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Pell Grant vs Perkins Loan

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

For most students, completing a college degree opens opportunities that would not be available otherwise. However, college is expensive, and any form of financial aid is welcome for struggling students. This blog discusses what you need to know about Pell Grant vs. Perkins Loan.

Pell Grants Vs. Perkins Loans

Pell Grants and Perkins Loans are two different types of financial aid programs available to students in the United States. Both are|

awarded to students who demonstrate financial need based on the information they provide in the FAFSA. However, the two programs have differences.

Pell Grants are a "gift aid" type that doesn't need to be repaid. The amount awarded depends on several factors, such as your EFC score, the school's COA, and your enrollment terms. Pell Grants are also awarded only to undergraduate students.

Perkins Loans are low-interest federal student loans available to undergraduate and graduate students. Unlike Pell Grants, Perkins Loans need to be repaid. This program expired in 2017 and is no longer accepting new borrowers.

Benefits Of Each Loan Type

Pell Grants and Perkins Loans provide students with financial assistance to help cover college tuition, fees, books, and living expenses. Unlike private student loans, Pell Grants and Perkins Loans are not dependent on credit checks, making them more accessible to students who may lack credit histories or have low credit scores.

Pell Grants don't have to be repaid, while Perkins Loans offer a low fixed interest rate and flexible repayment options. This helps students save money in the long run.

Eligibility For Pell Grants And Perkins Loans

Here's what you need to know about the qualification factors for both programs.

Who Is Eligible For A Pell Grant?

Applicants for Pell Grants must meet the following criteria:

  1. Citizenship or residency in the United States is required.
  2. A high school diploma or equivalent, like a GED, would be helpful.
  3. The student should be enrolled in a participating institution's degree or certificate program or accepted for enrollment.
  4. You must show financial need, as the Free Application for Federal Student Aid (FAFSA) determines. Your EFC score must also meet the minimum threshold set for the year.
  5. You must not have a prior drug conviction while receiving federal financial aid.

Notably, eligibility for a Pell Grant is not limited to students with exceptional academic records, and there is no minimum GPA requirement. However, you must maintain satisfactory academic progress to continue receiving the grant.

Who Is Eligible For A Perkins Loan?

The Federal Perkins Loan program has been ended since 2017, so it is no longer available for new borrowers. Applications stopped in September 2017, and final disbursements were completed in 2018.

Factors Affecting Eligibility

Several factors can affect your Pell Grant and other financial aid eligibility. Some of the most significant factors include the following:

  1. Financial need: Your financial need is determined by your Expected Family Contribution (EFC), which is calculated based on the information you provide on the FAFSA. You will likely be eligible for financial aid if your EFC is lower.
  2. Enrollment status: Most financial aid programs require you to be enrolled at least half-time in an eligible degree or certificate program. Your enrollment status can affect the amount of aid you receive.
  3. Cost of attendance: The cost of attendance (COA) for your institution, including tuition, fees, room and board, books, and other expenses, can affect the amount of financial aid you can receive.
  4. Academic progress: Many financial aid programs require you to maintain satisfactory academic progress (SAP) to remain eligible. This typically includes maintaining a minimum GPA and completing a certain number of credits each semester.
  5. Default status: If you default on a student loan or overpay a grant, you may be ineligible for additional financial aid.

Amounts Awarded With Pell Grants And Perkins Loans

The maximum amount granted for Pell Grants and Perkins Loans varies depending on the academic year and various factors.

Maximum Amount of a Pell Grant Award

The maximum amount of a Pell Grant award for the 2022-2023 academic year is $6,495. For SY 2023-2024, the maximum amount is $7,395. You may receive a different amount based on several factors, including:

  • Your financial need
  • COA at your institution
  • Whether you're enrolled full-time or part-time

It's important to note that the maximum Pell Grant award amount can change each year based on federal funding levels and other factors. Students with the greatest financial need are given priority in receiving the Pell Grant.

Maximum Amount of a Perkins Loan Award

When the Perkins Loan program was still active, it disbursed up to $8,000 for undergraduate students and $6,000 for graduate students. It's worth noting that the Federal Perkins Loan program had a limited amount of funds available each year, and not all institutions participated in the program.

How to Calculate Awards Based on Need

Awards based on need, such as the Pell Grant and other types of federal and state financial aid, are calculated using a formula that considers your financial need as determined by your FAFSA information and the school's COA.

The formula for calculating need-based financial aid is as follows:

Cost of Attendance (COA) - Expected Family Contribution (EFC) = Financial Need

The COA includes tuition, fees, room and board, books, and other educational expenses. The EFC considers factors such as

  • Income
  • Assets
  • Family size
  • Number of family members attending college

Once your financial need has been determined, your school's financial aid office will use this information to tell your eligibility for need-based financial aid programs.

Terms and Conditions of Repayment for Pell Grants and Perkins Loans

Repayment terms and conditions can vary depending on the loan program and the institution you attended. Check with your loan servicer or your school's financial aid office to learn more about your repayment options and obligations.

Repayment Period for Pell Grants

The Pell Grant does not require repayment and has no repayment period. The funds are disbursed every academic year, typically in two portions for spring and fall semesters. You can also get a Summer Pell Grant, depending on your summer term enrollment.

You can receive Pell Grant funds from up to one school at a time. Also, if you withdraw from school before completing the semester, you may be liable for a portion of the grant. In this case, you refund the government the grant money already awarded.

Repayment Period for Perkins Loans

During the loan term, the interest rate on Perkins Loans is fixed at 5%, and there is no origination fee. You may qualify for a deferment or forbearance if you suffer from financial hardship or other circumstances that make it difficult to make your loan payments.

Frequently Asked Questions

Here are answers to commonly asked questions.

Are Perkins Loans eligible for forgiveness?

Yes, Perkins Loans are eligible for certain types of forgiveness. Here are some options for Perkins Loan forgiveness:

Public Service Loan Forgiveness (PSLF)
Teacher Loan Forgiveness
Perkins Loan Cancellation
Other forgiveness programs include the National Health Service Corps Loan Repayment Program or the Military Service Loan Forgiveness Program.

It's important to note that eligibility for these forgiveness programs may depend on various factors, such as your employment history, the amount of your loan, and the repayment plan you are enrolled in.

Is a Pell Grant a subsidized loan?

A Pell Grant is not a subsidized loan. It is optional to repay Pell Grants, unlike loans. On the other hand, subsidized loans are also based on financial need, but they accrue interest while the student is enrolled in school.

The government pays the interest on subsidized loans for the duration of a student in school, for six months after graduation, and for periods of deferment.

Why would you pay back a Pell Grant?

It is optional to repay a Pell Grant. However, a portion of your Pell Grant may be repaid if you withdraw from school or drop below half-time enrollment before completing the semester.

This is known as the Return of Title IV Funds calculation. If you received more aid than you earned, you might be required to repay the excess funds.

Additionally, if you're found to be ineligible for the Pell Grant due to a change in your financial circumstances, you may be required to repay the funds you received. However, in most cases, Pell Grants do not need to be repaid and are considered "gift aid" that can help students pay for their education without taking on additional debt.

The Perkins Loan Program has ended, but there are still other ways to get financial aid for college. The Pell Grant is one example. Check the eligibility criteria, and if you don't cut, seek out other scholarship and federal loan options.

Check out our blog for a Step-by-Step Guide to Applying for a Pell Grant.

If you want to know about Pell Grant's limit, visit our article about Federal Pell Grant limit.

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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