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.
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What Is The Pell Grant?
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 2024-2025 school year, it can provide up to $7,395 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?
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?
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 "Student Aid Index". Student Aid Index (SAI) is approximately the amount of money your family is expected to provide to help you with your education.
Students who have parents who earned less than $40,000 in the previous year and were part of a federal benefit program (such as SNAP, WIC, Medicaid, Free Lunch programs etc.) automatically have an SAI of $0. Those from families with higher incomes will have SAI's above $0, but they may still qualify for the grant.
The Student Aid Estimator 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.
How Much Money Can I Get Through A Pell Grant?
For the 2024-2025 School Year (which runs from July 1, 2024 through June 30, 2025), borrowers can get between $740 to $7,395 from the grant.
- Minimum Pell Grant Award 2024 - 2025: $740
- Maximum Pell Grant Award 2024 - 2025: $7,395
The amount of money you receive depends on three primary factors:
- The cost of attending your school (you cannot receive more than the estimated cost of attendance).
- Your family’s Student Aid Index (which is determined by the FAFSA).
- Your enrollment status (full-time, part-time, etc.)
To get the maximum Pell Grant ($7,395), you must have a Student Aid Index of -$1,500 to $0. Beyond $0, you'll start to phase out.
You can see the full 2024-2025 Pell Grant Payment Schedule here.
How Pell Grants Are Calculated
To calculate the amount of Pell Grant a student can receive, schools will use this calculation:
Subtract the student's SAI from the Max Pell Grant amount. Round to nearest $5. If the result is greater than the Pell Grant minimum, and less than the student's Cost of Attendance (COA), the student is eligble for a Pell Grant of that result.
There are the main scenarios to calculate 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 anywhere from -$1,500 to $0, you'll receive the full $7,395 Pell Grant.
SAI Less Than COA
If the student has an SAI less than the cost of attendance, here is how this calculation looks.
Student SAI: $1,004
Cost Of Attendance: $10,000
Calculation: $7,395 - $1,004 = $6,391 (round to nearest $5) = $6,390
COA Less Than Max Pell Grant Award
A Pell Grant is also capped by the cost of attendance. If the Cost of Attendance is less than the max Pell Grant award, that is used as the cap.
Student SAI: $1,004
Cost of Attendance: $6,000
Calculation: $7,395 - $1,004 = $6,391 (round to nearest $5) = $6,390 <- This is above the COA!
However, since 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 will be ineligible for a Pell Grant.
Student SAI: $7,004
Cost Of Attendance: $10,000
Calculation: $7,395 - $7,004 = $391 (round to nearest $5) = $390 <- This is below the minimum award!
Notice that $390 is below the minimum Pell Grant award of $740, so this student is ineligible for a Pell Grant.
You can see these examples in the FSA Handbook.
How To Apply For A Pell Grant
One of the great things about the Pell Grant is students don’t have to apply separately for this grant. When you fill out the FAFSA, you automatically apply for a Pell Grant.
If you qualify for the grant, it will be included as part of your student aid package.
You'll receive notification of the grant award when your school's financial aid office contacts you. It will be listed as a line item on your financial aid award (along with any offers of scholarship from the school, and any student loans you're eligible for).
Final Thoughts
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.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.
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