Do You Have to Pay Back a Pell Grant?
If you secured a Pell Grant, congrats! You’re on your way to affordable education. But do you have to pay back a Pell Grant? Let’s find out!
Students have access to a variety of financial aid from colleges, private organizations, and of course, the government. Some forms of financial aid are based on merit, while others are based on financial need and other criteria. Financial aid might look like scholarships, grants, or loans. Do you have to pay back loans? Yes, eventually. Do you have to pay back grants? Usually, no!
The Pell Grant is a form of financial aid offered by the US government to help students with educational costs.
But do you have to pay back a Pell Grant? Not usually, but there are some exceptions.
We’ll cover everything you need to know about the Pell Grant and answer any questions you may have about paying back Pell Grants with this article.
What Is the Pell Grant?
The Pell Grant is one of many forms of financial aid for college education offered by the US government. Students can access the grant after completing the FAFSA. Traditionally, Congress funded Pell Grant funds, though it’s now overall funded by the US government and distributed through colleges.
Do you have to pay back grants for college? In many cases, no, and the Pell Grant is no exception. This grant is usually meant for undergraduate students that are enrolled or soon will be. It’s also need-based, meaning a student’s household income must be below a certain threshold for you to be eligible. Once granted, students can spend the grant on “qualified educational expenses,” including room and board, and tuition.
Students can access a maximum amount of money from this grant that changes each year. For 2021-2022, the maximum amount allowed per student was $6,495. However, the exact amount under that threshold varies based on the following:
- Estimated family contribution (“EFC”)
- Program cost of attendance
- Full-time vs. part-time enrollment
- Tenure of enrollment
Do pell grants have to be paid back? Let’s take a look in the next section.
Do You Have to Pay Back a Federal Pell Grant?
Do you pay back Pell Grants? Usually, no. This is a grant, not a student loan. Do grants have to be paid back? While students must pay back student loans with interests, grants do not have to be paid back.
However, there are a few scenarios in which a student might have to return some or all of the Pell Grant they received.
Reasons Why You Might Have to Pay Back a Pell Grant
In some scenarios, you may need to pay back your Pell Grant. In that case, you’ll receive a notice informing you of the decision. You’d be required to respond with the payment within 45 days.
Here are some of the reasons why a student might need to pay back a Pell Grant.
Dropping Out of School
Your Pell Grant amount is calculated based on your cost of attendance, as well as your, well, actual attendance. If you drop out of school, you will have to pay back at least a portion (usually half) of your Pell Grant back.
Switching to Part-time Studies
If you switch to part-time studies, your tuition fees usually change. Thus, so will your Pell Grant, and you will have to pay back a certain amount. Your Pell Grant is dependent on the cost of your school’s attendance (among other factors), so a change there will affect the grant amount.
Increase in Household Income
If your family’s household income increases, you might be eligible for less financial aid than you were before, which might result in having to pay back some of your Pell Grant. Similarly, if your household income decreases, you may be eligible for more financial aid, including more of the Pell Grant, under the maximum amount.
Excess Financial Aid from Other Sources
Your household income as well as other financial aid affects your Pell Grant amount. If you receive an excess amount of financial aid, you might be required to pay back some of the Pell Grant.
Sometimes the government makes mistakes. If they overpaid you and gave you more of the Pell Grant than you were eligible for, you’ll have to pay back the overpayment.
Learn more about Part-Time vs Full-time Students.
Frequently Asked Questions (FAQs)
1. Are Pell Grants Taxable?
Usually, no. Pell Grants are seen as scholarships, which the IRS doesn’t require taxes to be paid on. However, to avoid paying taxes, you may be required to prove that you’re enrolled in a qualifying college program, and that you used the Pell Grant for “qualified educational expenses.”
2. When Would You Have to Return Pell Grants?
If you need to pay back some or all of your Pell Grant, you’ll receive a letter saying so. From the date you receive the letter, you have 45 days to return the grant money. If for whatever reason you’re unable to pay it back, respond to the letter outlining your situation to see if you can be allowed more time.
3. What Happens If You Don’t Pay Back Pell Grants?
If you owe back some of your Pell Grant money and you don’t pay it back, your college will likely pass the debt to the US Department of Education.
4. What Happens to Unused Pell Grant Money?
If you have a remaining Pell Grant balance left over after your tuition and other educational fees are paid, your college will give you a Pell Grant refund. The refund might come in the mail as a cheque, or deposit it directly into your bank account.
The time it takes for a refund to be issued can vary from school to school. To find out when to expect your refund to arrive, contact your college’s financial aid office.
5. What is the Maximum Pell Grant for the 2022-2023 School Year?
The maximum Pell Grant for the 2022-2023 school year hasn’t yet been released. However, the maximum amount for 2021 was $6,495.
Do you have to pay back a Pell Grant? Luckily, most students don’t! Pell Grants are non-taxable student grants that don’t require repayment in most cases. However, the scenarios discussed in this article may warrant a student owing back some money from the Pell Grant.