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College students who need financial aid may qualify for various federal programs. For example, the government offers two different kinds of student loans. It also offers the federal Pell grant. If you’re eligible for this grant, you won’t be responsible for paying back any of the money you receive. Before helping your children apply for financial aid, you may want to learn more. You can work directly with a financial advisor who can help you save for college in the right way.
What Is the federal Pell grant?
The federal Pell grant provides financial assistance to low-income students. Since it’s a grant instead of a loan, it’s essentially free money that students can use to cover their college costs. If you qualify, you can use your Pell grant to pay for your undergraduate education and some post-secondary programs for aspiring teachers.
Thousands of schools accept funds from the federal Pell grant program. If you’re eligible to receive this grant, your college or university will probably use it to cover whatever you owe, such as fees or the cost of room and board. If there’s anything left over, you can receive it in the form of cash or a check. You may also be able to deposit the money directly into your bank account.
How to qualify for the Pell grant
Anyone who wants to apply for a federal Pell grant needs to fill out the Free Application for Federal Student Aid (FAFSA). The federal government will use the information you include on your FAFSA to calculate your expected family contribution (EFC).
Your EFC is simply a number that estimates what your family may be able to chip in toward your college education. It’s based on your and your parents’ income, assets and other factors like the size of your household. This number doesn’t tell you what you will be required to pay out of pocket for college. But the government (and possibly your school) will use your EFC to determine whether you need financial aid.
The students who qualify for the federal Pell grant typically come from families that make less than $30,000 per year. If your parents (or you) earn more than that, your chances of being able to receive the Pell grant will be small. That’s because the Pell grant program targets students who demonstrate financial need. If your household income is low and you have a significant amount of expenses, your odds of qualifying for the Pell Grant will be much higher.
Besides considering your financial situation, you can only qualify for the Federal Pell grant if you meet certain basic criteria. You need to be an American citizen or a non-citizen with a green card, a T-Visa, an arrival-departure record or battered immigrant status. You’ll also need a high school diploma (or a GED or proof that you completed an approved home-school program).
In some cases, you can lose your eligibility for the Pell grant. For example, that may happen if your grades slip and you fail to make satisfactory academic progress (depending on your school’s specific requirements). If you find out that you can no longer receive the federal Pell grant, you can contact your school’s financial aid office and find out whether it’s possible to appeal their decision.
Pell grant award amounts
Pell grant award amounts can change from year to year. For the 2021-2022 school year, students could have received up to $6,495. For the 2022-2023 school year, the maximum award amount rose to $6,895.
If you’re eligible to receive the Pell grant, the size of your award will depend on a number of factors, including your school’s cost of attendance, your expected family contribution (EFC) and whether you’ll be attending school for a full academic year. Your enrollment status matters as well. You’ll likely receive a larger award if you’re a full-time student rather than a part-time student.
Many students these days don’t graduate in four years. If you need additional time to earn your degree, you can continue to receive the Pell grant for up to six years (or 12 semesters).
If you’re worried about running out of Pell grant money over time, you can visit the National Student Loan Data System website. If you enter your financial student aid ID, you’ll be able to view your lifetime eligibility used percentage. That’s the amount of aid you’ve already used relative to the maximum amount you can receive.
Bottom line
Low-income students have been able to use the Pell grant to cover college costs since the Higher Education Act was passed in 1965. If you’re interested in finding out whether you qualify, you’ll need to complete your FAFSA form before your school’s deadline. That will also help you receive a financial aid award letter so you know what your total finances are going to look like when paying for the upcoming school year.
Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
