What is the Federal Pell Grant?

With high tuition costs and scary student loan interest rates, paying for college is an obstacle for many students. Besides scholarships, grants are a great way to get free money for college without the stress of having to pay it back later on. The U.S. Department of Education offers a few money-saving grants for college students, including the Federal Pell Grant. Determining your Pell Grant eligibility is as easy as completing the FAFSA.

In this article, we focus on answering the question: What is the Pell Grant and how can it help you pay for school?

What is the Pell Grant?

Developed as a need-based financial aid program, the U.S. government started the Federal Pell Grant in 1972 and first awarded it to students during the 1973-1974 school year. To this day, the Pell Grant is the largest federal grant program for undergraduate students. The program is designed so that all students who are eligible can receive funds. This is not a first come, first serve basis. Pell Grant funds are also considered a form of non-taxable income.

According to the Education Data Initiative, approximately 6.8 million students receive Pell Grant money as of the 2020-2021 award year. The U.S. Department of Education currently budgets $29.6 billion per year for this program.

You can use the Pell Grant at any Title IV-eligible institution in any state, which means you won’t have to give up your dream school to get the money. The estimated percentage of students who received Pell Grants in 2019-2020 was 33.6%. This means you have a 1 in 3 chance of being eligible.

» Read: A brief guide to need-blind admissions

How is Pell Grant eligibility determined?

In general, students who have demonstrated financial need as defined by the U.S. Department of Education and who are pursuing their first degree beyond the associate’s level are eligible to receive the grant. Both United States citizens and eligible non-citizens can receive Pell Grant money. A good majority of students who receive the Pell Grant have household incomes of $40,000 per year or less.

In some cases, teachers who already have bachelor’s degrees and are pursuing advanced teaching certifications can also meet Pell Grant eligibility requirements. Additionally, there is no age limit for receiving the grant.

Additionally, students can only receive Pell Grants for a maximum of 12 terms, which is generally equal to 6 years of education.

Previously, incarcerated individuals did not meet Pell Grant eligibility requirements. However, this is slowly changing thanks to the pilot Second Chance Pell Program, which the federal government introduced in 2015. This program allows incarcerated students in state and federal prisons to receive Pell Grant funds while studying in partnering programs. The goal of this program is to expand opportunities and impact lives through education.

There are also some restrictions that could have an impact on your eligibility or how you use the funding. Students can only receive the Pell Grant from one school at a time. In other words, if you’re enrolled in multiple programs at different universities, you can only use the funds for one of these programs. Additionally, students can only receive Pell Grants for a maximum of 12 terms, which is generally equal to 6 years of education.

How much can I receive from the Federal Pell Grant?

As of the 2021-2022 award year, the maximum Pell Grant award is $6,495 per year. Whether you’re eligible for the full amount or not will depend on your Expected Family Contribution (EFC), the cost of attendance of your school, whether you’re a full-time or part-time student, and whether you plan to attend the school for a full academic year or less. For the 2019-2020 school year, the average award amount was $4,491.

Like all rules, there are exceptions. In some cases, students who enroll in an extra term can receive up to 150% of their Pell Grant award. This is often called “Year-Round Pell”. For example, if you received a Pell Grant award of $5,000, you would receive $2,500 in your first semester and $2,500 in your second semester. If you enroll in a summer term within the same award year, you could receive an additional disbursement of $2,500. This would bring your total award to $7,500.

Your Pell Grant eligibility and the amount you receive are primarily calculated based on your Expected Family Contribution (EFC). The FAFSA calculates your EFC by entering the information you provide into an established formula.

For dependent students, EFC is the estimated amount of money your parents or legal guardians can contribute towards your education within a given year. For independent students, it’s the estimated amount that you’re able to put towards one year of your own college education.

The FAFSA calculates EFC based on several factors, including annual income, investments, assets, household size, and the number of dependents in college in the given year. Students who have had a parent or guardian die during military service in Iraq or Afghanistan after September 11th, 2001 might be eligible to have their EFC calculated as zero.

How do I apply for the Pell Grant?

Figuring out your Pell Grant eligibility is free and relatively easy. All you need to do is complete the Free Application for Federal Student Aid (FAFSA). Be sure that you complete the form on the studentaid.gov website. The FAFSA is always free. Any websites asking you to enter payment information or pay a fee are a scam, unless you decide to pay a trusted third-party to help you complete the application.

Once you submit your FAFSA, you are automatically considered for the Pell Grant. If you’re eligible, you can see the grant, along with the amount you’re eligible for, in your award letter.

» Read: Fill out the CSS profile for additional financial aid opportunities

What can the Federal Pell Grant be used for?

You can use the Federal Pell Grant for all costs related to education, including tuition, fees, room and board, and other educational expenses. Other education-related costs can include things like transportation, books, school supplies, or childcare. Need a new laptop to get your schoolwork done or a meal plan to keep you energized? You can use the Pell Grant for that too.

A good rule of thumb is that if it’s something you truly need to support your academic success, it counts as an educational expense.

Pell Grant money can’t be used for things like shopping sprees, going out to dinner with your friends, or going on vacation. A good rule of thumb is that if it’s something you truly need to support your academic success, it counts as an educational expense.

How is the Pell Grant disbursed?

“Disburse” is financial aid lingo for paying out your financial aid funds. The Department of Education provides colleges and universities with Pell Grant funding. From there, it is up to the schools to decide how to disburse it. They can either apply the funds directly to your tuition and fees or pay them directly to you.

Many schools use a combination of both methods – they apply funds to your tuition and fees and issue any remaining money directly to you to cover other educational expenses. Whether you receive a direct payment or not depends on the cost of your school. For example, community colleges tend to have lower tuition and fees so there is a higher chance to be extra money left over.

How do I reapply for the Pell Grant?

Each time you complete the FAFSA which is good for one financial aid award year—from July 1st to June 30th. To reapply for the Pell Grant, you just need to resubmit the FAFSA for each award year that you need funding.

While the FAFSA isn’t anyone’s cup of tea, it’s a much quicker process after you complete it the first time. It’s a good idea to complete the FAFSA each year you’re in school, even if you don’t think you’re eligible for the Pell Grant. It’s a great tool for showing you all federal aid you are eligible for and helping cut down on those pesky student loans.

As long as your situation is still similar, you continue enrollment in an eligible program, and you haven’t reached the maximum limitations, you should be able to receive the Pell Grant for the remainder of your undergraduate education.

Do I need to repay the Pell Grant?

In general, no. However, it is important to keep in mind that it might be necessary to repay all or part of the grant in certain situations. If you withdraw from the program that the grant is funding, change your enrollment status from full time to part time, or win outside scholarships that reduce your overall financial need, it could lead to a decrease in the total award amount for which you are eligible.

If any of these situations apply to you and the award was already disbursed, you may need to return funds. To be on the safe side, reach out to your financial aid counselor to go over potential impacts.

This is a great program to take advantage of if you meet Federal Pell Grant eligibility requirements. Not only can it reduce the stress of paying for school and the burden of student loans, but it’s easy and free to apply. Finding free money that you are entitled to is a great way to set yourself up for success and maximize the value of your education.