the Internal 
Revenue Code of 1986 is amended by striking ``received by an 
individual'' and all that follows and inserting ``received by an 
individual--
                    ``(A) as a scholarship or fellowship grant to the 
                extent the individual establishes that, in accordance 
                with the conditions of the grant, such amount was used 
                for qualified tuition and related expenses, or
                    ``(B) as a Federal Pell Grant under section 401 of 
                the Higher Education Act of 1965 (as amended by the 
                Pathways to an Affordable Education Act).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2015.

SEC. 8. FEDERAL PELL GRANT EARLY COMMUNICATION.

    Section 485E of the Higher Education Act of 1965 (20 U.S.C. 1092f) 
is amended--
            (1) in subsection (a), by inserting ``elementary schools,'' 
        before ``secondary schools,''; and
            (2) in subsection (b)--
                    (A) in paragraph (1)(A), by striking ``students'' 
                and inserting ``students and parents of students''; and
                    (B) in paragraph (2)--
                            (i) in the paragraph heading, by inserting 
                        ``Elementary and'' before ``secondary'';
                            (ii) by inserting ``elementary schools,'' 
                        after ``financial aid,'';
                            (iii) by striking ``notify students in 
                        secondary school'' and inserting ``notify 
                        students in elementary or secondary school'';
                            (iv) by striking ``students' junior year of 
                        secondary school'' and inserting ``students' 
                        sixth grade year of school''; and
                            (v) by striking ``students in secondary 
                        school'' and inserting ``students in sixth 
                        grade''.

SEC. 9. CONTRIBUTION FROM ADJUSTED AVAILABLE INCOME.

    (a) Amendments.--
            (1) Dependent students.--Section 475(b) of the Higher 
        Education Act of 1965 (20 U.S.C. 1087oo(b)) is amended in the 
        matter following paragraph (3), by striking ``except that'' and 
        inserting ``except that for purposes other than subpart 1 of 
        part A of this title''.
            (2) Independent students without dependents.--Section 
        476(a) of the Higher Education Act of 1965 (20 U.S.C. 
        1087pp(a)) is amended in the matter following paragraph (3), by 
        striking ``except that'' and inserting ``except that for 
        purposes other than subpart 1 of part A of this title''.
            (3) Independent students with dependents.--Section 477(a) 
        of the Higher Education Act of 1965 (20 U.S.C. 1087qq(a)) is 
        amended the matter following paragraph (4), by striking 
        ``except that'' and inserting ``except that for purposes other 
        than subpart 1 of part A of this title''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to award year 2017-2018 and each succeeding award 
year.
 Pathways to an Affordable Education Act This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to modify provisions related to the Federal Pell Grant program. Among other things, it:   increases the maximum Pell Grant award for academic year 2017-2018 and adjusts it in subsequent award years to account for inflation,  converts the Pell Grant program into a mandatory spending program,  increases from 12 to 15 semesters a student's lifetime Pell Grant eligibility period, and  restores year-round grants.   Additionally, the bill amends the Internal Revenue Code to include, as a qualified scholarship excludible from gross income, any amount received as a Pell Grant.
Pathways to an Affordable Education Act