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Pell Grants are a form of financial assistance awarded by the United States Department of Education. Unlike other forms of financial aid, Pell Grants are not loans. Recipients do not have to pay back the money they receive from the grant.
Since the average cost of a bachelor's degree from a public four-year university is now over $40,000, many students assume they will need to take out student loans to cover the cost. However, we always recommend that students limit their student debt by first taking advantage of “free” money options such as grants, scholarships, 529 plan funds, and more.
For those who can receive them, Pell Grants are one of the best free funding options for students to offset the high cost of a bachelor's degree. However, there are strict rules about who is eligible for the scholarship. Here's what you need to know:
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What is the Pell Grant?
Pell grants are federal education grants (meaning they are free money that does not have to be repaid) designed to provide financial assistance to students who demonstrate “exceptional” financial need. For the 2024-2025 school year, up to $7,395 may be provided per student per year who meets the qualifications.
Unlike many forms of financial aid, Pell grants are not available to graduate students. They are generally only open to students who have not earned a bachelor's degree. In some cases, teacher training students can also receive the scholarship during their master's studies.
Students who meet the qualifying criteria can receive the scholarship for 12 semesters, which is approximately six years of school. This is helpful for students who do not attend school full-time but still need financial assistance.
Related: Do you have to repay grants?
What are the qualification criteria?
To qualify for a Pell Grant you must meet the following criteria:
What does it mean to demonstrate financial need?
Because college is so expensive, most students can demonstrate at least some financial need. However, the Pell grant is aimed at students from very low-income families.
The U.S. Department of Education determines your family's needs using a calculation called the Student Aid Index. The Student Aid Index (SAI) is approximately the amount your family is expected to provide to help you with your education.
Students whose parents earned less than $40,000 in the previous year and participated in a government benefit program (e.g. SNAP, WIC, Medicaid, free lunch programs, etc.) automatically have an SAI of $0. Those from higher-income families have $0 SAIs but may still qualify for the subsidy.
The Student Aid Estimator is a free calculator that can help you determine how much money you might receive from a Pell Grant if you apply for a bachelor's degree in the future.
How much money can I receive from a Pell Grant?
For the 2024-2025 school year (which runs from July 1, 2024 to June 30, 2025), borrowers can receive between $740 and $7,395 from the grant.
- Minimum 2024-2025 Pell Grant Award Amount: $740
- Maximum Pell Grant Award 2024-2025: $7,395
The amount of money you receive depends on three main factors:
- The cost of attending your school (you cannot receive more than the estimated cost of attending).
- Your family's Student Aid Index (determined by the FAFSA).
- Your enrollment status (full-time, part-time, etc.)
To receive the maximum Pell Grant ($7,395), you must have a Student Aid Index of -1,500 to $0. You start exiting at $0.
The full 2024-2025 Pell Grant payment schedule can be found here.
This is how Pell grants are calculated
To calculate the amount of Pell Grant a student can receive, schools use this calculation:
Subtract the student's SAI from the Max Pell Grant. Round to the nearest $5. If the score is above the Pell Grant minimum and below the student's Cost of Attendance (COA), the student is eligible to receive a Pell Grant equal to that score.
There are the main scenarios for calculating a Pell Grant:
Maximum Pell Grant Award (SAI $0 or less)
The maximum Pell Grant will be awarded to families with an SAI of $0 or less. So between -$1,500 and $0 you will receive the full Pell Grant of $7,395.
SAI less than certificate of authenticity
If the student has an SAI that is less than the cost of attendance, this calculation will look like this.
Student SAI: $1,004
Participation costs: $10,000
Calculation: $7,395 – $1,004 = $6,391 (rounded to the nearest $5) = $6,390
COA less than Max Pell Grant Award
A Pell Grant is also limited by the cost of attendance. If the cost of attendance is less than the maximum Pell Grant, this will be used as the cap.
Student SAI: $1,004
Participation costs: $6,000
Calculation: $7,395 – $1,004 = $6,391 (rounded to the nearest $5) = $6,390 <- This is above the certificate of authenticity!
However, because the calculation is above the cost of attendance, the Pell Grant would only be eligible for $6,000.
Ineligible Pell Grant Award
Once a student's SAI is near or above the cost of attendance, they are ineligible for a Pell Grant.
Student SAI: $7,004
Participation costs: $10,000
Calculation: $7,395 – $7,004 = $391 (round up to the nearest $5) = $390 <- This is below the minimum premium!
Note that $390 is less than the $740 Pell Grant minimum, so this student is not eligible for a Pell Grant.
You can see these examples in the FSA manual.
How to Apply for a Pell Grant
The great thing about the Pell grant is that students do not have to apply for this grant separately. When you fill out the FAFSA, you automatically apply for a Pell Grant.
If you are eligible for the scholarship, it will be part of your financial aid package.
You will receive notification of grant award once your school's financial aid office contacts you. It will be listed as a line item on your financial aid award (along with any scholarships the school offers and any student loans you are eligible for).
Related: How to appeal your financial aid offer
Final thoughts
It is important to understand that you can decline loans from your student aid package and still accept the Pell Grant. Because it is free money that does not have to be paid back. I recommend always accepting 100% of the funding, even if you decide to decline the other forms of funding.
If you're looking for more financial aid options to help you minimize your student debt, be sure to check out our complete list of financial aid programs by state. And if you still have a funding gap after applying for all the grants and scholarships you might qualify for, here's our take on the best approach to funding your college.
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