Although financial aid is available in many forms, only a few options are truly free. A Federal Pell Grant is free money awarded by the federal government to low-income undergraduate students that does not need to be repaid.
Unlike loans, which typically require repayment with interest, Federal Pell Grants are one of four need-based grants and have no repayment stipulation. Additionally, the funds awarded can be used for tuition and fees, room and board, transportation, books, supplies and more.
All funds are awarded at least once per term through participating collegiate institutions that then disburse the money either directly to the student or credit the funds to the student’s account.
To be eligible for these Federal Pell Grant funds, a student must first prove that he or she is an undergraduate or vocational student that is either enrolled or accepted for enrollment in a participating school. The student must not have yet earned a bachelor’s or professional degree. Additionally, the student must meet the Basic Eligibility Criteria, which lists numerous requirements for federal financial aid, including a high school diploma or equivalent, social security number, and more.
The only way to receive free funds from the Federal Pell Grant program is to meet these criteria and fill out the Free Application for Federal Student Aid (FAFSA). An application that evaluates a student’s financial need, the FAFSA is the most important application in the collegiate funding process. It’s the only way to determine whether or not a student is eligible for Pell Grant funds.
The most important number the FAFSA will calculate is the student’s Expected Family Contribution (EFC), which will measure a family’s financial strength. Students with the greatest need for financial aid will have an EFC of 0, and as the EFC increases, the Federal Pell Grant award will decrease. (The maximum eligible EFC for the 2015-2016 academic year is 5198.)
To determine the amount of Federal Pell Grant Funds that a student will receive, a college will calculate the difference between the school’s Cost of Attendance (COA) and the student’s Expected Family Contribution (EFC). That number is the Financial Need.
A student cannot receive more need-based aid than the amount of his or her Financial Need. So, if a student’s COA is $5,000 and your EFC is 2000, you are not eligible for more than $3,000 in Federal Pell Grant aid.