A federal Pell Grant is better than a loan: It's a scholarship, which means repayment is not required. The amount awarded depends on your need, tuition and fees required to attend your school of choice, and whether you are a full-time student or a part-time student. As of the date of publication, the maximum an individual may receive in one academic year is $5,500. If you have grant money left after paying tuition, you can use it for other education-related expenses.
Getting Your Funds
The federal government leaves it to colleges and universities to decide how you get your money. The schools normally receive the money directly and can put it toward your bill, issue you a check or use a combination. The law requires all colleges to pay out funds at least once per semester or term, or twice per academic year. The school must tell you in writing when you'll get your money and how much you'll receive.
Using a Campus Account
After paying tuition, you can apply excess Pell Grant money to other expenses directly related to the cost of attendance, such as required fees, textbooks and supplies. If your college keeps the funds in a campus account for you, you may apply the grant money directly to textbooks and other supplies you buy at the campus store. If you still have excess, save it for the next term's tuition or apply it to your campus food or housing expenses.
Using Personal Accounts
If your grant is deposited into your bank account, you may use excess money to cover your other expenses. Some expenses might be tax deductible, so you should keep your bank statements and all receipts. If the excess money is in an account at your school, you may ask for a refund of the excess and deposit it into your bank account so you can pay off-campus bills. The school may allow you access to only part of it and require you to save the rest for the next term.
Paying Income Taxes
If you are a degree candidate, you don't have to pay taxes on at least some of your Pell Grant money, according to Internal Revenue Service. The part you use for tuition, fees and required supplies or textbooks is tax-free. However, whatever you spend on room, board, transportation or personal expenses is subject to federal income tax. Save your statements and receipts for deductible expenses you pay from your own accounts. You'll need them to prove where your money went at income tax time.
- Jupiterimages/Comstock/Getty Images
- What Expenses Are Allowed in a Section 125 Cafeteria Plan?
- What Do Scholarships Pay For?
- Do I Need to Claim My GI Bill When Filing Taxes?
- What Factors Are Considered to Determine a Pell Grant Award?
- Do Dislocated Workers Automatically Get Pell Grants?
- What Is the Maximum Amount You Get From a FAFSA Loan?