The Pell Grant

When most students are asked how they will pay for college, they answer “government grants.” Many people are under the impression that government grants offer free money to anyone who wants to go to college. This isn’t the case. While there are government grants available to students who want to attend college, students must apply for these grants and meet several eligibility requirements before they are given money for school.

The Pell Grant is the United States’ most well-known and common type of government grant. While many students get the grant each year, it is not free money that is available to all students. However, students should always apply for Pell Grants, even if they don’t think they can get them, because some people qualify for a Pell Grant but does not realize it.

What is the Pell Grant?

Offered by the federal government, the Pell Grant is a monetary gift presented to undergraduate and some graduate students who demonstrate financial need. Students often confuse federal grants and federal loans. The difference between the Pell Grant and the federal loan is that Pell Grants do not have to be paid back. The Pell Grant award amount changes each year. In 2011, it was $5,550.

The Pell Grant is a financial aid incentive awarded by the Federal government. The main qualification for the Pell Grant is to have a low income. These grants were previously called Basic Educational Opportunity grants. Undergraduate students seeking their first degree and some graduate students may qualify for the grants depending upon their EFC.

EFC stands for Expected Family Contribution. The United States Congress sets the EFC that qualifies for Pell Grants and other types of financial aid each year. Other factors which are weighed in the calculations include cost of attendance at the college or university, full time or part time attendance, and how long the student attends the college during the academic year.

Pell Grant Requirements

One requirement in order to apply, qualify, or receive any financial aid from the Federal government is completing the FASFA. FASFA or Free Application for Federal Student Aid asks questions concerning income, assets, and other important information about the student. This information is asked so that the EFC can be calculated. Once the EFC is calculated a Student Aid Report or SAR is also created. Within this report the student and parents will be able to see what types of financial aid the student qualifies for.

Exact amounts that are awarded to students vary widely. Depending upon funding within the fiscal year in which the grants are distributed they may increase or decrease in value. During Fiscal Year 2009 the lowest amount that was distributed was $500. The maximum amount that was awarded to a student was $5300. The amount that a student will receive is based upon their “need”. Need is based upon the financial information a family provides on the FASFA form.

Why Does the Federal Government Give the Pell Grant?

The intention behind the Pell Grant is to help equalize education for students from low income families. People with college educations typically earn more than those with just high school diplomas. College graduates are also more likely to have better health, more leisure time, better quality of life and more time with their families than non-graduates, according to ERIC Digest. However, college is expense. It is much less likely that students from low income families will have the opportunity to reap all of these benefits by attending college.

The Pell Grant was designed to help reduce that gap between the rich and the poor. Thanks to the Pell Grant, it is not just wealthy families who can send their children to school. Even families with very meager income can pay for large portions of college tuition with the grant, allowing families a more equal opportunity for education.

A major issue with Pell Grant is that they are not increasing with the rate of tuition. This means that a Pell Grant that would have paid a majority of the cost of attendance ten to 15 years ago now only pays 25%. The Federal government has realized this and are working to raise the maximum amount that can be awarded. In 2011 this amount will reach $5,800 per year that the student is in college.

Who Gets the Pell Grant?

To qualify for the Pell Grant, students must meet the following requirements:

• Students must be able to show financial need.
• Students must be enrolled in a participating secondary school, including colleges, universities and vocational programs.
• Students must not have already achieved a bachelor’s or any other professional degree in most cases. In some cases, the government makes exceptions for this rule for students entering certain types of programs, like teacher preparation programs.

To learn more about the requirements for obtaining a Pell Grant, students can visit the eligibility section of the U.S. Department of Education’s Pell Grant website.

Students do not ever have to repay these grants to the Education department. 42% of recipients attend a public four year university while 35% attend public two year colleges. 90% of Pell Grants are awarded to students who come from families making less than $40,000 a year.

What Does it Mean to Show Financial Need?

Most websites that give information about the Pell Grant explain that only students who “show financial need” can receive it. The problem is that most information sites don’t tell students what “showing financial need” means, and almost all students consider themselves as people who need finances when they go to college.

To calculate financial need, the US government uses a system called Expected Family Contribution, or EFC. A student’s EFC is the amount that a student and/or the student’s family is expected to be able to contribute to his or her college expenses. To calculate this amount, government uses the Federal Methodology, a complex series of formulas.

However, the items that the government uses to calculate the formula are rather simple: they include the family’s income, assets and other students who are in college. The government does not look at how much debt a person has, what other pressing bills the person has (like medical expenses) or if a person has had a major job change. This can hurt some students because many students have EFCs that are not realistic when other issues are taken into account.

Students with lower EFCs get more financial aid and are more likely to get the federal Pell Grant. Students with higher EFCs get less government money. The government expects the student or the student’s family to be able to pay for most of his or her education when a student has a high EFC.

Students often want to have an idea of what their EFC will be before they start college. Many organizations, like the College Board  provide free resources that can help students learn more about their EFC to determine whether or not they will likely be eligible for the Pell Grant.

Pell Grant funding is only available in the amount budgeted. Once the funding has been allocated to students no more can be distributed until the following year of the FASFA. It is extremely important to apply as early as possible. Apply in January even if your taxes have not yet been completed. Using estimated numbers and returning to correct them is better than waiting until late March when your award may be reduced.

Be honest on the application! If you believe that you are not receiving a fair student aid report, contact the school where you will be attending. Filing a letter of hardship will allow the school to look closer over the families financial history and may open up additional funding. Pell Grants may seem out of reach, but depending upon the information on the FASFA you may qualify!

What If I Am an Adult Returning to School?

An EFC is calculated for non-traditional students just as it is calculated for traditional students. However, for non-traditional students, the EFC is calculated using the students’ information, not her parents’ information. To be considered an independent and have your own income used to determine your EFC, you must meet one of the conditions below:

• You are over 24.
• Both of your parents are deceased.
• You are married.
• You have a depedant, such as a child. (If you are pregnant, you can count the child as a member of your household as long as he or she will be born during the award year.)
• You were a ward of the state until you were 18.
• You are a veteran. (Being a veteran means having been on active duty and having been discharged. You can’t count ROTC service, reserve service or dishonorable discharges.)
• You were a foster child after age 13.
• You have been emancipated by the court.
• You are homeless or at risk of being homeless.

Many students who live on their own, support themselves or consider themselves adults do not meet these criteria. Even students who live as adults and have no contact with their parents will have their parents’ or guardians’ information considered to determine their EFC.

What if My Parents are Divorced?

If your parents are divorced, the EFC will be determined using the income from the parent with whom you lived the most during the past year. If you have a stepparent, his or her income may also be used to determine your EFC. Issues of legal custody and prenuptial agreements mean little where the EFC is concerned.

Is the Pell Grant Merit Based?

No, the Pell Grant is not merit based. How well you did in high school, what classes you took, what extracurricular activities you were in and whether you got an honors diploma is not considered in whether you are eligible for the Pell Grant.

The grant is intended to equalize education for students of high and low incomes, and making the grant merit-based would not do that, since many low income students have access to fewer resources to help them achieve while in school. The only “merit” requirement is that you must be admitted into a post-secondary program to receive the grant.

Is Income the Only Thing Considered When Determining Whether I Get the Pell Grant?

In addition to income, the government will also consider the cost of tuition and other expenses at the school the student has chosen. Further, the number of people going to school in the family can change a person’s eligibility for a Pell Grant. This does not just include children who are going to school.

If student has two brothers going away to college and a parent taking night classes at a community college, that student has a family in which there are three students going to college. Remembering to add the parent could take that student from ineligible for the Pell Grant to eligible.

Students should also remember that the FAFSA only asks for the number of students who are going to college — not how they pay. In the example above, perhaps both of the student’s brothers got athletic scholarships to attend school that covered their entire tuition bill. The student can still claim those brothers as people in her family going to college when she fills out the FAFSA.

Are All Pell Grant Awards the Same?

Each year, the government establishes a maximum award amount for the grant. However, not all students who are approved for the grant get this award amount. The value of a student’s Pell Grant also depends upon the person’s financial situation. Students who have the highest amounts of financial need may be eligible for the maximum amount. Students who show moderate financial need may be eligible for just a few thousand dollars.

How Can I Apply for the Pell Grant?

Students apply for the Pell Grant using the Free Application for Federal Student Aid (FAFSA). This is one application that students use to apply for all types of federal aid, including not only the Pell Grant but other grants and loans. The document takes a long time to fill out and it requires a number of questions about your family’s finances, so waiting until the last minute to compete it is never a good idea. Students can find the FAFSA online or at their high school counselor’s office.

Students can also obtain a copy for the FAFSA at a local college or university. Many students prefer filling out the application online. The online option allows students to begin the application, save their work, and come back to it later. This means that they don’t have to worry about losing the paper form or allowing personal data to be obtained by another person. Many students have to start and stop filling out the FAFSA several times because of a number of questions that only parents can answer.

What Are Some Tips for Filling out the FAFSA?

Students should make sure to read each of the questions slowly and carefully and make sure they understand it before they attempt to answer it. Some of the questions on the FAFSA are confusing. Students may not be sure if the questions are referring to themselves or their parents. Students might not understand the vocabulary used in the FASFA, and they should use the dictionary to look it up. In many cases, high schools and colleges offer financial aid fairs or workshops in which they discuss issues related to filling out the FAFSA.

Students and their parents are encouraged to attend these workshops, since they can make the process of filling out the paperwork much easier. However, students and their parents should bring all financial paperwork with them to these workshops, as they will need much of this information to correctly fill out the form.

However, students and their parents should be wary of professionals charging money to help students fill out the FAFSA. While some of these companies may be legitimate, they are often unnecessary and just result in your loosing money. Students and parents should never follow any “professional” advice that encourages them to lie on the FAFSA.

What Are Some Popular FAFSA Myths About Pell Grants?

The FAFSA asks students to check what types of financial aid programs they are interested in when they fill out their applications. These include grants, work-study and loans. Many students think that if they don’t check non-grant options, like loans and work-study, then they will be awarded more grant money. This isn’t the case. In fact, this can actually hurt the student, as it is always best to get as much information as possible about the different types of financial aid programs a student may be able to use.

Students and their parents also often see the FAFSA process as an appeals process or a process through which they can make their case that they should get more grant aid. They do this by writing notes in the margins and attaching letters, paperwork (like unemployment notices) and even essays that discuss their financial need or unusual circumstances.

However unfair it may seem, this won’t help a student’s cause because the FAFSA uses only calculations to determine a student’s eligibility for the Pell Grant and other types of need. The people who process the FAFSA are simply plugging students’ and their parents’ financial information into a formula and recording outcome.

On the positive side, many universities use the same FAFSA application to determine their own grants, scholarships and awards. Students have a bit more recourse in these situations. They can call the financial aid office and ask to speak with a counselor about their extenuating circumstances. Schools often have emergency loan or grant programs that they can offer to students who truly have a dire financial need that cannot be reported on the FAFSA, such as a fire in their homes that has just occurred.

How do I Obtain My Pell Grant if I Am Awarded One?

The Pell Grant is typically disbursed to the school billing department. During orientation week or the first few weeks of school, most students are required to meet with a financial aid counselor who helps them understand their award package. The counselor will go over the student’s financial aid and help them understand how they receive their Pell Grants.

In most cases, the Pell Grant is sent directly to the school’s billing department, which subtracts it from the student’s costs before sending them a bill. In some cases, the Pell Grant may be paid directly to the student in the form of a check, but this is not usual, and tends to happen only when the school’s financial aid department will not process grants automatically.

Students should be aware that Pell Grants are ony accepted at participating schools. Most schools participate, but some schools do not. Unaccredited schools cannot accept Pell Grants. Students should check to see whether their schools participate in the federal aid program before making their final selection.

Can I Get a Pell Grant with Other Types of Aid?

Students typically receive a Pell Grant along with other types of aid. Some students still have to take out loans in addition to their grants. Other students receive scholarships or work-study program participation in addition to their grants. Students can receive the federal Pell Grant alongside other types of aid. In some cases, a student’s entire aid package will be less than the cost of tuition.

Students will have to pay the remaining tuition themselves or look for private loans in this case. If the cost of tuition is less than all of the student’s financial aid combined, the student can request a refund from the college or university. Typically, refund money is disbursed in the form of a check to the student. Students can use this money to pay for living expenses, books, fees and technology.

Does the Pell Grant Ever Have to Be Repaid?

A Pell Grant is not a loan, so it does not have to be repaid in most cases. However, there are some cases in which a student may have to repay part of a Pell Grant. This occurs when a student drops out of college. If a student drops out of school before she has completed 60% of the semester, she will have to pay back what is called the “unearned” portion of the Pell Grant.

The formula for determining how much a student will have to pay back is a little complicated. First, a student must calculate the percentage of the semester he or she has completed. He or she can do this by dividing the number of days she attended by the number of days in the semester. Next, the student must subtract this number from 100 to determine the percentage of the semester that he or she has not completed. Finally, the student should multiply this number by the entire Pell Grant award received. The resulting number is the amount of the Pell Grant that was unearned.

The university is responsible for paying the amount of Pell Grant that was unearned back to the government, and they will ask that the student participate in that refund by paying about half of the bill. Most schools wont’ require students to pay up front, but students are usually responsible for making the payments eventually, and students who don’t pay can be sent to collections.

To avoid paying the Pell Grant back, students typically try to withdraw from single classes instead of withdrawing from the whole semester, or they may try to keep their course loads balanced. Registrars and Advisers can help students pick courses that will make them less likey to feel the need to drop out of college and have to pay back their Pell Grants.

Pell Grants and Taxes

Students or parents who pay for college expenses can deduct or claim a credit for those expenses on their taxes. However, students or parents who paid for college can only deduct expenses that they actually paid, so they must deduct the amount of the Pell Grant award before they can claim a deduction or credit. For example, a student who had a $6,000 tuition bill and received a $5,000 Pell Grant can only claim $1,000 on his or her taxes for credits or deductions.

Grants Similar to the Pell Grant

The Pell Grant is not the only federal grant program available to students. Students can apply for Federal Supplemental Educational Opportunity Grants (FSEOG), Academic Competitiveness Grants (ACG), National Science and Mathematics Access to Retain Talent Grants (SMART Grants), and Teacher Education Assistance for College and Higher Education Grants (TEACH Grants).

FSEOG grants are very similar to Pell Grants and are awarded to students with some of the highest levels of financial need. Like Pell Grants, students can apply for them using the FAFSA.

Academic Competitiveness and SMART grants are unlike Pell Grants because they are dependent on academic success. The grants are designed to help students be more prepared for college through taking rigorous academic classes in high school.

The grants are available for students who take more challenging academic courses in public, private and home high schools. To receive these grants, students must have received a Pell Grant, be going to school at a four-year college or university that grants degrees, retain a cumulative GPA of at least 3.0, and major in an approved math, science or foreign language field.

Students can receive up to $4,000 when they qualify for these grants. Academic competitiveness grants are given during the first two years of college, and SMART grants are given during the last two years. Students apply for both grants using the FAFSA, but more information can be found by visiting the U.S. Department of Education’s student aid site .

The TEACH Grant is a conditional grant given to would be teachers who promise to teach in a high needs area in exchange for up to $4,000 per year in money to go to school. In order to receive the grant, students must be enrolled in a teacher preparation program and intend to specialize in a qualified area, and taking classes at a school that participates in the program. After graduation, teachers must spend at least four of their first eight years teaching in a low-income area school.

If they do not, they will have to pay back the grant amounts. The first step to applying for the TEACH program is filling out the FAFSA, but teachers can learn more by visiting the Department of Education’s Financial Aid website about the program.

Final Thoughts on Receiving Pell Grants

The Pell Grant has long been considered the foundation of the United States’ financial aid program. It’s awards have allowed many students who would otherwise be unable to go to college receive a bachelor’s degree. However, many students who feel like they should receive a Pell Grant don’t get one because they are not considered to be in financial need. Students who do not qualify for Pell Grants should not give up on their attempt to find aid to go to college.

They can get competitive student loans and scholarships that help them pay their way. While many students hesitate to take out loans, government loans have less rigorous standards involved when it is time to pay them back, and students who get scholarships may have to take out few government loans.

The bottom line is that students should try to do well in school and explore all areas of financial aid that are available to them. Students shouldn’t depend on the Pell Grant. If something changes, such as a parent’s marriage or a new job, and they are suddenly seen as having the means to pay for college, then they won’t receive this award. However, good grades and a focus on education cannot be undone. Students who study hard and earn good grades have many more opportunities for aid than those who do not.

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