# Pell Grant: What It Is, How It Works, and How to Get One

## What Is a Pell Grant?

Federal Pell Grants are a type of student aid generally awarded to undergraduates who’ve demonstrated extraordinary financial need on their Free Application for Federal Student Aid (FAFSA) forms. Unlike federal [student loans](https://www.investopedia.com/how-to-get-a-student-loan-without-your-parents-7254095), Pell Grants usually won’t require repayment.

### Key Takeaways

*   Pell Grants are need-based financial aid, with eligibility determined by the student’s Free Application for Federal Student Aid (FAFSA).
*   Each school determines the amount of Pell Grant funding an eligible student may receive, up to $7,395 for the 2025–2026 award year.
*   There are other types of federal [grant](https://www.investopedia.com/terms/g/grant-in-aid.asp) programs available for students who are ineligible for Pell Grants.

![College student concentrates while studying in the student center](https://www.investopedia.com/thmb/YsWUdrHi0hgV3igGBBSBgDnkeOI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/college-student-concentrates-while-studying-in-the-student-center-813979970-5b61e76dc9e77c00501e7098.jpg)

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## How a Pell Grant Works

The first step to receiving a Pell Grant is to submit the [Free Application for Federal Student Aid (FAFSA)](https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp). For all of the schools that a student applies to, the financial aid offices will each calculate how much federal aid they may be eligible for, based on the information included in their FAFSA.

There are two figures used to determine this amount: the applicant’s [Student Aid Index (SAI)](https://www.investopedia.com/terms/e/expected-family-contribution.asp) and the school’s [cost of attendance (COA)](https://www.investopedia.com/terms/c/cost-of-attendance.asp). The SAI is an eligibility index for student aid that takes both the student's and their parents’ income and assets into account. The COA, meanwhile, is the overall cost of going to a particular school, including tuition, fees, books, room and board, etc. If the difference between these two figures indicates that the student would have a substantial funding gap, then the school will likely provide them with at least some financial aid.

In addition to [subsidized and unsubsidized federal loans](https://www.investopedia.com/personal-finance/federal-direct-loans-subsidized-vs-unsubsidized/), which have to be repaid, students may also be offered scholarships, federal work-study, and/or Pell Grants. Of these types of aid, Pell Grants and subsidized loans are unique in that they’re both earmarked for students who’ve shown a greater financial need. Outside of students in certain postbaccalaureate teacher training programs, Pell Grants are only available for undergraduates.

> **Important**
>
> You cannot qualify for a Pell Grant without submitting the FAFSA, so be sure to do so for each year you expect to need financial aid.

## Limitations for Pell Grants

For the 2025–2026 award year (i.e., July 1, 2025, to June 30, 2026), the maximum annual Pell Grant is $7,395. Additionally, the total amount a student receives cannot exceed 12 terms (roughly six years) of funding, which the United States Department of Education tracks via its Lifetime Eligibility Used (LEU) percentage. If a student’s LEU equals or exceeds 600%, they won’t be eligible for further Pell Grant funding.

## 3 Pell Grant Alternatives

*   **Federal Supplemental Educational Opportunity Grants (FSEOG)**: FSEOGs are also awarded to students with “exceptional financial need,” just like Pell Grants, up to an annual maximum of $4,000.
*   **Teacher Education Access for College and Higher Education (TEACH) Grants**: The TEACH Grant Program provides recipients with grants of up to $4,000 annually. In order to receive this funding, eligible students must sign a TEACH Grant Agreement to Serve or Repay, in which they agree to satisfy certain requirements as a teacher after they graduate.
*   **Iraq and Afghanistan Service Grants (IASG)**: A student may qualify for an IASG if they’re ineligible for a Pell Grant and lost a parent or guardian who served in Iraq or Afghanistan after 9/11. However, at the time of their parent or guardian’s death, a student must either have been under 24 years old or enrolled in college at least part-time.

## The Bottom Line

Pell Grants give students with serious financial need a better chance of affording a higher education. As with other kinds of federal financial aid, a student must fill out the FAFSA in order to qualify. However, Pell Grants have the added benefit of not requiring repayment, whereas student loans do.

> **Article Sources**
>
> 1.  Federal Student Aid. “[How Financial Aid Is Calculated](https://studentaid.gov/complete-aid-process/how-calculated).”
>     
> 2.  Federal Student Aid. “[Direct Subsidized and Direct Unsubsidized Loans](https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized).”
>     
> 3.  Federal Student Aid. “[Federal Pell Grants](https://studentaid.gov/understand-aid/types/grants/pell).”
>     
> 4.  Federal Student Aid. “[Calculating Pell Grant Lifetime Eligibility Used](https://studentaid.gov/understand-aid/types/grants/pell/calculate-eligibility).”
>     
> 5.  Federal Student Aid. “[Federal Supplemental Educational Opportunity Grant (FSEOG)](https://studentaid.gov/understand-aid/types/grants/fseog).”
>     
> 6.  Federal Student Aid. “[Receive a TEACH Grant to Pay for College](https://studentaid.gov/understand-aid/types/grants/teach).”
>     
> 7.  St. Lawrence University. “[Iraq and Afghanistan Service Grant](https://www.stlawu.edu/offices/financial-aid-office/iraq-and-afghanistan-service-grant).”