Pell Grants

    A Pell Grant is the gold-plated financial award at colleges and universities for a lot of reasons, the most obvious one being it is money for tuition, room and board that doesn’t have to be paid back!

    Pell Grants come from the U.S. Department of Education and are distributed by participating colleges and vocational schools. They are a needs-based grant for students from low-income families. They do not have to be repaid as long as the student meets program requirements and is enrolled in college for the duration of the grant period.

    A total of $28.2 billion in Pell Grants were awarded to 7.6 million college students in the 2015-2016 academic year. Those numbers are down from the record 9.3 million students who received $39.1 billion in Pell Grants in 2010-2011, but they still represent the highest participation rate and award amount of any college grant.

    The reason so many students receive an award is that qualification for Pell Grants is based on one thing – financial need – and that one requirement is measured the same way for everyone. Students must fill out the Free Application for Student Aid (FAFSA) form by the appropriate deadline to start the financial aid process. When that form is completed, they automatically qualify for the pool of Pell Grant money.

    FAFSA determines a family’s expected financial contribution (EFC) and matches that against the actual cost of attending (COA) the college of your choice. The individual schools then determine the exact amount you’ll receive, if any.

    The maximum amount available for the 2017-2018 school year is $5,920 per student. Most awards are for less than that number, which is why so many students qualify.

    Pell Grant Eligibility

    There are some qualifying standards for Pell Grants, but most are easily met. They include:
    • Demonstrate financial need, which requires filling out the FAFSA form
    • Be a U.S. citizen or eligible non-citizen (i.e. U.S. national)
    • Have a valid Social Security number
    • If you are a male between 18 and 25, be registered with Selective Service
    • Be enrolled or accepted for enrollment as a regular student in a degree or certificate program
    • Maintain satisfactory academic progress toward a degree or certificate
    • Have a high school diploma or recognized equivalent such as a GED certificate

    If you had a parent in the military who was killed in action, you could be eligible for additional Pell Grant funds if you are 24 years old or younger and enrolled in college or career school at least part-time.

    You are not eligible for a Pell Grant if you are incarcerated in a federal or state prison or are subject to an involuntary civil commitment upon completion of a jail term for a sexual offense.

    Basis for Receiving Pell Grants

    The maximum Pell grant amount for the 2017-2018 school year was $5,920, but most students receive smaller amounts.

    If you are eligible for a Pell grant, your grant amount is based on the following criteria:
    • Your financial need
    • Your school’s cost of attendance
    • Whether you are a full-time or part-time student
    • Whether you plan to enroll for a full academic year or less

    Your financial need is based solely on the results of your Free Application for Federal Student Aid (FAFSA). You do not need to complete any additional applications for Pell grants.

    To determine need, the FAFSA looks at the following:
    • Your income
    • Your assets, if you’re independent
    • Your parents’ incomes and assets if you’re dependent (students who receive Pell grants typically have family incomes below $40,000)
    • Your family’s household size
    • The number of family members (excluding your parents) currently attending college

    If your school plans to award you a Pell Grant, it will notify you in writing to tell you how much you’ll receive, as well as how and when you can expect to receive it. Your school will send funds to you at least once per semester, trimester or quarter. It likely will credit your school account first and then send any extra money to you for other expenses.

    Do You Have to Repay Pell Grants?

    The answer to that question for 99% of Pell Grant recipients is No!

    But as is often the case with federal programs, there are some instances where students who received Pell Grants must repay some or all of the grant money received.

    The most common reason for having to pay back a Pell Grant is that you received a check for more money than you were actually awarded. In other words, you should have received a check for $1,000 and, for whatever reason, received one for $1,200.

    That happens more often than you would think. You would have to contact your school’s financial aid office and repay the $200 – or whatever amount the difference was – immediately.

    Another common reason is failure to maintain satisfactory progress toward a degree or certificate. That used to be called “flunking out.”

    If, for example, you received Pell Grant money for the fall semester and withdrew at mid-terms because of health, home emergency or poor academic standing, and thus failed to complete schoolwork, you would be required to repay the money you received for that semester.

    Other instances where you could be required to repay Pell Grant money include a change of planned enrollment status (e.g. changing from full-time student to part-time) or you received unanticipated grants or scholarships from outside sources that reduce your financial aid need.

    Failure to repay the debt could mean you lose eligibility for future financial aid.

    Controversy and the Future of Pell Grants

    While the Pell Grant is a welcome aid in helping pay the cost of college, it doesn’t come close to covering the whole cost. In fact, the percentage of cost covered by Pell Grants has been dropping for over a decade and may continue to do so.

    The Federal Pell Grant Program started small in 1973, awarding an average of $270 to 176,000 students. It has expanded rapidly since then in number of students assisted, but declined in amount of costs being covered.

    Approximately 7.6 million students used Pell Grants in 2016-2017. Those who received the maximum grant of $5,815 were able to cover 60% of the costs for tuition and fees at public four-year colleges. The maximum grant represented only 29% of the average cost of tuition, fees, room and board at a state school.

    If you went the private school route in 2016-2017 and received the maximum Pell Grant money, you still needed $27,655 to cover tuition and fees and another $12,000 for room and board.

    That is the smallest percentage of college costs covered since the program’s inception in 1973.

    About 90% of college students who received Pell Grants, also had student loan debt when they graduated. On average, their student loan debt was $4,750 higher than students who did not receive Pell Grants. Surveys report that 61% of Pell Grants recipients require student loans to complete college.

    In his first few years in the White House, Democratic President Obama doubled Pell grant funding from $16.3 billion in 2008-09 to $32.9 billion at its peak in 2010-11. When President Trump took office in 2016, his first budget proposed a $3.2 billion reduction in Pell Grant funding because of “unobligated carryover funding.”

    The indications are that the current level of funding will continue through the 2017-2018, but the maximum amounts granted probably won’t increase under the Trump administration.

    Other Financial Aid Options

    If you don’t qualify for a Pell grant but need financial aid to help you through school, you may qualify for other options. If you’ve already completed the FAFSA, you’ll automatically find out if you qualify for federal aid like student loans, as well as some school-specific aid.

    Other popular forms of financial aid include scholarships and private student loans. Scholarships are awards that are typically based on merit such as a student’s academic, athletic, music or acting skills.

    Private student loans, on the other hand, depend on your credit history and score. As a young adult, you may not have a long credit history, so it’s usually in your best interest to use a co-signer.

    As college costs continue to balloon, it’s important for you to consider all of your options to help you pay for higher education. While federal solutions may be forthcoming, you have other ways to help pay for college in the meantime.

    Bill Fay

    Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at Debt.org is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at bfay@debt.org.

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