The Pell Grant is a highly sought-after form of financial aid for one simple reason: it doesn't need to be repaid. The Pell Grant can be seen as a form of scholarship that pays off a portion of the tuition. A misconception about financial aid is that most aid comes in the form of loans that need to be repaid. While many financial aid programs are interest-bearing loans, there are also a wide variety of gift-grants available as well.

It is not surprising that there is stiff competition for the Pell Grant. Even though there are strict eligibility requirements for the Pell Grant, there are still thousands of applicants. It is a good idea to apply early, to ensure quick processing.

Who Is Eligible For A Federal Pell Grant?

The main eligibility requirements for the Pell Grant are determined by the Expected Family Contribution, or EFC. This will take into account family income, family size, as well as yearly expenses–such as the size of a mortgage. It is not enough to factor in the yearly salary. A family with a higher yearly salary may have a lower EFC if they have higher mortgage payments. Income is only one factor in determining the EFC. However, income is a big one–the lower the income, the more likely it is that a family will be able to secure a Pell Grant.

Other requirements are U.S. citizenship, or an eligible non-citizen. The student needs to have a high school diploma or GED, and should not already have a Bachelor's Degree–i.e. graduate students are not eligible for Pell Grants.

The Amount of the Award

The amount of a Pell Grant is determined by the EFC. Currently, the maximum for a Pell Grant is $4,050 a year. Depending on the school, this can cover a significant portion of the tuition or a very small amount. The amount of the Pell Grant will determine where a student decides to enroll–especially if he or she is not able to secure other types of financial aid. It is not uncommon to combine a Pell Grant with a private student loan or work-study program in order to fill the gap between what is awarded from gift aid and what is left of tuition.

Cost of Attendance

The Cost of Attendance (COA) is also instrumental in determining the amount of aid, as is if the student is full or part time. Part time students will receive less aid-but they are still eligible for some form of Pell Grant. A student can receive a Pell Grant for as long as he or she is in school. This is especially important for part-time students who may be enrolled in a degree program for longer than a four year term.

Payments will normally made in one lump sum at the beginning of the year–usually in a check–or deposited directly into the school account. This last method is preferable, as the money will be used exactly as it is intended.