Federal Grants for College: 3 Sources of Free Money for Students
Note: This is the fifth post in the Financial Aid Fundamentals series. Here we learn more about federal grants for college students. We look at the three major types of federal college grants and answer some important questions about these grants.
In the first installment of the Financial Aid Fundamentals series, we learned there are three major federal financial aid programs: student loans, student grants and work-study.
In this post we’ll answer some basic questions about college grants and learn about the three major types of federal college grants: the PELL grant, the FSEOG, and the TEACH grant.
Though all three grants come from the same source (the federal financial aid system), the requirements for each are very different.
The federal college grant system can be confusing, so we give each type of grant its own section here. But first we’ll start by answering a basic question: what is a grant, anyway?
What Is a College Grant?
A college grant is a form of financial aid that doesn't have to be repaid. This is the main difference between student grants and student loans. You must repay your loans, while you’re usually not required to repay grants.
Like federal student loan money, federal grant money is typically given directly to the school you attend. The school applies the grant money to your tuition, books and any other charges on your student account. Once your bills to the university are paid, you get any leftover money through your financial aid disbursement.
Who Is Eligible for Federal College Grants?
Federal grants for college are need based financial aid. Grants generally go to students with the lowest household incomes, but that isn’t the only factor considered. The government also takes into account the number of people in a household and how many children are in college at the same time.
As with all financial aid, in order to qualify for a federal college grant, you first must complete the Free Application for Federal Student Aid (FAFSA). The government uses the information on your FAFSA to determine if you meet the requirements for grant programs.
Even if you think your family makes too much money to qualify for grants, you should still fill out the FAFSA. Some of the other factors mentioned could make you eligible for grant assistance.
What Are the Major Types of Federal College Grants?
There are three major federal grants for college students: PELL grants, FSEOG and TEACH grants. Each of these grant types is discussed in their own section below.
The federal government also offers Iraq and Afghanistan Service Grants. These are only for students with a military parent who died while serving in Iraq or Afghanistan since 2001.
In order to qualify for an Iraq and Afghanistan Service Grant, a student must have been 24 years old or younger when their parent died. They must also be ineligible for a PELL Grant. That means if a student qualifies for a PELL grant based on income, they can’t get an Iraq and Afghanistan Service Grant.
Federal PELL Grants
PELL grants are available only to undergraduate students who don't already have a bachelor’s or professional degree. If you have a four-year degree but are returning to school to train for another career, you can’t get a PELL grant. You also can’t get a PELL grant if you’re in graduate school.
You can only receive PELL money from one school at a time. For example, if you’re enrolled full-time at a university but take a few night classes at a community college, you can only get PELL money from one school.
Aside from those requirements, whether you're eligible for a PELL grant is based on your financial need and your school’s estimated cost of attendance.
How much is a PELL Grant worth?
The maximum amount you can receive in PELL grants is currently (as of 2019) $5,920 a year. You may get less, depending on your school’s cost of attendance. You may also get less if you’re only enrolled part-time.
You can receive the PELL grant for a maximum of 12 semesters, or roughly six years. If you don’t graduate within six years, you won’t be able to get more PELL money.
If you drop out of school while you’re receiving a PELL grant you may have to pay back the money. You may also have to give back your PELL money if you get enough scholarships and other grants to cover your total cost of attendance.
The other major income based federal grant program is the Federal Supplemental Educational Opportunity Grant, or FSEOG. The FSEOG goes to undergraduate students with extreme financial need.
While both grants are need based, there are some important differences between the FSEOG and the PELL.
What's the difference between a PELL Grant and an FSEOG?
The PELL grant is administered by the federal government. The government guarantees you'll receive the full amount of PELL money you're approved for based on your financial need. In contrast, the FSEOG program is administered by individual schools. This means the school, not the government, distributes FSEOGs to students.
Each school in the FSEOG program gets a set amount of money from the federal government every year. Once the school has given out all its FSEOG money for the year, there’s no way to get more. So, unlike in the PELL program, students are not guaranteed a certain amount of FSEOG money.
If a student waits too late to apply, FSEOG funds might be gone and he or she may not get any money at all. This is another reason you should file the FAFSA as early as possible.
How much is an FSEOG worth?
Currently (2019), students can get a maximum of $4,000 a year in FSEOG money. Students who qualify for PELL grants get priority when it comes to getting FSEOGs.
Participation in the FSEOG program is voluntary and not all colleges and universities have FSEOGs. You should keep this in mind when applying to schools. If you think or know you're eligible for an FSEOG, make sure the school you want to attend participates in the program. If it doesn’t, you could be turning away $4,000 a year in free financial aid.
If you get an FSEOG to help pay for college, make sure the school you attend participates in the program. Otherwise you could be turning away $4,000 a year in free financial aid.
Federal TEACH Grants
Teacher Education Assistance for College and Higher Education (TEACH) Grants are for students who plan to teach in elementary or secondary schools. Unlike other federal college grants, TEACH grants are open to both undergraduate and graduate students.
Students who get TEACH grants must teach full-time for at least four years in low income schools upon graduation. They must also teach in a high demand field, like science, math or special education.
Like the FSEOG program, school participation in the TEACH program is voluntary. Not all schools have TEACH grants, even if they offer education degrees. Also like the FSEOG program, schools administer the TEACH program, so they decide which students are eligible for TEACH grants.
Schools also decide which of their programs are TEACH grant eligible. Some programs may qualify for TEACH grant funding while others don’t, even if they are on the same campus. If you’re thinking about using TEACH grants to help pay for college, talk to a financial aid adviser and make sure you and your program of study are both eligible for the TEACH program.
Beware: TEACH Grant Loan Conversion
Each year you receive a TEACH grant you’ll be required to sign an agreement to serve. When you sign this, you’re stating that you understand the conditions of the TEACH grant and agree to meet the four-year teaching requirement after you graduate.
If you don’t fulfill the conditions of the TEACH service agreement, your grants will be converted to federal direct unsubsidized loans. This means you’ll have to pay back the grant money plus interest.
TEACH grants can be a great way to help future teachers graduate college with less or no debt. But because of the post-graduation requirements these grants place on your life, you need to make sure you're really committed to a teaching career and can fulfill the conditions of the service agreement before you sign on for TEACH grants.
Because TEACH grants can be converted to loans, you should think very carefully before using them to help pay for college.
For example, suppose you start out as an education major using TEACH grants to help pay tuition. If you decide to change your major, as more than half of students do, then your TEACH grants will be converted to loans that you have repay.
Similarly, if you leave school before finishing your degree, your TEACH grants will be converted to loans and you’ll have to start making monthly payments.
Finally, your life circumstances may change in ways that make it impossible for you to fulfill your four year service obligation. You may get married, have children, or need to care for aging parents. All of those things mean you might have to change schools or leave the workforce entirely. If that happens, then your TEACH grants will be converted to loans.
Do You Have to Pay Back College Grants?
Typically, you aren’t required to pay back grants you receive to help pay for college, but there are exceptions.
As discussed, if you fail to meet the requirements set forth in your service agreement, then your TEACH grants may be converted to loans that you have to repay.
For PELL and FSEOG grants, you may be required to pay back some or all of your grant money if your enrollment status changes.
Do You Have to Pay Back College Grants if You Drop Classes?
Suppose you start the semester enrolled full-time, but then drop a few classes. This means you are now enrolled part-time. Your grants were calculated based on you staying enrolled full-time, so you may have to pay back part of the money.
If you’re planning to drop a class or two, be sure to talk to a financial aid adviser about whether that means you’ll have to repay some of your grant money.
Do You Have to Pay Back College Grants if You Drop Out?
If you decide to quit school completely at some point during the semester, then you'll likely have to repay any grants you received for that semester.
If you’re thinking about dropping out of school, do so at the end of the semester. Since grant money is distributed on a semester-by-semester basis, if you drop out at the end of the semester, you probably won’t have to repay any of your grant money. But if you drop out during the semester, the college will likely ask you to repay some of the grant money it gave you.
What if I Don't Repay My College Grants?
If you drop classes, or drop out of school completely, your college should let you know if you have to pay back some of your grant money. If you do have to repay grants, your college can work with you to set up a repayment plan. But if you skip out on these payments, you won’t be able to get any federal financial aid in the future, even if you go to a different school.
Have a question about federal grants for college students? Financial aid in general? Planning for college? Feel free to post your questions in the comments section and start the conversation.