How Pell Grants Work

Students who come from low-income families often give up on college degrees. The Federal Pell Grant was designed to help those students make it to graduation.
Scott J. Ferrell/Congressional Quarterly/Getty Images

On television, college life is a season of romance, sororities and parties, with a few classes thrown in for good measure. Maybe college really works that way for some people. But in reality, most college students have to worry about paying for classes, books, food, and rent. They have to work jobs, study to keep their grades up, and show up for classes on time. It can be very stressful -- definitely not the carefree life of the TV college student.

Not surprisingly, many people put off college or quit altogether because money gets too tight. So, the federal government, in an effort to encourage higher education, offers the Federal Pell Grant. Pell Grants are awarded to undergraduate students based on need; the amount of money a student can receive is directly related to the student's financial status, the number of classes a student is enrolled in and the costs of the school he or she attends.


Because Pell Grants are need-based aid, applicants must prove their income is low enough to receive the funds. This discourages many people from even applying, but the application takes into account the number of students in a household who are enrolled in college, as well as other factors. So it's definitely worth applying for a Pell Grant if you're interested in attending college.

In this article, we'll explore the steps to apply for a Pell Grant, the rules for spending the money, and how Pell Grants are distributed. We'll also find out how easy -- or hard -- it can be to get a Pell Grant to help put you through college.

One of the most important things to understand is how to determine your eligibility. Read on to learn more about the eligibility formula and how you can prove your eligibility for a Pell Grant.



Qualifying for Pell Grants

The College Cost Reduction Act of 2007 will increase by nearly 600,000 the number of low- and moderate-income students who are eligible to receive federal Pell Grants.
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Qualifying for a Pell Grant can require lots of paperwork, but it pays off if you find you're eligible for the aid. After the recent Congressional increases in the maximum Pell Grant award, eligible students can receive up to $4,731 for the 2008-2009 year. The criteria for eligibility include your financial information (or that of your parents if you're still considered a dependent), the number of classes you'll be taking in a given quarter or semester and the costs for the school you'll be attending.

To apply for the Pell Grant, the first step is to fill out the FAFSA (Free Application for Federal Student Aid) application. The application can be completed online or hard copy, but it's a good idea to complete the FAFSA on the Web Worksheet first, to ensure that you have all the information you'll need on hand. The documents you'll need include your Social Security number, driver's license number, current tax returns and bank statements, and proof of citizenship. You can find a more comprehensive list of the necessary documents on the FAFSA website.


Your financial status helps determine your EFC, or Expected Family Contribution. The EFC shows your family's ability to pay for college. It's based on your family income and size, and on the number of family members attending college. The formula for determining eligibility is updated each year, but it generally provides aid to families who earn less than the set amount for that year.

Of course, there's some controversy over Pell Grants. Many people think the recent increases in the maximum yearly award are too little and too late. Since the cost of college is rising so sharply, the Pell Grant pays a much smaller percentage of the total cost of a year's college than it did when the Pell program began. President Bush's administration has plans to increase the yearly maximum even more, to over $5,000 over the next few years. He has a great deal of support for increasing the grants, but it's not clear where the money will come from. Those who worry that the money will be taken from other federal grant programs say it's wrong to take from those deserving programs to fund the Pell Grant. Either way, it's pretty obvious that the situation will be greatly affected by the election of a new president this fall.

To find out more about how the U.S. government funds its many grant programs, keep reading.


Other Government Grants for Education

President George Bush signs the College Cost Reduction Act making college more affordable for low-income students by increasing funding for Federal Pell Grants by more than $11 billion.
Ron Sachs-Pool/Getty Images

The Pell Grant is certainly not the only grant funded by the U.S. government. Anyone interested in attending college would be well advised to research the grants; there's a good chance of finding something that you qualify to receive.

The FAFSA site has a list of federal education grants, such as the Academic Competitiveness Grant and the National Science and Math Access to Retain Talent (SMART) Grant. There are also various loans and work study positions available. You can apply for all the federal funding sources using the FAFSA online application. The funds will be distributed in the same way as the Pell Grant, in most cases. Of course, there are many more possibilities for financial aid through state and local programs, so check every possible source for help.


Most government education grants begin when Congress sets aside money for individual grant programs. For example, $12,606,713,000 was appropriated for the Pell Grants for 2007. There's always a great deal of political pressure from various sides concerning the amount of money Congress allots to specific grant programs. You can learn more about the final appropriation amounts for other years for the Pell Grant and for various other grants at the U.S. Department of Education website.

The United States Department of Education (USDE) is in charge of the distribution of grants, loans, and work study agreements. USDE sends the money to schools and institutions, who pass the money to the students. However, if a student does not keep up his or her grades, the funds can be cancelled or cut off for future terms. So you must do your part by maintaining a qualifying GPA (check with your school for specific grant GPA requirements). Registrars are responsible for checking to see that students remain eligible for Pell Grants and other grants, and for distributing the funds to students.



Lots More Information

Related HowStuffWorks Articles
More Great Links


  • "FAQs: Eligibility." (4/29/08)
  • "Federal Pell Grant." (4/29/08)
  • "Federal Pell Grant Program." (4/29/08)
  • Lederman, Doug. "Pell Grant Increase on the Way." 9/7/07 (4/29/08)
  • "Get Ready for College: Federal Pell Grant." (4/29/08)
  • "Pell Grants: Frequently Asked Questions." (4/30/08)
  • "The EFC Formula, 2008-2009." (4/30/08)