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Pell Grant Vs. Loans

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

In an economy with high inflation, the cost of living increases rapidly, making it challenging for low-income individuals and families to afford necessities like housing, food, and healthcare.

For students, taking out a student loan or qualifying for the Pell Grant is a solution to affording college tuition fees. Let's differentiate Pell Grant vs. loans in this article.

What Is The Importance Of Financial Aid For Students?

What Is The Importance Of Financial Aid For Students?

Financial aid is crucial for many students as it provides financial assistance to help cover the cost of higher education. Higher education can be expensive, and not all students or families can afford to cover tuition, fees, and books.

Financial aid can come in many forms, such as scholarships, grants, work-study programs, and loans. It can significantly affect a student's ability to pursue higher education.

The Pell Grant Explained

Low-income students can receive the Pell Grant to help them pay for their education. It s funded by the federal government and provides grants of up to a certain amount each year, which is determined by the recipient's financial need, the cost of attending the institution, and other factors.

Pell Grant amounts can change from year to year depending on the student's financial situation and the college's cost of attendance. The grant can be used to cover a variety of educational expenses, including tuition, fees, books, and living expenses.

Eligibility Requirements

To qualify for a Pell Grant, students must complete and submit the Free Application for Federal Student Aid (FAFSA). Eligibility for the grant is determined by the student's Expected Family Contribution (EFC), which is calculated based on their family's income, assets, and other financial circumstances.

Income Eligibility

For SY 2023-2024, the EFC score to be eligible is 6656.

Academic Progress Requirements

Pell Grant recipients must also demonstrate academic progress and meet the minimum GPA requirements set by their institution. Usually, a 2.0 GPA (or C rating) is the minimum requirement.

Enrollment Status Requirements

Students must be enrolled part-time in an eligible institution to receive a Pell Grant. Enrollment status also determines the amount of Pell Grant you'll receive.

Benefits Of Receiving A Pell Grant

Receiving a Pell Grant can provide significant financial assistance to eligible undergraduate students to help them receive higher education and reduce their reliance on student loans.

These funds can cover various educational expenses, including tuition, fees, books, and living expenses. This flexibility ensures that students have the resources they need to succeed in college and increases the likelihood that they will complete their education.

Paying Back The Grant Award: Not Required

Unlike a loan, a Pell Grant does not need to be repaid. Although if you drop out of school or there are changes in your enrollment status before completing the term, you need to refund the unused portion of the Pell Grant.

Helps Cover School Costs

The Pell Grant provides a certain amount of funding that can be used to cover a variety of school-related expenses, including tuition, fees, books, and living expenses.

Once a student receives their Pell Grant award, the funds are typically applied to their school account to pay for tuition and fees. If there are any remaining funds after tuition and fees have been paid, the student may receive a refund that can be used to cover other school-related expenses, such as books, transportation, or housing.

Federal Student Loans Explained

A student loan is a type of financial aid the government provides to help students afford higher education. These loans are offered through the U.S. Department of Education and are designed to help students and their families cover the cost of tuition, fees, room and board, and other related expenses.

Taking out a federal student loan is usually cheaper than taking out a private student loan. They also offer a range of repayment plans, including income-driven repayment plans that allow borrowers to make payments based on their income and family size. Additionally, federal student loans offer certain benefits, such as deferment and forbearance options, and loan forgiveness programs for those who meet certain criteria.

Types Of Federal Student Loans

Among the types of federal student loans are:

  • Direct Subsidized Loans for students who demonstrate financial need
  • Undergraduate and graduate students with no financial need can apply for direct unsubsidized loans
  • Parents of dependent undergraduate students and graduate students may qualify for a Direct PLUS Loan

Subsidized Loans

Subsidized loans are another option for students with financial needs if they're not eligible for the Pell Grant. Generally, the government pays the interest on these student loans during school and certain other periods, such as deferment or forbearance.


Frequently Asked Questions

Here are answers to your common questions.

Do Pell Scholarships Require Repayment?

No, Pell Grants do not require repayment. As a form of federal financial aid, Pell Grants are awarded to eligible undergraduate students based on financial need.

What Happens To Pell Award Money That Isn't Used?

If a student receives a Pell Grant award but does not use all the funds, the remaining amount is typically returned to the federal government. This is because Pell Grants are intended to help cover the cost of attendance for eligible students, and any unused funds are considered excessive.

When Will I Receive My Pell Award Money?

The timing of when you will receive your Pell Grant award money depends on several factors, including your school's financial aid disbursement schedule, the payment period for which the award was granted, and whether you have completed all of the requirements to receive the funds.

In general, Pell Grant funds are typically disbursed by your school in at least two equal payments during the academic year.

Higher education can be within reach. If you're a low-income student, the Pell Grant or Direct Subsidized Federal loans can help you achieve your dreams.

Alternatively, you can qualify for scholarships, such as those for Children of Veterans.

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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