What Is a Pell Grant?
A Pell Grant is a form of need-based federal aid for students in college or other post-secondary education. In contrast with student loans, Pell Grants do not have to be repaid except in rare instances.
How a Pell Grant Works
To be eligible for a Pell Grant, students and their parents must fill out the government's Free Application for Federal Student Aid (FAFSA).1
The application, which can be completed online, asks a series of questions about the student's and parents' finances, in addition to other relevant information, such as whether any of the student's siblings will be in college at the same time. Schools that the student applies to will receive an electronic copy of the application.
Financial aid officers at those schools use the FAFSA to determine how much federal aid to offer the student. The school's calculations consider the difference between the expected family contribution (EFC), as calculated by the FAFSA, and that school's cost of attendance (COA).2
- Expected family contribution (EFC) is based on the student's and family's income and assets, such as bank and investment accounts.
- Cost of attendance (COA) includes the school's tuition and fees, as well as room and board, books, and other expenses. Most schools publish their cost of attendance on their websites and elsewhere.
To bridge the gap between the EFC and the COA, the school may offer the student a combination of Pell Grants, subsidized and unsubsidized federal loans, and paid work-study jobs. Pell Grants and subsidized loans are intended for students with "exceptional financial need," while unsubsidized loans are available to students and parents regardless of financial need. Colleges typically make these financial aid offers around the same time that they send out their acceptance letters.34
Only undergraduate students generally qualify for Pell Grants, though there is an exception for some post-baccalaureate teacher training programs.5
The confusingly named Expected Family Contribution (EFC) has been renamed the Student Aid Index (SAI) to clarify its meaning for the 2023–24 award year. EFC does not indicate how much the student and their family must pay the college, but is used to calculate how much student aid the applicant is eligible to receive.6
Pell Grant Maximums and Other Limits
The maximum annual Pell Grant for the 2023–2024 school year is $7,395. There is also a limit on how much you can receive in total: 12 terms, or roughly six years of funding.4 To keep track, the government calculates your Lifetime Eligibility Used (LEU) percentage while you are receiving Pell Grants.7
KEY TAKEAWAYS
- Pell Grants are awarded based on financial need and, unlike loans, typically don't have to be repaid.
- Applicants must complete a Free Application for Federal Student Aid (FAFSA) every year in order to qualify.
- The school determines how much Pell Grant money (if any) a student may receive, up to the federal maximum.
- Pell Grants are awarded based on financial need and, unlike loans, typically don't have to be repaid.
- Applicants must complete a Free Application for Federal Student Aid (FAFSA) every year in order to qualify.
- The school determines how much Pell Grant money (if any) a student may receive, up to the federal maximum.
Other Federal Grants for Education
While the Pell Grant is the primary subsidy for higher education, the federal government also funds several smaller aid programs.
While the Pell Grant is the primary subsidy for higher education, the federal government also funds several smaller aid programs.
