Pell Grant

The Pell Grant is a need-based federal grant for low-income students who require financial support to pay for college.

Pell Grants are awarded to undergraduate students who have not received their first bachelor’s degree and to some students who are enrolled in qualifying post-baccalaureate programs.

To receive the Pell Grant, you must demonstrate significant financial need, and the funds you receive do not have to be repaid.

Johnson & Wales University student

The United States government recognized a need to help lower-income and middle-income students with potential to achieve higher education, and under President Lyndon B. Johnson, the Higher Education Act was passed in 1965. It was the original legislation intended to improve and assist with college education in America. Grants, which do not need to be paid back, were awarded by the federal government, as were loans with low interest rates for students. Universities also benefited from federal aid, receiving funds to improve their education process.

History of the Pell Grant

The Pell Grant program was established in 1972 during the reauthorization of the Higher Education Act, and it was originally called the Basic Education Opportunity Grant Program. This program was renamed in 1980 after Senator Claiborne Pell, a Democrat from Rhode Island.

The Pell Grant program provides federal financial aid to students demonstrating financial need, and it is money that doesn’t need to be paid back. The Pell Grant is intended to be the foundation of a student’s financial aid package onto which other loans and aid are added.

Pell Grant Funding and the Background of Laws and Regulations

Originally, the Pell Grant was funded entirely through Congress’s annual appropriations process in which the lawmakers and the Congressional Budget Office would decide on a one-time sum for educational funding and establish a maximum grant level per student, using cost estimates for the upcoming year. Since these decisions are made before schools are in session, funding can either be too much or too little for a given year, causing overfunding or shortfalls.

The College Cost Reduction and Access Act was passed by Congress in 2007 to update and supplement the original funding process for the Pell Grant program. The new law created additional funding, not through the annual appropriations process, and set up a 10-year mandatory funding source to be added onto Pell Grants. This was to help account for shortfalls in the education budget and awarded more money per year to students. It was a uniform add-on, awarding students a set amount on top of the grant amount, and it increased each year.

In 2010, this funding structure was amended again in the Health Care and Education Reconciliation Act. This law reduces the cost of the loan program by ending private lender subsidies and once again reallocating those funds to the Pell Grant program. In contrast to the 2007 law, the 2010 version does not place a mandatory cap on the amount of funds that can be allocated. Supplemental grants are capped, however, but they do account for inflation in future years. These supplemental grants are not added as a uniform amount as in the past, but instead in the same way appropriated funds are added through the grant.

Disbursement Information

Pell Grants are disbursed directly to the school and then given out in one of two ways: as a credit on your account or directly to you by cash, check, or EFT. Schools are required to notify you how and when you will receive your funding, which will be on a payment schedule set up by them and made at least once per term and twice per academic school year. The school chooses how to apply the funding to tuition, school fees, and room and board. If there is a remaining balance, the school can disburse the funds directly to you to pay for educational expenses.

Pell Grant Alternatives

Alternatives do exist beyond the Pell Grant, and you should explore all of your options. There are many other federal grants out there, and you need to research each one individually to see if you qualify. For example, if you desire to become a teacher the Teacher Education Assistance for College and Higher Education, or TEACH, Grant provides assistance for prospective teacher undergraduates.

Other options to explore are the various scholarships that are awarded annually on the state, federal, school, and even private level. Check with your financial aid office to learn about which ones you may be eligible for.

Other than grants, federal and private student loans are also an option. Federal student loans typically offer low interest and flexible repayment schedules while private loans can have higher interest and stricter repayment options, but they can be a viable option to cover the cost of school if you need them.

Funds Available

The Congressional Budget Office reported a surplus in 2013 with the cost of the program seemingly lower than in past years. The preliminary 2014 total surplus estimate is around $11 billion dollars, as published by the Federal Education Budget Program. The appropriation amount for 2014 is $22.5 billion with a previous year surplus of $3.2 billion. The 2012 grace period interest subsidy for the 2014 budget is $0.6 billion, and the mandatory entitlement amount equals $5.9 billion.

The total Pell Grant funding amount for the year 2014 was $31.1 billion. Broken down this means that for 2015, the maximum grant appropriation per student is $4,860, and the mandatory entitlement amount is $915 for a total of $5,775 for the year. These amounts are set through 2017 and, at this point, years beyond that are still estimations.


In order to be eligible for a Pell Grant, you must:

Benefits of the Pell Grant

benefits of the pell grantThe value of higher education is universally understood and appreciated; yet the cost to obtain higher education has never been greater. Tuition and fees at a private college or university can top $50,000, and the total cost rises when books, study materials, room and board, and living expenses are factored in.  Students who attend in-state public universities can save on tuition, but their costs could still reach nearly $20,000 a year.  With the cost of college only continuing to rise, applying for a Pell Grant could be very helpful in financing an education. Grants are the best source of financial aid, as they are essentially ‘free money’ awards – if you receive a Pell Grant, it does not have to be paid back.

Financial Aid


There is no direct application process for a Pell Grant; every student is considered after completing and submitting the Free Application for Federal Student Aid, or FAFSA. This application provides key information on a family’s income, assets, and expenses, and it allows both federal and institutional aid officers to determine how much financial assistance the student needs. Pell Grants are reserved for students from low-income families, so you must demonstrate exceptional financial need on your FAFSA to qualify for one. Unfortunately, Pell Grants are not terribly common, and as such are reserved for those with the greatest financial need.

what to expectHow much support should I expect?

The maximum amount awarded for a Pell Grant during the 2016-17 school year is $5,815. The size of a student’s Pell Grant is dependent on the student’s expected family contribution (EFC), the cost of attendance (COA), the student’s enrollment status (full-time or part-time), and whether the student attends for a full academic year or less. While a Pell Grant is a great source of funding for low-income students, it will not cover the entire cost of college. Many students still need much more financial assistance to attend college, which can be found in forms of financial aid like other grants, scholarships, and student loans. When searching for sources of funding for college, always pursue free money awards first, such as grants and scholarships, and if those sources are not enough, pursue federal student loans. If federal student loans do not fully cover the cost of college, you can turn to private student loans to fill the gap between any aid received and your tuition bill.

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