Pell Grants are provided by the federal government and are disbursed to postsecondary school students based on their financial needs. Unlike a loan, a Pell Grant does not need to be repaid upon graduation or withdrawal from school. Even if a student does not qualify for the full grant amount, partial grant disbursements are possible if the finances of the student's family fall within range.
The Basic Educational Opportunity Grant Program was created in 1972 to provide financial assistance to needy undergraduate students. Later in 1980, Congress amended the Higher Education Act of 1965 and restructured the grant process as well as renamed it. The BEOG program was dissolved and in its place the Pell Grant was enacted. The name change was in honor of U.S. Sen. Claiborne Pell of Rhode Island, who was not only a firm believer in higher education but also a supporter of federal funding for college-bound students.
The maximum amount of disbursement that is provided by the Pell Grant for an eligible student, per year, is established by the federal government on a yearly basis. The most recent maximums have risen to an annual grant of $4,731 for a needy student who has a family income level that falls below $20,000 annually. The annual award drops significantly as family income rises, with the minimum disbursement averaging approximately $500 per year.
To be considered for a Pell Grant, a Free Application for Federal Student Aid (FAFSA) needs to be submitted by the student. The U.S. Department of Education uses this form to determine a student's financial need. The FAFSA provides detailed information of a student's assets, income, dependent information and living expenses, which are all used to determine the Expected Family Contribution (EFC). The formula that the department uses to determine need will also determine the amount of the award that is offered to the student in the form of the Pell Grant. This award can then be used toward the annual tuition of the student's educational institution of choice.
The Pell Grant Program has specific eligibility guidelines that must be met to receive an award. Students who are incarcerated, arrested for narcotics possession, have defaulted on a prior government student loan or failed to refund the unused portion of a previously awarded grant are ineligible.
To be eligible for a Pell Grant a student must also be registered with the Selective Service (if a male over the age of 18), a U.S. citizen with a Social Security number, a high school graduate or in possession of a GED, and registered as a student of an eligible postsecondary school.