A Pell Grant is financial aid that comes directly from the U.S. federal government, from a program that is sponsored by the Department of Education. Unlike federal student loans, a Pell Grant does not have to be repaid. Eligibility of Pell Grant recipients is determined according to the financial need of the student or student's family and is based on a formula that has been determined by Congress.
Pell Grant funds are distributed by the government directly to the colleges and universities, who then redistribute the money to students. Some colleges pay the students directly, usually by giving them a check, but other schools apply the money as a credit to the awarded students' overall bills for tuition or housing.
Most typically, Pell Grants go only to students who are earning a bachelor's degree for the first time. Only a small fraction of overall Pell Grant money goes to students in graduate or post-graduate programs. Unlike other scholarships, some of which don't consider a student's financial situation at all, Pell Grants are theoretically awarded only to students who demonstrate clear and substantial financial need in order to enroll or remain in college. As a result, the number of Pell Grants any college or university distributes is often part of the equation that researchers use to determine the number of low-income students in attendance at the school — or it's used in various material written by the school, itself, to demonstrate the economic diversity of the school's student population.
The Pell Grant amount each student is awarded depends on his or her individual financial needs, as well as overall tuition costs for the college or university being attended, the student's status (as either a full- or part-time student), and plans to attend school for a full academic year or just one semester. The maximum Pell Grant award per student for the 2007-08 academic year (July 1, 2007 to June 30, 2008) is $4,310. The maximum award for the 2008-09 academic year (July 1, 2008 to June 30, 2009) is $4,731. This amount changes each year based on the federal government's budget and funding.
Note that the cost of getting a college education has risen much more dramatically than the government's support of Pell Grant awards. In the 2005-06 academic year, the average Pell Grant award covered approximately 30% of the average yearly college costs for each recipient; but back up 20 years to the 1985-86 academic year, and average Pell Grants covered 60% of a student's costs. This means that today's underprivileged college student will need to rely on a wider variety of financial aid (including student loans and other scholarships) to afford the costs of college.