The Pell Grant is a federal subsidy intended for students with demonstrated financial need. The program awards money to eligible undergraduate and, in certain situations, post-baccalaureate students. Unlike other federal financial aid, the the Pell Grant does not need to be repaid. Pell Grants are need-based grants that are intended to provide low-income students access to post-secondary education.

History of the Pell Grant

The Pell Grant was created by the Higher Education Act of 1965 and emerged in 1972 as the Basic Educational Opportunity Grant. It was later renamed for Rhode Island Senator Claiborne Pell. The main purpose of the Pell Grant was to bring the dream of college into reach for students who could never have afforded it otherwise.

According to the Center on Budget and Policy Priorities, the Pell Grant has been the “single largest source of grants for postsecondary education” in the past 40 years. And the Department of Education estimates that 7.3 million students will be awarded the Pell Grant in 2018, for a total of $28.8 billion in aid.

These federal funded grants are not like loans, and do not need to be repaid. Students may use their grants at any one of approximately 5,400 participating postsecondary institutions. These federally funded grants help about 5.4 million full-time and part-time college and vocational school students nationally. As of 2016, six of the top ten colleges (by total Pell Grant money awarded) were for-profit institutions.

How it works

The Federal Pell Grant program is administered by the United States Department of Education, which determines the student’s financial need and the student’s Pell eligibility. The U.S. Department of Education uses a standard formula to evaluate financial information reported on the Free Application for Federal Student Aid (FAFSA) for determining the student’s expected family contribution (EFC). The EFC isn’t determined solely by your family income; it also factors in how many children your family has in college, family assets, and your college’s cost of attendance. That’s an estimate of tuition, books, room and board, etc., which you could find on the school’s website.

Once you have qualified for the Pell Grant, the grant amount you receive is determined by the students’ expected family contribution (EFC), the cost of attendance, whether the student is full- or part-time and whether or not the students attends a full academic year.

Students can receive Pell Grant funding from one school at a time. Higher education institutions that participate in the Federal Pell Grant Program can credit the Pell Grant to the student’s school account or pay the student directly, typically by check. The school must release funds at least once per term (semester, trimester or quarter), or at least twice per school year where semester, trimester or quarterly terms are not defined.

Today, a Pell Grant is generally considered the foundation of a student’s financial aid package, to which other forms of aid are added. Pell Grant recipients are obligated to achieve a standard of academic success. Often this involves maintaining a certain grade-point average, but could also include a minimum hours or credits requirement. Students should consult with their school on what those academic standards look like.