In the quest to pay for college, students need all the help they can get. Two federal programs, one a grant and the other a loan, can make a college education more accessible for qualified students. Don’t worry if you’ve been awarded a Pell grant and also obtained a Stafford loan. The two don’t cancel each other out, and it’s smart to apply for both.
TL;DR (Too Long; Didn't Read)
You won't lose your Pell grant if you obtain a Stafford loan. These two offerings complement each other in your financial aid package.
Free Application for Student Aid
For eligibility determination, both the Pell grant and the Stafford loan depend on the Free Application for Student Aid or FAFSA. Submission of this form is necessary to obtain a grant, loan, scholarship or work-study program admission. This form includes information about parental and student income, as well as demographic information and schools that should receive the form to consider financial aid awards.
As of the 2017-to-2018 academic year, the FAFSA becomes available as of October 1, rather than January 1, as had previously been the case. The earlier date makes applying for financial aid match up with the typical college admissions application.
Pell Grant Program
Named for the late Rhode Island Senator Claiborne Pell, who initiated the grant program, Pell grants are awarded to undergraduate students who have not received a baccalaureate degree. There is an exception for graduate students enrolled in specific teacher certification programs. While the Pell grant is needs-based, even high-income families should complete the FAFSA as some schools provide non-need based funds for students.
As of the 2018-to-2019 academic year, the maximum Pell grant award is $6,095. Eligible students may receive a Pell grant for up to 12 semesters. To keep receiving this grant, the amount of which does not require repayment, you must submit the FAFSA each year to prove financial need and fulfill the necessary eligibility criteria which include maintaining “satisfactory academic progress” at your school. The individual academic institution maintains standards for satisfactory academic progress, so you must check with your school to ensure you comply.
Stafford Loan Program
Stafford loans require repayment. These loans are available to undergraduate and graduate students. As of the 2018-to-2019 academic year, a first-year undergraduate may receive up to $5,500 in Stafford loans. That means as a freshman eligible to receive the maximum amounts for Pell grants and Stafford loans, you may receive up to a combined $11,595. Amounts rise as the student progresses through the subsequent years of college.
Interest rates on Stafford loans depend on when the loan is taken out. Two types of Stafford loans exist. With a subsidized Stafford loan, all interest is paid by the government when you are in school. In contrast, you are responsible for all interest payments with an unsubsidized Stafford loan from the moment the amount is borrowed until the loan is paid off. With an unsubsidized loan, the government does not require you to demonstrate financial need, and you can generally borrow a larger amount.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.