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The Pell Grant program is a type of post-secondary, educational federal grant program sponsored by the U.S. Department of Education. It is named after U.S. Senator Claiborne Pell[1] and originally known as the Basic Educational Opportunity Grant program. Grants, which do not require repayment, are awarded based on a "financial need" formula determined by the U.S. Congress using criteria submitted through the Free Application for Federal Student Aid (FAFSA).

The Pell Grant is covered by legislation titled the Higher Education Act of 1965, Title IV, Part A, Subpart 1; 20 U.S.C. 1070a.

Because Pell Grants are targeted toward students from poor families, receipt of them is often used by researchers as a proxy for low-income student attendance and to indicate the economic diversity of the student body.


Amount of grant

Federal budget legislation passed in early 2006 cut the federal financial aid budget by $12.5 billion. While the maximum Pell Grant legislative limit was raised to $5,800 through 2011, maximum Pell Grant awards were not funded at this level. The maximum award available to students has been frozen at $4,050 since 2003-04.[citation needed]

For 2006-07, the maximum Pell Grant available to students was $4,050. For the award year of 2007-2008 the maximum Pell Grant award was $4,310. The maximum award for the 2008-09 award year (July 1, 2008 to June 30, 2009) is $4,731. For 2009-2010, the maximum is $5,350, with an added option for receiving an additional disbursement ($2,675) in the summer. The maximum can change each award year and depends on program funding. The maximum grant is to increase to $5,400 by 2012.[citation needed]

Due to rapid increases in tuition and fees, Pell Grants do not cover as many credit hours as they used to. Twenty years ago, a grant covered 60% of a student's cost of attendance while in 2006 the maximum grant covered about 31% of the cost of attendance.[2]

Pell Grant recipients

To qualify for a Pell Grant, a student must demonstrate financial need. The amount of the award is based on the Expected Family Contribution, derived from the information on the FAFSA. In the 2005-06 school year, students with family incomes of less than $20,000 accounted for 57% of Pell Grant recipients. 35% of these recipients attended public two-year colleges, and 42% attended public four-year colleges.[3]

The National Postsecondary Student Aid Study found that during the 1999-2000 school year, students from families making less than $41,000 accounted for 90% of Pell Grant recipients.[4]

Students may not receive Federal Pell Grant funds from more than one school at a time.

Financial need is determined by the U.S. Department of Education using a standard formula, established by Congress, to evaluate the financial information reported on the Free Application for Federal Student Aid (FAFSA) and to determine the family EFC. The fundamental elements in this standard formula are the student's income (and assets if the student is independent), the parents' income and assets (if the student is dependent), the family's household size, and the number of family members (excluding parents) attending postsecondary institutions. The EFC is the sum of: (1) a percentage of net income (remaining income after subtracting allowances for basic living expenses and taxes) and (2) a percentage of net assets (assets remaining after subtracting an asset protection allowance). Different assessment rates and allowances are used for dependent students, independent students without dependents, and independent students with dependents. After filing a FAFSA, the student receives a Student Aid Report (SAR), or the institution receives an Institutional Student Information Record (ISIR), which notifies the student if he or she is eligible for a Federal Pell Grant and provides the student's EFC.

FSA Handbook Federal Pell Grant Program

Federal Pell Grants are direct grants awarded through participating institutions to students with financial need who have not received their first bachelor's degree or who are enrolled in certain postbaccalaureate programs that lead to teacher certification or licensure. Participating institutions either credit the Federal Pell Grant funds to the student's school account, pay the student directly (usually by check) or combine these methods. Students must be paid at least once per term (semester, trimester, or quarter); schools that do not use formally defined terms must pay the student at least twice per academic year.

Pell Grant Controversy

The primary controversy is that a small set of educational institutions comprising 6% of all college students receives roughly 20% of all Federal Pell grant money. University of Phoenix tops this list with Pell Grant revenue of $656.9 million with second and third place held by Everest Colleges at $256.6 million and Kaplan College at $202.1 million for the 2008-2009 educational year[5]. This is combined with accusations of predatory loan practices on students by the highest Pell Grant recipient, University of Phoenix [6]. Additionally, some of the universities that are top recipients of Pell Grants have low completion rates, so students leave with no degree and large indebtedness leading some former students to accuse recruiters of being "duplicitous" [7]. Top recipient University of Phoenix received $3.2 billion in federal moneys of all kinds in 2008, and these federal dollars provided 86% of its revenue (thus, roughly 20% of its revenue came from Pell Grants)[8]. University of Phoenix has, among similar online universities, the lowest graduation rate tabulated by OEDB at 4% compared to the median of 37% and a high of 84% for Champlain College[9].

In 2003, a Government Accountability Office report estimated that overpayments of Pell Grants were running at about 3% annually, amounting to around $300 million per year.[10]


  1. ^ Origin of name "Pell"
  2. ^
  3. ^ 2005-06 Family income statistics
  4. ^ 1999-2000 Family income statistics
  5. ^ For-Profit Colleges Capitalize on Pell Grant Revenue, The Chronicle of Higher Education, January 4, 2010.
  6. ^ Suit Accuses U. of Phoenix of Improper Loan Tactics, The Chronicle of Higher Education, January 23, 2009.
  7. ^ Fed Up at the University of Phoenix, Higher Ed Watch, February 27, 2007.
  8. ^ University of Phoenix Settles Suit Over Recruitment Practices, Pro Publica, February 27, 2007.
  9. ^ Online College Ranking by Graduation Rate, Online Education Database, 2007, accessed January 2010.
  10. ^ "TAXPAYER INFORMATION: Increased Sharing and Verifying of Information Could Improve Education's Award Decisions". Government Accountability Office. July 2003. 

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