For nearly 50 years, Pell Grants have been an important tool to help parents and students cover college costs. Here’s a closer look at how this federal grant program works and who qualifies for it.
What is a Pell Grant?
Administered by the U.S. Department of Education, the Pell Grant program is a financial aid resource primarily intended to help undergraduate students pay for tuition, fees, room and board, and other costs of attending college.
The amount awarded to each student who applies is based on financial need — which means that more money goes to students who have lower incomes or who have parents unable to contribute a significant amount toward college expenses. Because this aid is classified as a grant, it doesn’t have to be repaid (unlike a student loan).
How to determine Pell Grant eligibility
To be eligible for a Pell Grant, students must be U.S. citizens and enrolled — or about to enroll — in undergraduate classes for their first degree (students working toward a second undergrad degree aren’t eligible). There is one exception to this: Students pursuing graduate teaching degrees can qualify, too.
To qualify, students must also demonstrate need, which is calculated using factors like the cost of attending a specific school, full-time or part-time attendance status, and most importantly, Expected Family Contribution, or EFC. A lower EFC means a student is eligible for a larger amount of Pell Grant and other aid.
Applying for a Pell Grant
In order to qualify for and receive Pell Grant funds, students and their parents need to fill out and submit a Free Application for Federal Student Aid, or FAFSA. This application gathers details on parental income and assets, along with information about other siblings also attending college. This data is used to calculate students’ EFC, which is subtracted from the total cost of attendance to determine the amount of aid a student is eligible for.
Students must submit a FAFSA every school year to remain eligible for Pell Grants and other federal aid. Overall, students can only qualify for 12 total semesters or terms of Pell Grant aid. Nerdwallet contributor Anna Helhoski notes an exception to this last requirement — students who withdrew from school because of COVID-19 won’t have that semester counted toward their lifetime Pell Grant limit.
Other Pell Grant information to know about
What’s the maximum annual Pell Grant award? The Pell Grant maximum changes from year to year. For 2022-2023, it’s set at $6,895. Regardless of whether students qualify for the full amount or not, what they do get is frequently packaged with additional grants and loans to cover the school year’s full costs.
How are Pell Grant funds disbursed? Pell Grant money usually goes directly to the school. Once it’s applied to tuition, fees, and room and board, any leftover funds will be paid to the student.
Is a Pell Grant taxable? In an article for Bankrate, Holly Johnson states that Pell Grant money is exempt from taxes if it’s used for approved educational costs. Any funds spent on optional expenses must be tracked and reported as income.
Is Pell Grant repayment ever required? If students change their enrollment status or earn non-federal grant and scholarship money after the Pell Grant is applied, they may be required to pay back some or all of the money.
As the cost of a college education continues to rise, the Pell Grant remains a crucial source of financial aid. It’s especially important for students and their parents who might otherwise struggle to pay for an undergraduate degree — and gaining access is as simple as filing an annual form.