- The U.S. government awards Pell Grants to college students with exceptional financial need.
- Unlike student loans, there’s no need to repay Pell Grants as long as the student remains in their education program full-time.
- Students may apply for Pell Grants through the FAFSA, which can be found online.
Students pursuing higher education may consider applying for a Pell Grant to help pay for their schooling. The U.S. federal government offers this form of financial aid. And unlike a student loan, there’s usually no need to repay Pell Grants.
Want to know how a Pell Grant works and how to apply? This article explains what you need to know about the grant.
What Is a Pell Grant?
A Pell Grant is a form of federal financial aid awarded by the U.S. Department of Education that helps low-income students pay for college. Recipients may use the funds to pay for education expenses such as tuition, fees, textbooks, and food and housing.
However, Pell Grants may not cover the entire cost of a university education; the maximum award for the 2024 to 2025 year (from July 1, 2024, to June 30, 2025) is $7,395. In addition, the Department of Education limits each Pell Grant recipient to a maximum of 12 terms of funding (roughly six years) over their lifetime.[1]
Do You Have To Pay Back a Pell Grant?
Typically, Pell Grants do not need to be repaid, unlike student loans. However, there are a few instances in which a student may have to repay all or part of a Pell Grant, such as if they:
- Withdrew early from the program for which the grant was awarded — for example, if they quit college in the middle of a semester
- Change their enrollment status from full-time to part-time enrollment (typically, in this scenario, the student will have to pay back part of the original award)
- Receive other grants or scholarships that reduce the need for federal student aid
- Receive Pell Grants for more than one program at a time[2]
- Received a Teacher Education Assistance for College and Higher Education (TEACH) Grant, but did not meet the requirements of the TEACH Grant service obligation
How a Pell Grant Works
To be considered for a Pell Grant, students must apply and meet specific criteria. Here's how it works:
Eligibility
To be eligible for a Pell Grant, a student must demonstrate exceptional financial need, as detailed on the FAFSA form (see below for more information on FAFSA). They also must not have previously received a bachelor’s, graduate, or professional degree.
Although graduate students typically don’t qualify for Pell Grants, there are certain cases in which someone enrolled in a post-baccalaureate teaching certificate program may qualify.
Pell Grants aren’t limited to U.S. citizens. Permanent residents, nationals, and other noncitizens such as refugees, asylum seekers, and certain visa holders may apply.[3]
In addition, individuals who are currently incarcerated in federal or state prisons and enrolled in eligible education programs may also apply for Pell Grants.
How To Apply for a Pell Grant
Applying for a Pell Grant is relatively straightforward. All the student needs to do is to complete and submit the FAFSA. This form will determine whether the applicant is financially eligible for a Pell Grant. Federal Student Aid office will also use the information in the FAFSA to determine how large an award will be granted.
The FAFSA, which students can complete online, asks questions about the student's and parent's income, assets, and family size. The information provided will determine the applicant’s eligibility based on their Student Aid Index (SAI) number. The Federal Student Aid office calculates this number based on the income, assets, and benefits of the student and their family.
The school’s cost of attendance (COA), which includes tuition, fees, books, food and housing, etc., is also considered. Everyone who fills out the FAFSA is automatically considered for a Pell Grant. Even students who don’t believe they are eligible for a Pell Grant due to financial status are encouraged to complete the form. That’s because it also serves as the basis for other financial aid and scholarships.
How Is Pell Grant Money Disbursed?
When someone is awarded a Pell Grant, the money is transferred directly from the federal government to the school. Typically, the school then applies the funds toward education related expenses such as tuition, fees, and room and board.[4]
What Happens to Unused Pell Grant Money?
After tuition, fees, food and housing, and any other education-related expenses are paid, any funds that are left over from the Pell Grant will be paid to the student unless they have directed the funds to be transferred to the following term. By law, the school must pay the remaining credit balance within 14 days.[5]
This money may be used however the student chooses. However, they must report any Pell Grant money not used toward qualified educational expenses to the IRS as taxable income.[6]
Other Grants You Should Know About
The Pell Grant is the best-known federal financial aid award for college students. However, the U.S. government also offers several other grants.
TEACH Grants
TEACH Grants are earmarked for students planning to teach certain high-need subjects in low-income areas. These grants are worth up to $4,000 per year.
Within eight years of graduation, TEACH Grant recipients must teach full-time for four years. If not, their grant award will be converted to a Direct Unsubsidized Loan that must be repaid with interest.[7]
FSEOG Awards
Like Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG) are also intended for students with exceptional financial need. Not all schools participate in the FSEOG program. FSEOG awards range from $100 to $4,000 per year, depending on the need and availability of funds. As with Pell Grants, FSEOG awards are also awarded based on the student’s FAFSA.[8]
Military Service Grants
The federal government also offers a Maximum Pell Grant to students whose Student Aid Index score renders them ineligible for a Pell Grant but who lost a parent or guardian serving as a member of the U.S. armed forces or as a public safety officer following 9/11. The student must be under 33 years old as of January 1 of the year prior to the beginning of the school year.[9]
The Bottom Line
Pell Grants may make college affordable for students with financial need. Unlike student loans, they don’t have to be repaid as long as the conditions of the award are met. They’re also easy to apply for — students must simply fill out the FAFSA form.
