How you can spend your Pell Grant money
Senior Associate, JPMorgan Chase
According to the National Center for Education Statistics, 32% of U.S. undergraduates received a Pell Grant for the 2021-22 school year (the most recent year data is available). The funds can be used to pay for many college expenses and are awarded to students based on financial need.
But what exactly can you use the Pell Grant for? Below, we’ll cover that commonly asked question and others related to the Pell Grant.
What’s a Pell Grant?
The Pell Grant is a form of federal financial aid provided to college students to help with education costs. The Pell Grant is given to students who demonstrate financial need. A student’s financial need is determined by the information shared on their Free Application for Federal Student Aid (FAFSA®). If students are ultimately eligible for aid, that aid is awarded and distributed by colleges.
The maximum award for the 2024-25 academic year is $7,395, and the U.S. Department of Education announces the amount for the upcoming academic year every February.
How to apply for a Pell Grant
To access Pell Grant funds, you must fill out the FAFSA® each year you plan to enroll in college. The information you provide on the FAFSA® helps schools determine how much aid you need to help pay for college.
Since the Pell Grant is a federal program, the FAFSA® is the only way to qualify for any potential Pell Grant funds.
Who’s eligible for a Pell Grant?
According to Federal Student Aid (FSA), Federal Pell Grants are awarded to undergraduate students who display exceptional financial need and haven’t earned a bachelor's, graduate, or professional degree previously.
It’s important to note that the government recently expanded Pell Grant eligibility to incarcerated students enrolled in eligible prison education programs beginning July 1, 2023.
How you can spend the Pell Grant
The Pell Grant is awarded and distributed by your school. You’ll learn how much Pell Grant money you’ll receive via a financial aid award letter sent to you by your school. Generally, your school will apply your Pell Grant funds directly to your tuition or release the funds to you directly.
Pell Grants can be used to pay for:
- Tuition
- School fees, such as technology fees
- Textbooks
- School supplies
- Transportation
- Costs that occur surrounding child care for a student’s dependents
Pell Grant funds may be applied to any expenses (not limited to the list above) but expenses not considered “qualified education expenses” will subject those funds to taxation.
What does that mean in practice? Pell Grant funds spent on “qualified education expenses” like tuition, fees, textbooks, and school supplies are exempt from taxation. However, Pell Grant funds spent on other expenses that aren’t considered “qualified education expenses,” even if associated with living expenses, count as taxable income. You should consult with your school’s financial aid office or a tax professional before spending these funds.
Here are some commonly asked questions in regards to what a Pell Grant can be used for
The Pell Grant can theoretically be used to pay for any expense. However, using these funds on expenses that aren’t considered “qualified education expenses” may make the money subject to taxation. Let’s dive into some use cases.
Can the Pell Grant be used to pay rent?
The Pell Grant can be used to pay rent, but using the Pell Grant this way may not be considered a qualified education expense. Consult with your school’s financial aid office or a tax professional if you want to do this or if you have other questions about using your Pell Grant money.
Can the Pell Grant be used to pay for school supplies?
The Pell Grant can be used to pay for supplies you need to complete your education. That includes items like laptops, notebooks, backpacks, and other necessities.
Can the Pell Grant be used to buy a new car?
The Pell Grant can be used for transportation expenses like gas, public transportation, rideshares, and cars, though using the funds in this way may not be considered a qualified education expense.
Can the Pell Grant be used for child care?
Child care is considered something that will impact your ability to complete your education. While using your Pell Grant on child care might not be considered a qualified education expense, there are specific child care grants worth researching as an alternative.
Can you use your Pell Grant for vacation or spring break?
Vacations and trips typically aren’t considered college expenses.
Can the Pell Grant be used to pay for medical bills?
Medical bills aren’t considered an education expense. That being said, many schools consider medical debt when awarding financial aid. If your medical bills were incurred recently and aren’t reflected on your recent FAFSA®, you may want to consider filing an aid appeal and including those expenses on your application.
Other commonly asked Pell Grant questions
How many times can you get the Pell Grant?
You can receive the Pell Grant for no more than 12 terms or semesters or the equivalent (roughly six years). This is called the Federal Pell Grant Lifetime Eligibility Used. You’ll be contacted and informed when you’re getting close to your limit.
Can grad students get Pell Grants?
In most cases, Pell Grants are limited to undergraduate students.
Is the Pell Grant a loan?
No, the Pell Grant is offered by the government as a grant and, in most cases, doesn’t have to be paid back. It's, therefore, not a loan.
Does the Pell Grant need to be repaid?
To reiterate this point, the Pell Grant isn’t a loan and, for the most part, doesn’t need to be repaid. Two reasons why you might need to repay your Pell Grant are if you withdraw from school early or if you exhibit poor academic performance. If you’re concerned about having to pay back your grant, contact your school’s financial aid office.
Does the Pell Grant cover summer classes?
Yes, the Pell Grant does cover summer classes. To be eligible, students will need to file the FAFSA®, and eligible undergraduate students can expect to receive up to $3,697.50 for the summer session.
What’s a Pell Grant refund?
Once the fall and spring semesters are complete, you might still have money left over from your Pell Grant that didn’t get applied toward your college expenses. If that’s the case, your school may issue you a refund of the remaining balance.
Is the Pell Grant taxable?
A Pell Grant is not taxable if the funds are spent on qualified education expenses. There are situations where you may have to include your Pell Grant as income on your taxes. The main case when you’ll have to do this is when you use your Pell Grant funds for unqualified expenses such as a vacation, buying a car, or purchasing non-education-related items.
If you’re concerned you need to include your Pell Grant as income on your taxes speak to a tax professional.
Final thoughts
The key to accessing Pell Grant funds is to file the FAFSA® to see if you’re eligible. It might be worth filing even if you think you aren’t eligible, as the FAFSA® can also help you qualify for other federal financial aid.
