Home  »  Paying For School   »   Pell Grant: Everything You Need to Know

Pell Grant: Everything You Need to Know

Although there are many different ways to find money for college, receiving a Federal Pell Grant for your education can be an excellent way to help lower your out-of-pocket costs. While a service member can find money for education with the GI Bill or Tuition Assistance, the Pell Grant can also help children and spouses find some money for school.

Federal Pell Grant Overhaul

A Federal Pell Grant is a form of government assistance for education that does not require repayment, unlike a student loan.

The Federal Pell Grant program has been updated, thanks in part to the FAFSA Simplification Act, which mandated changes to the program as we’ll examine below.

Key changes for the 2024-2025 and 2025-2026 academic years include a new eligibility formula and a streamlined application, which will impact how all students apply for and receive federal aid.

For the 2025-2026 academic year, the maximum Federal Pell Grant award is $7,395. This amount is the same as the amount for the 2024-2025 award year. The minimum award is $740.

One important change is the replacement of the Expected Family Contribution (EFC) with the Expected Family Contribution (EFC). Federal aid eligibility is now determined by the Student Aid Index (SAI) instead.

Understanding the Student Aid Index (SAI)

The shift from EFC to SAI is a sea change in how financial need is calculated. The SAI is an eligibility index number, not a specific dollar amount your family is expected to pay, and financial aid offices use it to determine the amount and type of federal aid you can receive.

Unlike the EFC, which had a minimum of zero, the SAI can be as low as minus 1,500.

A negative SAI indicates a student has a very high level of financial need, which can help colleges better target institutional aid. There are also key calculation changes.

Two major factors from the EFC calculation have been eliminated: the formula no longer divides the parent’s contribution by the number of family members in college, which may reduce aid for some families, and the “small business/family farm exclusion” has been removed. That means families must now report the net worth of these assets.

The new formula also automatically qualifies applicants for the maximum Pell Grant. This applies if their adjusted gross income is below a certain threshold based on family size and the federal poverty level.

Other Key Updates to Federal Aid

Several other significant changes have been implemented in conjunction with the new SAI.

The Free Application for Federal Student Aid (FAFSA) form has been shortened, reducing the number of questions from over 100 to around 36. The application now requires all “contributors,” such as the student, a spouse, or parents, to provide consent for their tax information to be transferred directly from the IRS.

Pell Grant eligibility has been fully restored for those who are incarcerated. This expansion of the “Second Chance Pell” initiative allows students in approved Prison Education Programs (PEPs) to access federal grants. Finally, grants for military families have been streamlined.

Iraq and Afghanistan Service Grant (IASG) and Children of Fallen Heroes (CFH) Scholarship recipients automatically receive the maximum Pell Grant award, regardless of their SAI, effective for the 2024-2025 award year.

This applies to children (under 33 years old) of service members who died on active duty after 9/11 or public safety officers who died in the line of duty.

Pell Grant Basics: What Hasn’t Changed

Although the application and formula are new, the core purpose and eligibility requirements of the Pell Grant remain unchanged. A Pell Grant is federal financial aid for undergraduate students that, in most cases, does not need to be repaid and is typically awarded to students with exceptional financial need.

This is for undergraduates who have not yet earned a bachelor’s, graduate, or professional degree.

To apply, you must complete the FAFSA every year you are in school. Students are limited to a total of 12 full-time semesters (or its 600% equivalent) of Pell Grant funding over their lifetime. Students may also be eligible for Year-Round Pell, which allows them to receive up to 150% of their annual award in a single year, covering terms such as summer sessions, to accelerate their studies.

Who Is Eligible to Receive a Federal Pell Grant?

Pell Grants are awarded to undergraduate students who display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree.

There are instances where a student enrolled in a post-baccalaureate teacher certification program may be eligible to receive a Federal Pell Grant.

How Do You Apply For a Federal Pell Grant?

To apply for a Federal Pell Grant, you will need to submit your free application for Federal Student Aid (FAFSA.) You will need to do this every year you attend school to remain eligible.

How Do You Receive the Money for the Federal Pell Grant?

Your school can apply Federal Pell Grant funds to your school costs, pay you directly, or a combination of the two.

You must maintain your status in an undergraduate course of study at a non-foreign school.

After you have earned a baccalaureate degree or your first professional degree, or if you have used up all 12 semesters of your eligibility, you are no longer able to receive a Federal Pell Grant.

Do I Have To Repay a Federal Pell Grant?

Usually, you would not have to repay a Federal Pell Grant; however, you would have to in these circumstances, if you:

• Withdrew early from the program which the grant was given to you for
• Changed your enrollment status which reduces your eligibility for the grant
• Received outside scholarships or grants that reduce your need for federal student aid
• Do not meet the requirements for the TEACH Grant service obligation

Although not everyone will qualify for a Federal Pell Grant, if you do, it can be an excellent way to pay for your college education.

 

RELATED:

• DoD MOU: Everything You Need to Know
• Lessons Learned: Getting the Most from Your GI Bill
• FAFSA: What You Need To Know