What Is a Pell Grant? How Can It Help You Pay for College?

If you applied to college in the fall, you are likely getting your acceptance letters and financial aid packages now.

Maybe something called the Pell Grant is a part of your financial aid package. Or maybe you’ve heard about the Pell Grant before, but you’re not really sure what it is or how it works. It’s beneficial to understand this type of aid and whether you’re eligible, because Pell is “free” money that will help you pay for college.

What is a Pell Grant? How much money will I get?

The Pell Grant is money from the federal government that you can use to help pay for college. Unlike student loans, this financial support does not have to be repaid. For the 2015–16 academic year, the Pell Grant can range from $587 to $5,775. The amount you receive is dependent on a variety of factors, including:

  • Your financial need (for example, your family’s household income relative to the cost of attendance at a particular college)
  • The overall cost of attendance (including tuition, fees, other higher education expenses, and room and board)
  • Whether you’re a part-time or a full-time student (determined by the number of courses you take in a given semester)
  • Whether you plan on attending college for a full academic year or less (a full academic year usually means attending both the fall and spring semesters)
  • Whether you have already used up 12 semesters of eligibility for the Pell Grant (roughly equivalent to six years in college)

How do I know if I’m eligible for the Pell Grant?

In order to get any federal student aid, including the Pell Grant, you must fill out the Free Application for Federal Student Aid, most commonly known as the FAFSA. You also must meet basic eligibility requirements, such as being a U.S. citizen or an eligible noncitizen, having a valid Social Security number, and having a high school diploma or GED.

Confused already? Don't worry, bookmark Noodle's expert written guide, Financial Aid 101: The Terms to Know, to help you understand the complex terminology you need.

The FAFSA requires income information (usually from your tax returns and W2s), both for you and your parents if you are under the age of 24. When you fill out the FAFSA, you can designate the colleges you are applying to for financial aid. A copy of your FAFSA information is then sent to those colleges so they can determine your financial aid package.

Your college will inform you if you are Pell eligible in the financial aid package it sends, as well as how large a Pell Grant you will receive. Your aid package will also include information about any institutional scholarships or grants you’ve received, and any federal student loans for which you’re eligible. Remember, your financial aid package is only good for one academic year, so you must reapply for financial aid each year you plan to go to college. A new FAFSA is available every January.

The Pell Grant is need-based aid, meaning that it’s provided to students whom the federal government determines need help in paying for school. There are no easy rules of thumb to figure out if you’re Pell eligible, but if you come from a household making $40,000 or less per year, chances are you’ll be eligible for some amount of Pell. The calculation of how much Pell money you get is dependent on many factors, including household income, the number of people in your household, and the cost of the college you’d like to attend.

If you are wondering whether you’re eligible for Pell, but you’re not quite at the point where you’ve applied to college or filled out the FAFSA, there’s a tool called FAFSA4caster that will help you determine your eligibility ahead of time.

What are some special considerations I should be aware of?

You must make “Satisfactory Academic Progress” (SAP) in order to continue to get any federal student aid, including Pell. This means you have to meet a certain GPA threshold and complete enough classes so that you are moving towards obtaining your degree. SAP differs depending on which school you attend, so be sure to ask your financial aid office or visit its website to learn about the requirements.

If you drop a class or two after your financial aid has been disbursed, you should check with your financial aid office to see how taking fewer credits may change your overall package. In most cases, if you are a full-time student and drop enough classes to be considered a half-time student, your Pell Grant will have to be adjusted. And if you drop below half-time enrollment, you may be ineligible for aid.

Moreover, if you are unable to finish the semester, you may have to pay back part of the money you received from your Pell Grant. How much you owe depends on a variety of factors, including when you dropped out. It’s a complicated process that you can learn more about here.

A good rule of thumb is to always contact your financial aid office if you’re thinking of dropping classes so you will understand how it may affect your financial aid.

What else should I know about financial aid?

Remember, the Pell Grant is only one component of a total financial aid package. Be sure to review all your financial aid awards thoroughly, and choose the college that makes sense for you both academically and financially.

Take advantage of scholarships and grants before taking any loans. Try to minimize your loans as much as possible to ensure you aren’t over-borrowing for your education, and be sure to research your loan repayment options. Develop a budget — including your living expenses — in order to understand how much it will cost you to attend college for a year. You should also estimate in advance how much money it would cost you each year until you earned your degree at each of the different colleges you’re considering. This will go a long way in helping you plan for your future while in college and after you graduate.

Find further expert advice about financial aid for college, including my article about demystifying the financial aid award process.