What You Need To Know About The Pell Grant Program

September 22, 2014 8:00 AM

Photo Credit Thinkstock

Photo Credit Thinkstock

The federal Pell Grant program is the nation’s largest needs-based college grant program. It provided more than $32 billion in financial aid to 9 million students for the 2012-2013 school year. The program began modestly as the Basic Educational Opportunity Grant Program when it launched in 1972, providing average grants of $270 to 176,000 students for the 1973-1974 school year. Today, the average Pell grant is $3,579, and President Obama’s 2015 budget request seeks to increase the program further for the 2015-2016 school year. 

Increasing access to college has been a priority of the Obama administration. In March 2010, the president signed legislation that eliminated subsidies to private banks and other financial institutions that administered federal student loans. All loans now come directly from the U.S. Department of Education. Eliminating the middleman created a savings of $68 billion in the program, $40 billion of which was directed to the Pell Grant program to increase awards. The president’s 2015 budget seeks to expand the maximum annual grant from $5,730 to $5,830 for the 2015-2016 school year.

In addition to the increase in award amounts, the president’s budget seeks two reforms to the Pell Grant Program. While the program is needs based — eligibility is not contingent on academic performance — students must make satisfactory academic progress, as defined by their college, to continue receiving grant money. Most colleges require students maintain a minimum 2.0 grade point average and pass three out of four classes to retain financial aid eligibility. To encourage students to complete their studies on time, the president seeks to strengthen these requirements, although the Department of Education has not released details.

The President is also asking Congress to reinstate the Ability to Benefit program, which grants eligibility for federal financial aid to those without high school diplomas or GEDs.  This program, which was eliminated by Congress in 2012 as a budget-cutting measure, allowed non-graduates to prove they could benefit from a Pell grant, or other federal aid, by passing an exam or successfully completing six credit hours of college study. Should Congress approve this measure, high school dropouts who enroll in an eligible career path (yet to be defined) could receive federal aid.

Awards are determined by a formula that factors income, household size and the number of college students in a household along with college costs. Award amounts are based on the Expected Family Contribution (EFC) to a college education. For example, a family with two dependent children and an annual adjusted gross income of $40,000 would have an EFC of approximately $1,500. For the 2014-2015 school year, a full-time student in this family could expect a Pell grant of up to $4,180 per year, depending on the cost of attending his or her selected college.

Students may receive Pell grants for up to 12 college semesters. Certain non-citizens, including those who hold green cards or have refugee status, are eligible. To be considered for a Pell grant, a student must complete a Free Application for Federal Student Aid (FAFSA) form.

Gillian Burdett is a freelance writer covering all things home and living. Her work can be found on Examiner.com.