House approval of a student loan reform plan will help alleviate a potential crisis in the Pell Grant program as growing numbers of low-income students seek to access the program during this recession, higher education advocates say.

“If this financial package does not get passed, we’re looking at a catastrophic situation,” said Rich Williams, higher education advocate for U.S. PIRG. As more students return to school or continue their educations, the Pell Grant program faces a shortfall of $13 billion and growing.

In addition, Pell Grant increases contained in the 2009 economic stimulus bill are at risk without congressional action on the loan reform plan. As passed by the House on Sunday, student loan reforms would generate about $36 billion for Pell, enough to pay off the shortfall and sustain grant increases through 2017.

Financial aid experts also endorsed the move, noting the Pell shortfall and the large increases in the number of eligible students represent a serious challenge for the program. “These developments threaten to drastically reduce students’ Pell Grant awards and ultimately their ability to pursue their higher education goals,” said Joan Crissman, interim president of the National Association of Student Financial Aid Administrators.

The House-approved bill would “set the program on a firm financial foundation” for the future, she said.

In a rare Sunday night session, the House approved a large budget reconciliation bill that would end federal student loan subsidies to banks and reallocate much of the savings to financial aid. These provisions are part of a bill that also contains House recommendations on comprehensive health care reform.

The reconciliation bill represented the second of two major votes Sunday. In the first vote, the House approved a comprehensive health bill cleared earlier by the Senate. But since some members object to provisions of the Senate bill, House lawmakers also approved a quick fix-it—the reconciliation bill—and added in student loan reform as well.