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What is a Pell Grant and how does it affect student loan forgiveness?

August 26, 2022, 8:21 PM UTC
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In addition to President Joe Biden’s anticipated forgiveness of $10,000 in federal student loan debt Wednesday, the president also announced Pell Grant recipients would be eligible for up to $20,000 in relief.

That came as a welcome surprise to many borrowers. But it also came with a lot of questions. Like, what exactly is a Pell Grant, anyway?

Here’s what to know about Pell Grants and how to tell if you have them.

What is a Pell Grant and who gets them?

Pell Grants were created by the Higher Education Act of 1965, and are the single largest source of federal grant aid for students seeking higher education. They are a need-based aid originally intended to cover the majority of costs for students expressing great financial need. 

“For 50 years, Pell Grants have been a key way for the federal government to help lower-income families, particularly those earning less than $60,000 a year, to send their kids to college,” Biden said in a speech Thursday.  

Those families earning less than $60,000 a year account for 93% of recipients; two-thirds earn less than $30,000 annually. 

Black families are twice as likely to be recipients of Pell Grants than white families. Biden’s forgiveness program aims to help close the racial gap on student loan debt by relieving $20,000 for Pell Grant recipients, according to the White House. Additionally, half of Latino students receive a Pell Grant. 

Since the Pell Grant program was created, it’s provided aid to an estimated 80 million people, reports the Institute for College Access & Success.

Do Pell Grants need to be repaid?

Generally speaking, a Pell Grant is a form of aid which does not have to be paid back, unlike a student loan. 

Do I have to apply for Pell Grants?

You don’t need to apply separately for Pell Grants. They are awarded through the Free Application for Federal Student Aid (FAFSA), which needs to be submitted once for every year you’re in school.

Schools then use the information from the FAFSA to determine eligibility for a Pell Grant, and how much you are able to receive. 

Where does the money come from and how much can I get?

The funds for the grant derive from the U.S. Department of Education and are awarded directly to schools to disperse to their students—which is why it is important that students report on their FAFSA which school they plan to attend. 

Pell Grant amount maximums change every year—which is why the award used to cover nearly 80% of the cost of a four-year public college, but now only covers less than one-third of the cost, according to the White House. For the 2022-2023 award year, the maximum federal Pell Grant a student can receive is $6,895. 

But that amount is capped. Students can only receive a Pell Grant for up to twelve terms, or approximately six years, or until the student earns their bachelor’s degree or first professional degree. 

Where do I find out if I received a Pell Grant?

If you are wondering whether you received a Pell Grant, you can log on to the Federal Student Aid website. Under the FSA/FAFSA portal, you can click “My Aid” to view the details of if you received a Pell Grant, and if so what amount. 

How do I get $20,000 in forgiveness if I received a Pell Grant?

Individual borrowers have to make less than $125,000 in adjusted gross income in the 2020 or 2021 tax year to qualify for forgiveness, and $250,000 for married borrowers. If you are still a dependent, your parents must meet these income requirements. 

If the Department of Education already has your income information, you may receive forgiveness automatically, which is the case for approximately 8 million borrowers. 

If your forgiveness is not automatic, the Biden Administration announced that a simple application will become available in October. You will need to certify your income on the application.

The relief applies to most types of federal loans, including federal undergraduate, graduate, Parent PLUS, and Pell Grants, but does not include private loans. 

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