Pell Grants have been in the news a great deal after President Joe Biden announced his sweeping student loan forgiveness plan.
The president's policy, unveiled in August, offers up to $10,000 in loan cancellation for tens of millions of Americans who borrowed for their education. And it goes further for those who received a Pell Grant in college, a type of aid available to low-income families, by clearing as much as $20,000 from their student debt balance.
The federal Pell Grant program, signed into law in 1965, is one of the largest sources of financial aid available to college students. More than 6 million undergraduate students received the grants in 2020.
Yet many other eligible students miss out on the grant because they don't apply for it, said Betsy Mayotte, president of The Institute of Student Loan Advisors. The consequences of that loss can be severe, Mayotte said.
"It could mean not attending or completing college, or taking out more expensive private student loans," she said.
Here's what families need to know about Pell Grants.
Pell Grants are worth up to $6,895
In the 2022-2023 academic year, Pell Grants range from a minimum of $692 to a maximum of $6,895, depending on how much it's calculated that a student's family will be able to contribute to their college costs, said higher education expert Mark Kantrowitz.
In some cases, a student can receive more than the maximum aid for a single year if they're in an accelerated degree program, Kantrowitz added.
Funds help undergrads from 'low-income families'
More than 90% of Pell Grant recipients in 2015-2016 came from families with household incomes below $60,000, according to Kantrowitz.
"Pell Grants are intended for very low-income families," Mayotte said. The funding is also typically available only to undergraduate college students.
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You can check for what funding you might be eligible for at the U.S. Department of Education's student aid website.
You must submit a FAFSA to qualify
To qualify for a Pell Grant, you have to submit the Free Application for Federal Student Aid, or FAFSA, form, said Michele Streeter, senior director of college affordability at The Institute for College Access & Success. You'll have to do this each year you're enrolled in college, Streeter added.
"You should always submit a FAFSA, even if you don't think you'll qualify for aid," she said.
In some cases, if you're in school right now and haven't filed the FAFSA this year, you may be able to apply by the June 30 deadline and still get the grant for this academic year.
There's a limit to how many Pell Grants you can get
College students typically can receive the grant for up to six years. That's important to know, considering more than half of undergraduates take more than four years to graduate.
How aid is paid depends on your college
At most colleges, the grant is given out in two disbursements, at the start of each term, Kantrowitz said.
"However, many colleges prefer to make monthly or biweekly disbursements," he added. "This is often called 'Pell as a paycheck.'"
Funds typically cover tuition, but other expenses qualify
Pell Grant funds are applied first to tuition and fees, Kantrowitz said. Any college-owned or -operated housing could also be covered by the aid.
If there's still money left over after those costs are covered, it's usually disbursed to the student within 14 days, Kantrowitz said.
"The student can then use the money to pay for other college costs, such as textbooks," he said.
You usually don't have to pay the money back
A federal Pell Grant, unlike a student loan, typically doesn't have to be repaid. The exceptions are rare, and include cases in which your enrollment status changed from full time to part time or if you left a program early.