What is a Pell Grant? All Your Questions Answered

By Kate Gillian | Citizens Staff

What Is a Federal Pell Grant?

The Pell Grant is a need based federal aid. What makes it different from other types of assistance is it's not a loan. A Pell Grant typically does not have to be repaid, which makes it highly sought after. The Pell Grant was created in 1972 and is the largest grant program offered by the U.S. Department of Education (ED) to undergraduate students. It was named after Senator Claiborne Pell, of Rhode Island, the chief sponsor of the program. Pell made history not only for the Pell Grant, but also for helping create the National Endowment for the Arts and Humanities, as well as simplified train travel for all with the High-Speed Ground Transportation Act which led to the formation of what is known today as Amtrak.

Who Is Eligible for a Pell Grant?

Federal Pell Grants are awarded by the ED and intended to help eligible low-income students pay for college costs, including tuition, fees, room and board, and other educational expenses. According to the Department of Education the Federal Pell Grant Program provides financial aid to low-income undergraduates to promote access to postsecondary education. Students may use their grants at any participating institution. Grant amounts are dependent on the student's expected family contribution (EFC; see below); the cost of attendance (as determined by the institution); the student's enrollment status (full-time or part-time student); and whether the student attends for a full academic year or less. Students may not receive Federal Pell Grant funds from more than one school at a time.

Are the Pell Grant and FAFSA Different?

To apply for a Pell Grant, the first step for students is to complete the Free Application for Federal Student Aid, called the FAFSA. To put it simply, the FAFSA is a form that allows you to apply and determine eligibility for the Pell Grant. Thus, they are related, but different. Think of the FAFSA as the rocket ship you need to climb aboard to propel yourself to the galactic realm of securing the Pell Grant and earning your degree!

How Much of a Pell Grant Will You Receive?

The Federal Government runs the show and sets the amount with an easy formula. When you fill out your FAFSA form, it determines your expected family contribution and looks like the following:

Essentially, the fundamental elements in this standard formula are:

• The student's income (or assets if the student is independent)
• The parents' income and assets
• The family's household size
• The number of family members (excluding parents) attending college

The Pell Grant typically does not have to be repaid, which makes it highly desirable. Also, keep in mind the cost of tuition at the college you or your dependent chooses, as tuition will factor into your Pell Grant. A student's grant amount can also change depending on the amount of the academic year they plan to attend, and the student's enrollment status as a part time student, full time or somewhere in between. Institutions use the ED to calculate a student's Pell Grant award each year, based on the abovementioned factors.

What Factors Can Affect Your Pell Grant?

Students must submit the FAFSA every year, without fail, to continue receiving Pell Grant funds. They must be enrolled in college, and not have left the college. A student may lose Pell Grant eligibility if they do not continue making academic progress, which can include GPA requirements set by individual colleges. Because the information entered into the FAFSA may change year to year, a student's EFC may change, leading to different Pell Grant award amounts. One positive element? If you or your dependent needs more financial assistance, other financial aid a student qualifies for will not have an impact on their Pell Grant award.

Congress can also impact Pell Grant amounts based on its annual budget. Also, let's keep in mind the reality that a family’s financial situation can also change year to year. A parent or guardian can lose their job. This is a very stressful situation, but not to worry. If a family's financial situation changes after filing the FAFSA, such as a parent's job loss or significant medical bills, the family can submit an appeal to their school's financial aid office and the student may even possibly receive a larger Pell Grant award. Inflation, or other children or dependents starting college, can also impact your Pell Grant amount.

What Happens to Unused Pell Grant Money and Is It Taxable?

If there is leftover money, a student will be issued a credit. It's left up to the college or university to decide what form the credit will take. The credit can be used to pay for books, up to a certain amount, and other educational expenses during the school year. It's also important to keep in mind that Pell Grant funds are not taxable income. However, if you withdraw from a course or change enrollment status after the award has been given, there could be tax implications, or you may be asked to repay your award. The bursar's office at your college may have further information for you.

Next Steps

Whether you apply for a Pell Grant or are also considering student loans, you can find out more by perusing Citizen's library of articles on our College Bound Citizens hub and learn about what options are out there to help you afford it.