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The federal Pell Grant is a type of needs-based financial aid that helps students from low and middle-income families pay for tuition, living expenses, and other costs while in college. Since the early 1970s, the federal government has offered the Pell Grant as a way to help offset the cost of a college degree for families from low-income backgrounds.

Today, it’s the largest source of free federal funding available to help pay for college, awarding more than in the 2022-23 school year. According to the National College Attainment Network, the average Pell recipient was awarded .

Importance of Pell Grants

The Pell Grant plays a critical role in making college more accessible for students across the country. The need for a college education has steadily increased over the last 50 years, and more jobs require some education past a high school diploma than ever before.

According to estimates from the , 72% of jobs will likely require some education or training past a high school degree by 2031. However, that doesn’t mean students need to earn a bachelor’s or master’s degree to be competitive in the workforce.

While roughly one in four jobs will likely require a bachelor’s degree, another 29% will require some college education or training but less than a four-year degree, such as a certificate, certification, or associate degree.

As the cost of living, inflation, and rising tuition prices make college more expensive each year, sources of free financial aid like the Pell Grant become increasingly important for students who can’t afford to pay for school. Because the Pell Grant doesn’t usually need to be paid back, it also helps lower student loan debt by reducing the amount students have to borrow in order to pay for school.

The availability of the Pell Grant increases access to a college education for students from low- and middle-income families and can reduce the cost significantly. Students can use the Pell Grant for some certificate programs as well as associate and bachelor’s degrees.

How To Apply For The Pell Grant

All students have to do to apply for the Pell Grant is fill out the Free Application for Federal Student Aid, or the FAFSA. This form acts as an application to all types of federal financial aid, including Pell Grants, work study funding, and federal student loans, which they can then accept or reject later on. The government also sends the application information to schools the student is interested in attending, which often acts as an application for aid from the schools themselves.

Here’s how the general process works:

• Student fills out the FAFSA

• Federal government reviews the application and assigns a Student Aid Index (SAI), formerly known as Expected Family Contribution (EFC)

• Government sends the FAFSA to schools listed on the application

• Schools assess financial need based on SAI and Cost of Attendance (COA)

• Schools send the student a financial aid offer with Pell Grant and other aid

• Students can ask for more funding if financial circumstances have changed or if they receive a better offer from another school

The FAFSA can be a daunting process and many students choose not to apply, often because the application is confusing or they think they won't get funding. However, billions of dollars go unclaimed by students who would likely be eligible for Pell funding each year.

When a student fills out the FAFSA and applies for aid, they get evaluated based on a few key factors. If they’re considered an independent student, they only provide their financial information. Most young adults under 24 years old who are working toward their first degree are considered dependent students, and their financial aid will be determined by their parents’ income as well. 

The federal government sends the student’s financial information to each school they want to attend, where the financial aid office determines how much funding they are eligible to receive based on COA at that school, which factors in charges such as tuition, room and board, fees, and other costs. That might come in the form of Pell Grants, federal work-study funding, state grants, or scholarships from the university.

The Pell Grant is a needs-based grant, and eligibility is based on a variety of factors, including income and family size. To qualify for the Pell Grant, students must:

• Demonstrate financial need

• Be a U.S. citizen (in most cases)

• Be enrolled/accepted in a degree/certificate program

• Attend an accredited school that is allowed to participate in federal financial aid

• Hold a high school diploma, GED, or equivalent (also in most cases)

• Not already have a bachelor’s degree

Pell Grant awards for the 2024-25 school year range from $740 to $7,395. Since it’s a needs-based grant, whether or not students qualify and how much funding they get depends on a student’s income and/or their parents’ income, family size, and whether or not they live in a single-parent household. How much a student gets also depends on how much their school costs and if they attend school full- or part-time.

Pell Grants vs. Student Loans - What’s The Difference?

Grants, loans, and scholarships are three key pieces that make up financial aid packages. All three might show up on a financial aid offer. Grants and scholarships might come from the federal government, state government, or university a student is attending. They are considered gift aid, meaning they don’t need to be repaid like student loans do. For the Pell Grant, there are a few special circumstances where students would have to repay the funding.

For example, if a student withdraws from a class or drops out mid-quarter or semester, they will likely have to pay back some of their grant. If students get additional scholarship funding that changes their need for federal aid, they also might have to pay some of it back.

Student loans can come from the federal government or a private lender. When a student takes out a federal loan, they will need to repay all of the loan plus interest after they finish school.

Who Does The Pell Grant Benefit Most?

Students who receive federal financial aid to go to college — including the Pell Grant, work-study funding, and federal student loans — tend to keep their costs lowest when attending public universities or community colleges.

Average net price shows what students pay out-of-pocket on average for tuition, fees, room and board or estimated rent costs, books, and other college costs after grants and scholarships are applied. Many students make up the difference by taking out student loans and working while in school.

Students from lower-income backgrounds who attend community college have an average net cost of less than $10,000 per year after financial aid, on average. Students from similar socioeconomic backgrounds who want to pursue a bachelor’s degree pay less than $15,000 per year at public universities, on average, after grants and scholarships.

Because private schools are often more expensive, students at private colleges tend to get the bulk of their financial aid from the schools themselves. While the Pell Grant and other forms of federal financial aid don’t always cover as much at more expensive schools, they still make up a key part of financial aid packages.

Pell Grant Recipients by Family Income Level (2021-2022)

The Pell Grant is reserved for undergraduate students from low- and middle-income families who haven’t earned a bachelor’s degree. Historically, the majority of students who receive the Pell Grant come from families making $60,000 per year or less. However, hundreds of thousands of students with higher family incomes are still awarded the Pell Grant every year depending on factors such as family size.

The majority of Pell Grant recipients go to public colleges, with 2.6 million attending a public university and 1.5 million attending community college in the 2021-22 school year, the year with the most recent year with data available.

Pell Grant Recipients by School Type

The passage of the FAFSA Simplification Act brought significant changes to the way financial aid was calculated for the 2024-25 school year. The legislation aimed to make it easier to fill out the paperwork, but it also is designed to help expand access to the Pell Grant. According to the , these changes will make more than 600,000 college students eligible for the Pell Grant and bump aid up to the maximum Pell Grant for almost 1.5 million college students.

Eligibility for the Pell Grant is now determined based on whether or not students live in a single-parent household or are single parents themselves as well as factors like family income, family size, and state poverty guidelines. The government uses to determine how much aid a student is eligible for. For example, students who are single parents can make up to 400% of the poverty guideline for their state and family size and still qualify for the minimum Pell Grant.

Some other changes include expanding the Pell Grant to people who are enrolled in Prison Education Programs. For the first time in decades, people who are in prison are able to use the Pell Grant to pay for a degree while incarcerated.

Limitations of the Pell Grant

While the Pell Grant is a significant driver in making college more affordable for low-income students, many critics argue it doesn’t go far enough. Rising costs of living and college expenses have driven up the cost of a degree for students today, and the Pell Grant does not cover as much as it used to.

Research from the National College Attainment Network shows that less than one in three public universities is affordable for Pell recipients, even after taking into account financial aid, federal student loans, and a part-time minimum wage job.

The changes made to the 2024-25 FAFSA are designed to increase access to the Pell Grant and make more students eligible for the maximum amount, but advocates say this funding doesn’t cover enough of the cost for low-income students. 

The maximum Pell Grant award for the 2024-25 school year is $7,395, covering roughly a quarter of the average students pay for tuition, room and board, and other fees at a four-year university. Some organizations advocate for significantly increasing or even to keep up with the rising cost of college.

Another critique of the Pell Grant is that it’s not currently available to undocumented students, even those who are enrolled in the Deferred Action for Childhood Arrivals program, or DACA. This makes it far more difficult for hundreds of thousands of undocumented people to access the economic mobility a college education can provide.

The Bottom Line

The Pell Grant has long been a key piece of financial aid to help low-income students and families go to college. It’s a key component of financial aid packages and enables many students to earn a certificate or degree while reducing the amount of student loans they need to take out. Today, roughly one in three college students use the Pell Grant to help pay for school.

While Pell Grants typically go to students from families earning less than $60,000 per year, factors like family type and size mean students from higher-income backgrounds can still qualify. 

The best way to apply for the Pell Grant is to fill out the FAFSA, but many students don’t apply because they think they won’t qualify for aid. Recent changes to the federal student aid system means more students will be eligible for the Pell Grant, and there will be an increase in the amount students are eligible for. It also means the forms are now easier to fill out.

Even if students think they won’t qualify, they should still fill out the FAFSA to see if they are eligible for scholarships or grants from their state and school.