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Is Pell Grant Subsidized Or Unsubsidized: Understanding Types Of Pell Grants

Written by: Jody Adams
Last updated: January 31, 2024

Pell Grants are one of the most important financial aid forms for students who want to attend college or university. These grants are awarded based on financial need and do not need to be repaid. However, there are two types of Pell Grants: subsidized and unsubsidized. 

This article will explore the question “is Pell Grant subsidized or unsubsidized” and help you decide which option is best for you.

Is Pell Grant Subsidized Or Unsubsidized?

There is no such thing as a subsidized or unsubsidized Pell Grant. Pell Grants are always subsidized, meaning that they do not accrue interest and do not have to be paid back after a student completes their education.

However, there are subsidized and unsubsidized versions of other types of federal student loans, such as Direct Stafford Loans. The main difference between subsidized and unsubsidized loans is how interest accrues and is paid.

With a subsidized loan, the federal government pays the interest on the loan while the student is in school and during other periods of deferment, such as during a grace period after leaving school or during a period of financial hardship. This means that the loan balance does not grow while the student is not making payments.

With an unsubsidized loan, the student is responsible for paying the interest that accrues on the loan while they are in school and during other periods of deferment. If the student chooses not to pay the interest while in school, it will be added to the loan balance, and the student will end up owing more in the long run.

It's important to note that while there are subsidized and unsubsidized versions of federal student loans, Pell Grants are always subsidized and do not have to be paid back.

The key feature of subsidized Pell Grants is that the federal government pays the interest on the loan. At the same time, the student is enrolled in school at least half-time, during the grace period after the student leaves school, and during any authorized periods of deferment. 

To be eligible for subsidized Pell Grants:

  • students must be able to demonstrate financial need
  • they must be enrolled in an undergraduate degree or certificate program at a participating institution
  • they must be a U.S. citizen or eligible non-citizen
  • they must maintain satisfactory academic progress

Students must complete the Free Application for Federal Student Aid (FAFSA) to apply for subsidized Pell Grants. This application determines a student’s eligibility for various types of federal financial aid, including subsidized Pell Grants.

Pros And Cons Of Subsidized Pell Grants

The main advantage of subsidized Pell Grants is that the federal government pays the interest on the loan while the student is still in school. Additionally, because these grants are based on financial need, they can help students who lack the financial means to attend college or university.

Potential Downside 

  • not all students will be eligible for these grants; as they are based on financial need
  • there is a limit to how much money a student can receive in subsidized Pell Grants each year. For the 2022-2023 academic year, the maximum award amount for subsidized Pell Grants is $6,495
  • once a student graduates or leaves school, they will be responsible for repaying the loan, even though the interest was paid while in school.

What Are Unsubsidized Loans?

Unlike subsidized Pell Grants, these grants are not based on financial need. Instead, they are available to any student enrolled in an undergraduate degree or certificate program at a participating institution.

The main difference between subsidized and unsubsidized grants is that the student is responsible for paying the interest on the loan while they are still in school, during the grace period after they leave school, and during any authorized periods of deferment. This means that the loan will accrue interest while the student is still in school, and the total amount of debt will be higher than it would be with a subsidized Pell Grant.

To be eligible for unsubsidized grants:

  • students must meet the same eligibility criteria as subsidized Pell Grants
  • they must be enrolled in an undergraduate degree or certificate program at a participating institution
  • they must maintain satisfactory academic progress throughout their studies
  • they must be a U.S. citizen or eligible non-citizen

Students must also complete the Free Application for Federal Student Aid (FAFSA) to apply for unsubsidized grants. The amount of money a student can receive in unsubsidized grants varies based on various factors, including the cost of attending school and other financial aid that the student may be receiving.

Pros And Cons Of Unsubsidized grants

One of the advantages of unsubsidized grants is that they are available to any undergraduate student, regardless of financial need. Students who may not qualify for subsidized Pell Grants can still receive financial aid to help pay for college or university.

Potential Downside 

  • the interest on the loan accrues while the student is still in school, which means that the total amount of debt will be higher than it would be with a subsidized Pell Grant
  • the maximum award amount for unsubsidized grants is the same as for subsidized Pell Grants, which means that students who receive unsubsidized grants may still need to take out additional loans to pay for their education
  • once a student graduates or leaves school, they will be responsible for repaying the loan, including the interest that has accrued while they were still in school

How To Decide Which Pell Grant To Choose?

Is Pell Grant Subsidized Or Unsubsidized? Pell grants are always subsidized. However, you will need to consider your financial needs when deciding between which type of Pell Grant or loan you need. If you can demonstrate financial need, you may be eligible for a subsidized Pell Grant, which means that the federal government will pay the interest on your loan while you are still in school.

However, an unsubsidized loans may be a good option if you do not demonstrate financial need or need additional financial aid to help pay for your education. While you will be responsible for paying the interest on the loan, an unsubsidized Pell Grant can still help you cover some of the costs associated with attending college or university.

You should also consider the maximum award amounts for both types of grants. If the cost of attending school is higher than the maximum award amount for either type of Pell Grant, you may need to consider other forms of financial aid, such as scholarships, grants, or loans.

Finally, you should think about your long-term financial goals. While subsidized and unsubsidized grants can help you pay for college or university, you will be responsible for repaying the loan once you graduate or leave school. If you are concerned about your debt after graduation, you may want to consider other forms of financial aid that do not require repayments, such as scholarships or grants.

Subsidized Or Unsubsidized: The Bottom Line About Pell Grants

Is Pell Grant Subsidized Or Unsubsidized? Pell Grants are always subsidized to undergraduate students and can help cover some of the costs associated with higher education. When deciding between subsidized and unsubsidized grants, students should consider their financial needs, the maximum award amount, and long-term financial goals.

A scholarship can make it possible for a student to afford an education, especially for students who have deceased parents. Pell Grants are crucial financial aid for students looking to pursue higher education. Find out the requirements for a Pell Grant and how to maintain eligibility by exploring our Gov Relations resources.

Jody Adams
Jody Adams is an accomplished editor-in-chief with a deep understanding of social care and government benefits issues. With a background in journalism and a master's degree in Public Policy, Jody has spent her career shaping the narrative around social policies and their impact on society. She has worked with renowned publications, effectively bridging the gap between complex policy analysis and public understanding. Jody's editorial expertise ensures that vital information on social care and government benefits reaches a broad audience, empowering individuals to make informed decisions.
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