President Joe Biden is set to announce a plan that would forgive student loan debt for millions of Americans on Wednesday.
The plan would relieve $10,000 of federal student loan debt for borrowers who are earning less than $125,000, and $20,000 for those who went to college on Pell grants.
But what are Pell grants? That’s something plenty of student loan borrowers seemed to be double-checking on Wednesday, as Google GOOG, -0.06% searches for “What are Pell grants,” “Pell grant eligibility” and “Pell grant requirements” spiked more than 5,000% in the hours after the president tweeted the preliminary details of his student loan debt plan. “Pell grant” also began trending on Twitter TWTR, +2.33%.
So here’s what you need to know about Pell grants.
What are Pell grants?
A Pell grant is a form of need-based federal financial aid. These grants are usually awarded only to undergraduate students who “display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree,” according to the U.S. Department of Education website. The DOE site also notes that some students enrolled in postbaccalaureate teacher certification programs might receive a federal Pell grant, as well. About one in three (34%) undergraduate students across the U.S. receive a Pell grant, according to the Education Data Initiative, and 68% of Pell grant funds go to public universities.
Unlike a loan, however, a Pell grant does not have to be repaid, except under certain circumstances. Such situations would include withdrawing early from your academic program, or receiving other federal aid or scholarships that would reduce your need for the grant in the first place.
Are you eligible for a Pell grant?
Pell grant eligibility is based on need, so students must apply for financial aid by submitting a Free Application for Federal Student Aid (FAFSA) form. This will determine whether someone is eligible for a Pell grant, as well as how much money they get. The reward is drawn from calculating factors such as the cost of attending the school, income and family size. And students will need to fill out a FASFA every year that they are in school in order to remain eligible for federal student aid, the DOE explains.
How much money do Pell grants give?
As noted above, the amount of money awarded via a Pell grant, if a student’s application is accepted, varies according to several factors. These include cost of attending the college and expected family contribution.
The maximum federal Pell grant award for the 2022-2023 award year was $6,895, the DOE notes. And the average Pell grant award is $4,491, according to a 2021 report from the Education Data Initiative. About half (51%) of Pell grant funds are awarded to students whose families earn less than $20,000 a year.
But it should be noted that this “free money” often doesn’t come close to covering a Pell recipient’s total undergraduate education costs. In fact, data from the DOE shows that Pell graduates tend to have higher debt burdens than non-Pell graduates, and a 2020 report found that, collectively, graduates who received Pell grants left school with $6 billion more in debt than their peers.
Where can you check to see if you’ve received a Pell grant?
Borrowers can track which forms of financial aid they received by logging into their studentaid.gov account.
The news from Biden is expected to impact a great amount of federal student debt holders. A recent analysis by the Washington Post showed that 33% of borrowers owed less than $10,000, or about 15 million Americans.
Biden made the announcement in a tweet, and is expected to give a speech at 2:15 p.m. Eastern on Wednesday to further discuss the move to forgive student loan debt. The White House also indicated that the student loan repayment pause will once again be extended for the “final time” through Dec. 31, 2022.