Editor's Note: On January 31, 2014, the U.S. Department of Education announced the maximum Pell Grant Award for the 2014-15 financial aid award year will be $5,730. Click here to read Barbara Thompson's latest Pell Grant update.
Established more than 40 years ago, the Federal Pell Grant program is the nation's largest source of need-based grants for undergraduate college students. But if you're just now starting college and applying for financial aid, there's a good chance you're asking one or more of the following questions about how Pell grants work.
1. Just who gets a Federal Pell Grant? Students who demonstrate financial need. This need is determined by a federal formula that can only be officially calculated after you file your FAFSA – the Free Application for Federal Student Aid. No FAFSA, no Pell grant. You also must be:
- A U.S. citizen or eligible non-citizen.
- An undergraduate student. Note: Unless you’re pursuing a post-baccalaureate teaching certificate, you can’t get a Pell Grant if you already have a baccalaureate (four-year) degree or you are pursuing a graduate degree, such as an MBA or a doctorate in physics.
- Enrolled at least part-time in a college that is eligible to participate in the federal financial aid programs.
2. How is the amount of the Pell Grant determined? Pell Grant awards are based on a formula that takes into account a number of factors, including your expected family contribution (EFC), the cost of attendance at the school you’re attending, and your enrollment status (full-time vs. part-time).
3. Is there a maximum Pell Grant amount? Yes. For the 2013-2014 financial aid award year, which begins July 1, 2013, the maximum Pell award for a full-time undergraduate student is $5,645. Maximum Pell Grant awards are lower for part-time students.
4. Is there a minimum Pell Grant award? Yes, the minimum Pell Grant award is $582 for a full-time undergraduate student.
5. When do I get my Pell Grant money? Because the federal government will send your Pell Grant money directly to your school, you may not receive any cash at all. The school likely will first apply your grant money against your school account, which will include tuition, fees, and any room and board charges paid directly to the school. If there is any leftover cash after your direct school costs have been met, your school will issue a “refund” to you.
The payment method varies by school. Most likely, the refund will be issued to you via check, a debit card, or a credit to your bank account. Also, Pell Grant refunds are typically disbursed in multiple installments. For example, if your school schedule is based on the traditional two semesters per year, you can expect to receive a Pell disbursement each semester. Make sure to respond to any information requests from your school’s financial aid office; if your paperwork is incomplete, your Pell payment will be delayed.
6. Are there restrictions on how I can use my Pell Grant refund? Yes! This is not “extra” cash that you can spend on a sound bar for your entertainment system. This money is to be used to pay for your out-of-pocket expenditures for eligible school-related expenses – for example, books, lab materials, or art supplies, a bus pass to cover your daily ride to and from campus, or the rent owed on your off-campus apartment. Pell money can be used for food, but we’re talking about the slice or two of pizza you need for your dinner, not a pizza party for your friends.
7. If I’ve been awarded a Pell Grant for my freshman year, is the grant automatically renewed for my sophomore year? No. Pell Grant eligibility is determined on an annual basis, and you have to submit a new FAFSA each year. Your Pell eligibility could increase or decrease, depending on changes in your family situation. For example, you may be eligible for a larger Pell award if your twin siblings enroll in college next year.
After your freshman year, you’ll file a “renewal” FAFSA, which is pretty much like the FAFSA you submit for your first year in college, so don’t forget or lose your FAFSA PIN. If you want to apply for financial aid for the 2014-15 academic year, make sure to file your renewal FAFSA as soon as possible after January 1, 2014.
Tip: You can use the FAFSA4caster to estimate your eligibility for federal financial aid, including federal student loans as well as Pell Grants.
Mandy Sponholtz is a Senior Policy Analyst at USA Funds in Lawrence, Kansas.
Updated May 5, 2014.