What Happens to Unused Pell Grant Money?
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Summary:
A Pell grant is a form of federal financial aid awarded to undergraduate students to help pay for their college education. This grant differs from federal student loans because you don’t have to pay it back. If you have unused Pell grant money, this money can either be held by the school for future qualified education expenses or given directly to the student.
Having unused Pell grant money is not a very common “problem.” In most cases, recipients of Pell grant money use it all up on college costs and must rely on federal student loans to fund the remaining costs. A study by the U.S. Department of Education found that 70% of all undergraduates receive some type of financial aid and 44% receive Pell grants.
But sometimes, perhaps in the case of less expensive community colleges, money is leftover. Keep reading to learn more about Pell grant refunds, how much you can receive, and what you can use them on.
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What is a federal Pell grant?
The federal Pell grant program is funded by the government and distributed by participating schools, who are then reimbursed by the U.S. Department of Education (ED). To receive Pell grant funding, eligible students must demonstrate an “exceptional” financial need and remain enrolled in school at least half-time.
Pell grants are only offered to undergraduate students attending a college or career school. As soon as you receive a bachelor’s or another professional degree, you are no longer eligible for the program. However, there may be an exception for a student enrolled in a post-baccalaureate teacher certification program.
Can I apply for additional financial aid?
Pell grants represent the largest grant program offered by the federal government and are usually the first type of financial aid a student with financial need can expect to get. After that, the student aid report (which includes answers from your FAFSA) is used to calculate how much other financial aid a student is eligible for. The remaining aid usually comes in the form of subsidized and unsubsidized Direct loans.
In order to qualify, you must fill out the Free Application for Federal Student Aid (FAFSA). You cannot receive any aid without using this form to apply. Students and their parents must fill out a FAFSA every academic year, as any income changes alter the amount of aid you can get.
Because the Pell grant program never runs out of money, the program does not enforce a lifetime eligibility limit like federal student loans. Instead, you can continue to receive the grant for 12 semesters, or roughly six years. Eligible low-income students who send in the FAFSA every year will typically get at least some grant money.
Will I ever need to repay my Pell Grant?
In almost every case, Pell grant rewards do not have to be paid back. However, there are a few exceptions.
- Low attendance rate. If you drop out of school or reduce your enrollment status to less than half-time, you may have to repay some or all of the grant dollars you received.
- Additional funding. You may also have to repay all or some of a Pell grant if you receive money from other scholarships or grants that reduces the need for federal financial aid.
Pro Tip
Even if you’re not sure whether you’re eligible for financial aid, it’s worth filling out the FAFSA to see if you can get some help with your education expenses.
What happens to unused Pell grant money?
When a student receives Pell grant funds (or any federal aid), their school’s financial aid office typically applies it to the costs for tuition and room and board, if applicable. Most Pell grant money gets used up pretty quickly, but sometimes there is money left over.
If you have leftover funds, you are due a Pell grant refund, and you can choose how you’d like to receive those funds. You can keep the money in your student account to use for future expenses or have the unused grant money delivered by check or directly deposited into your bank account.
Sometimes a school will issue a voucher so the student can use the funds at the student bookstore. However, you must have the option to receive your refund in another way. Because you may be able to find a less expensive way to purchase your books or you might need the money for off-campus living expenses instead. The important point is the school can’t hold your Pell grant refund hostage.
Does my Pell grant count as taxable income?
Generally speaking, Pell grant awards used for qualified education expenses are not taxable income. However, unused Pell grant money that is not used for school-related costs may be considered income, meaning you might have to pay taxes on it.
The IRS uses a few variables to determine if your income is taxable. These include the total amount you’ve earned, your age, whether you are a dependent on someone else’s tax return, your filing status, and your age. Someone at your school’s aid office should be able to help you understand if any of your grant is taxable income.
If you need some help determining what taxes you owe on unused Pell grant money or any other income you receive while at college, speak with a tax professional or do it yourself by using tax preparation software.
How much Pell grant money can I get?
Currently, the maximum federal Pell grant award for the 2022-2023 year is $6,495. What you receive depends on your EFC (expected family contribution), the cost of attendance (COA), your status of full- or part-time enrollment, and if you plan to attend the full academic year.
You will usually receive the money in two installments (or three if your school uses trimesters). So, if you’re awarded $2,000, you would get $1,000 for each semester.
Is it possible to earn additional Pell grant money?
Students may receive additional funding through the Pell grant depending on a few factors. These included:
- A sudden loss of income. If after getting your Pell grant money your family experiences a sudden loss of income, you can submit an appeal and possibly receive more funding.
- A summer semester. You can sometimes get even more Pell grant money — up to 150% of the award — if you attend full-time for the fall and spring semesters and plan on attending the summer session as well. Then, continuing with the above example, you could also get a summer Pell grant award and receive $1,000 for each term for a total of $3,000.
- Loss of parent in military or police force. You may receive additional funds if you had a parent who died due to military or police service. (Regarding military service, these events must have taken place after the events of 9/11 as part of the parent’s service in Iraq or Afghanistan.) The following must also be true for you to receive additional Pell grant funds:
- You were 24 years of age or younger during the time; and
- You were enrolled in school full time.
This should allow you to receive the maximum Pell grant. If you were only enrolled part-time, you will get an adjusted amount.
What if my Pell grant and federal loans don’t cover all my expenses?
Unfortunately, college is extremely expensive and federal grants and loans may not be enough money for you to attend college. It’s not for nothing that student loan debt is one of the fastest-growing sources of debt.
If you do need more financial aid, you might want to look into private student loans. These may bridge the gap between what federal money will cover and what you actually need to pay for school. Because interest rates and loan terms vary, you’ll want to shop around for the best deal.
How do I keep my Pell grant eligibility?
To continue receiving Pell grant money throughout your undergraduate career, you must make “satisfactory academic progress.” Most schools consider “satisfactory academic progress” to mean you are in school full time (or at least half time), making headway towards a degree, and getting decent grades.
However, individual schools determine what demonstrates this “progress.” Because of this, be sure to speak with your college’s financial aid office for exact specifications. The financial aid office can also tell you how many credits you need to take per term to stay in the “acceptable” range, how often your progress will be evaluated, and what to do if you don’t meet the school’s requirements.
You may be able to appeal the decision and have your grant reinstated under certain circumstances. These include a death in the family, illness or injury to yourself, or other special circumstances.
Key Takeaways
- Pell grants, unlike other types of federal financial aid, usually do not have to be paid back.
- Only undergraduates of colleges or career schools are eligible for Pell grants.
- The money for Pell grant funding doesn’t run out; if you apply and qualify, you will get some money for school.
- Sometimes you’ll have money leftover, in which case your school must issue a Pell grant refund directly to you unless you authorize otherwise.
- Most students who receive Pell grants also receive federal Direct student loans.
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