Pell Grant: What It Is, How It Works, and How to Get One

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Maya Dollarhide
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Maya Dollarhide has 15+ years of experience as a fact checker and reporter, freelance writer, and working with B2B clients.
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Updated February 28, 2023
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Ebony Howard
Ebony Howard
Reviewed by Ebony Howard
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Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries.
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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.

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.

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).

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).

  • 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.

Only undergraduate students generally qualify for Pell Grants, though there is an exception for some post-baccalaureate teacher training programs.

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.

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. To keep track, the government calculates your Lifetime Eligibility Used (LEU) percentage while you are receiving Pell Grants.

You can see how much you have left to go by logging into your My Aid account on the Department of Education's Federal Student Aid website. Your eligibility for Pell Grants ends when you receive your degree.

$20,000

The amount of federal student loan debt Pell Grant recipients earning less than $125,000 a year ($250,000 for married couples) are eligible to have canceled under President Biden's debt relief plan, announced in August 2022. Graduates, non-graduates, and current students are all eligible under the plan.

Note: This student loan forgiveness plan is currently (as of late February 2023) on hold as the result of a court ruling, which the Biden administration is challenging.

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.

Federal Supplemental Educational Opportunity Grants (FSEOG)

Like Pell Grants, these grants are for students with "extreme financial need" as determined through the FAFSA. The awards range from as little as $100 to as much as $4,000 a year. FSEOGs are not available at every school, and the schools that do offer them may have a limited amount of money to allocate.

Teacher Education Access for College and Higher Education (TEACH) Grants

These grants are for students planning to teach high-need subjects, such as math, science, foreign languages, and special education in low-income areas. They are worth up to $4,000 per year.

TEACH grants recipients are required to fulfill service requirements, including at least four years of full-time teaching. If they fail to do so, the grant is converted into a direct federal unsubsidized loan that must be repaid.

Iraq and Afghanistan Service Grants

These grants are available to students who lost a parent or guardian as a member of the U.S. armed forces serving in Iraq or Afghanistan after 9/11 and who don't qualify for a Pell Grant. The student must have been under 24 years old or enrolled in college at least part-time at the time of the parent or guardian's death.

The maximum Iraq and Afghanistan Service Grant is based on the maximum Pell Grant for that year, but reduced by 5.7% as a result of the Budget Control Act of 2011.

How Do You Stay Eligible for Pell Grants?

In order to continue receiving Pell Grants or other federal financial aid, students and their parents must fill out a new FAFSA every year. Students must also show that they are making "satisfactory academic progress" toward their degree or other education goal, such as a certificate. Satisfactory academic progress is defined by the school and may involve maintaining a minimum grade-point average, taking a certain number of credits, or other requirements. Students may lose eligibility for Pell Grants, at least temporarily, if they default on a student loan or are convicted of a drug offense.

What Happens to Unused Pell Grant Money?

Generally, your school will first apply the money from your Pell Grant and other aid, such as loans, toward your tuition, fees, and room and board. If there's anything left over in your account after that (often referred to as a "credit balance"), the school is required to pay it to you within 14 days, unless you've authorized the school to apply it toward your future bills. These federal funds are typically disbursed each school term or at least twice a year.

Do You Have to Pay Back Pell Grants?

Grants, like scholarships, generally represent money that doesn't have to be repaid. However, there are circumstances when you might have to repay some or all of your Pell Grant. Those include dropping out of the program of study for which you were awarded the grant, changing your attendance from full-time to part-time, or receiving other scholarships or grants that reduce your eligibility for federal aid. If any of this happens, the school should let you know how much you owe and how to repay it.

Who Was Pell?

Pell Grants are named for the late U.S. Senator Claiborne de Borda Pell of Rhode Island, who championed them.

The Bottom Line

Pell Grants can help undergraduate students with significant financial need pay for college or other post-secondary education. Unlike student loans they do not have to be repaid in most circumstances. To apply for a Pell Grant, students and their families need to fill out the Free Application for Federal Student Aid (FAFSA).

Article Sources
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  6. Federal Student Aid. "Did You Know There’s a Maximum Amount of Federal Pell Grant Funds You Can Receive Over Your Lifetime?"

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  8. Federal Student Aid. "The Biden-Harris Administration’s Student Debt Relief Plan Explained."

  9. Federal Student Aid. "A Federal Supplemental Educational Opportunity Grant (FSEOG) Is a Grant for Undergraduate Students With Exceptional Financial Need."

  10. Federal Student Aid. "A TEACH Grant Can Help You Pay for College if You Plan to Become a Teacher in a High-Need Field in a Low-Income Area."

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