Pell Grants: What They Are And How To Qualify

Pell Grants are a form of financial aid issued by the United States Department of Education. Unlike other forms of financial aid, Pell Grants are not loans. Recipients don’t have to repay the money that they receive from the grant.

With the average cost of a bachelor's degree at a public four-year university now costing over $40,000, many students assume that they'll need to take out student loans to cover the cost. But we always recommend that students try to limit their student debt by pursuing "free" money options first like grants, scholarships, 529 plan funds, and more. 

For those who are able to receive them, Pell Grants are one of the best free financing options for students to offset the high cost of pursuing an undergraduate degree. But there are strict rules about who qualifies for the grant. Here's what you need to know.

Pell Grants are federal educational grants (meaning they are free money that does not have to be repaid) that are meant to provide financial aid for students who display “exceptional” financial need. For the 2020-2021 school year, it can provide up to $6,345 per student per year that meets the qualifications.

Unlike many forms of financial aid, Pell Grants aren't available for graduate students. They're typically only accessible to students who haven't earned an undergraduate (bachelor’s) degree. In some cases, students training to be teachers can also receive the grant during their master’s degree.

Students who meet the qualification criteria, may receive the grant for 12 terms, which translates to approximately six years of school. This is helpful for students who are not attending school full-time, but still need financial aid.

Related: Do You Have to Pay Back Grants?

With college being so expensive, most students are able to demonstrate at least some financial need. However, the Pell Grant is for students from families with very low incomes.

The US Department of Education determines your family’s level of need using a calculation called your “Expected Family Contribution.” Expected Family Contribution (EFC) is the amount of money your family is expected to provide to help you with your education.

Students who have parents who earned less than $26,000 in the previous year and were part of a federal benefit program (such as SNAP, WIC, Medicaid, Free Lunch programs etc.) automatically have an EFC of $0. Those from families with higher incomes will have EFC’s above $0, but they may still qualify for ​the grant.

The FAFSA4Caster is a free calculator that can help you determine how much money you may receive from a Pell Grant if you apply for an undergraduate degree in the future.

A full-time student, attending a school that costs $16,700 annually, who has an expected family contribution of $150 per year will receive $6,195 from the Pell Grant. You can see the full 2020-2021 Pell Grant Payment Schedule here.

It's important to understand that you can choose to decline loans from your student aid package and still accept the Pell Grant. Since this is free money that doesn't have to be repaid. I recommend always accepting 100% of grant funds, even if you decide to decline the other forms of aid.

If you're looking for more funding options to help you minimize your student debt, be sure to check out our complete list of every financial aid program by state. And if you still have a funding gap after pursuing all the grants and scholarships you may qualify for, this is our take on the best order of operations to pay for college.