The intention of the Pell Grant is to offer need-based financial assistance to low-income students and encourage their enrollment in post-secondary education institutes. "The Pell Grant was established in 1965 under the Higher Education Act of 1965 Title IV, Part A, Subpart 1; 20 U.S.C. 1070a," according to PellGrantInformation.com.
Unlike a loan, the Pell Grant does not have to be repaid, however, it must be used at one of the 5,400 participating post-secondary institutions.
The "Guide to U.S. Department of Education Programs" is released by the U.S. Department of Education and contains information regarding the approved programs, requirements, funding, contact information and additional resources (see Resources for link).
A student's eligibility for the Pell Grant and the specific amount of the grant is established by a standard formula, which calculates the expected family contribution (EFC).
The primary elements of the EFC formula include the income and assets (if independent) of a student, her parents' income and assets (if dependent), number of family members (enrolled in college) and the overall size of the household. "The EFC is the sum of: (1) a percentage of net income (remaining income after subtracting allowances for basic living expenses and taxes) and (2) a percentage of net assets (assets remaining after subtracting an asset protection allowance). Different assessment rates and allowances are used for dependent students, independent students without dependents, and independent students with dependents," according to the Department of Education website.
To be considered for the Pell Grant, students must first submit the Free Application for Federal Student Aid (FAFSA). Once the FAFSA is processed by the Department of Education, a Student Aid Report (SAR) is sent to the student or an Institutional Student Information Record (ISIR) is sent to the institution he plans to enroll in; together the SAR and ISIR notify the student of Pell Grant qualification.