How Public Grants Work

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There are many ways to pay for an education. You can pay out of pocket, earn a scholarship, secure a student loan, join a work-study program or apply for a grant. Students find scholarships and grants particularly helpful -- they don't require repayment.

A grant is just what it sounds like -- money is granted to the receiving party. Grants can come from different sources. Some companies and organizations have private grant programs, often overseen by a board of directors. But another type is the public grant.


Public grants receive funding from the public through tax dollars. The United States government has 26 agencies in charge of making grants. Not all of these grants are for education. Some are meant to help people secure housing or start a small business. In addition to federal grants, some states have their own grant programs.

The justification for using tax money to help students pay for college is straightforward. By helping citizens further their education, society stands to benefit from their contributions later on.

Many, but not all, grants are need-based. That means only students who fall below a certain income level will be eligible to receive a grant. Some grants, such as the state of Georgia's HOPE grant, don't have a needs-based requirement.


Federal Grants and the FAFSA

The late Senator Claiborne Pell, for whom the Pell grant was named, helped millions of students afford a college education.
AP Photo/Joe Giblin

To apply for a federal grant, students need to complete the Free Application for Federal Student Aid (FAFSA). The FAFSA helps administrators assess students' financial need and eligibility. Students will need to divulge many facts about themselves, including:

  • Citizenship status
  • Marital status
  • Parents' education history
  • One parent's date of birth and social security number
  • Any drug convictions
  • Student dependency status
  • The family's latest income tax return
  • Family income estimation

The federal government expects the applicant's family to contribute to educational costs, too. The common term for this is the Expected Family Contribution (EFC). Most federal grants are meant for students who have a greater financial need and might otherwise not be able to afford to go to school. As a result, a student from a family making income above the cutoff isn't eligible no matter what that student's academic performance might be.


The Federal Pell Grant is one of the better-known grants available to students in the United States. Undergraduate students from low-income families are eligible for the Pell Grant as long as the student doesn't already have a bachelor's degree. In 2010, the maximum amount the government could grant a student under the Pell Grant was $5,500 [source: Federal Student Aid]. Congress determines the maximum payment -- the amount can change over time.

The federal government offers other grants in addition to the Pell Grant. Some, like the Federal Supplemental Educational Opportunity Grant, require the student to qualify for the Pell Grant first. Others, like the Teacher Education Assistance for College and Higher Education (TEACH), are meant for students with specific majors or career paths.

In all cases, federal grants come from a limited pool of resources. Once that money is gone, even an eligible student won't be able to secure a grant until Congress replenishes the grant budget.


State Grants

Former Georgia governor and U.S. Senator Zell Miller pushed the HOPE scholarship and grant programs.
AP Photo/Joe Marquette

Some states have their own public grant programs. Most states require grant recipients to be a resident of the state and to attend a state university or college. Some states also have limited funds set aside for students who wish to attend a private institution as long as it's within the state.

Many states reserve grants for those students with the most financial need. For example, Massachusetts has the Howard P. Rawlings Guaranteed Access Grant. This grant only goes to students who maintain a 2.5 GPA or better in high school and who also demonstrate a financial need. It's also available to students who did not apply for college directly out of high school.


Other states have grant programs that don't take financial need into account. One example of a state grant program is Georgia's Helping Outstanding Pupils Educationally (HOPE) program. It has both a scholarship and a grant element. Georgia students with a strong academic performance who are seeking a college degree are eligible for the scholarship. The HOPE Grant is meant for students seeking a technical certification or diploma and doesn't depend upon academic performance. Both the scholarship and the grant program receive funds from the Georgia Lottery.

Students eligible for the HOPE Grant will receive funds that cover the entire cost of tuition. They also receive a book allowance per semester. Other expenses, such as room and board, are not covered by the grant.

It's important for all college students to research financial aid options. Grants and scholarships can help a student cover expenses without adding the burden of repayment. Take everything into consideration -- your financial status, the career you hope to pursue and the college you want to attend. You may find a grant that's perfect for you.

Learn more about grants and financial aid through the links on the next page.


Lots More Information

Related HowStuffWorks Articles

  • Federal Student Aid. "Grant Programs Fact Sheet." January 2010. (March 1, 2010)
  • FinAid. "Grants." 2010. (Feb. 25, 2010)
  • GAcollege411. "Georgia's HOPE Grant Program." 2009. (Feb. 25, 2010)
  • Georgia Student Finance Commission. "HOPE Grant Program." State of Georgia. 2009. (Feb. 24, 2010)
  • "Grant Sources." 2010. (Feb. 25, 2010)
  • Pennsylvania Higher Education Assistance Agency. "Eligibility Requirements." (Feb. 26, 2010)
  • U.S. Department of Education. "FAFSA On The Web Worksheet." 2010. (March 1, 2010)
  • U.S. Department of Education. "Federal Pell Grant." Jan. 11, 2010. (Feb. 24, 2010)
  • U.S. Department of Education. "Federal Student Aid Programs." Jan. 30, 2010. (Feb. 24, 2010)
  • U.S. Department of Education. "Office of Chief Financial Officer: Grant Information." Aug. 27, 2008. (Feb. 24, 2010)