Can Pell Grant Money Be Used for Living Expenses?

The Federal Pell Grant program had $32 million in aid available for 2010. College students who demonstrate need are eligible for a Pell Grant up to a maximum amount of $5,550. The average Pell Grant is about $3,600, and most students find that this covers only tuition, fees and books. The Internal Revenue Service treats Pell Grants as scholarships for income tax purposes, but only if used for school expenses.

Function

File a Free Application for Federal Student Aid form and wait about four weeks for a response. The response provides the expected family contribution figure that factors into the Pell Grant amount. The U.S. Department of Education awards Pell Grants based on the EFC or family contribution, the cost of attendance at the college you choose and the number of credit hours you take.

Features

Register for a college, university or vocational school that accepts Pell Grants. The U.S. Department of Education sets requirements that delay Pell Grant funding until after the drop/add date so the schools can verify attendance and hours. Many colleges offer textbooks on credit or an advance for books, but some schools expect the student to buy books and get repayment when funding is completed.

Considerations

You should receive information from your college with details for handling Pell Grant funds. Many colleges do not pay Pell Grant funds to the student, but apply them to tuition and fees, and maybe pay back the book advance. If funds remain, the college may send you a check for the remainder. Most students find that this will not pay living expenses. However, the Student Financial Aid Handbook published for financial aid professionals specifically authorizes use of Pell Grant funds for living expenses. If you need to pay living expenses with the Pell Grant funding, you can still keep records to show that your costs for school were more than the Pell Grant funds.

Recordkeeping

Keep careful records if you receive a Pell Grant. This form of student aid does not require repayment, but you do not want to pay federal income taxes on the funds if avoidable. Document your expenses to show the total for attending college for the semester. Save receipts and credit card statements. Keep the expense information in a file for tax preparation.

Effects

Pell Grant funds will make it easier to attend college, but will not pay all your expenses. A study by the College Board shows that the maximum Pell Grant covered 32 percent of a student’s needs at a public college in the 2007-2008 school year. Most students find they need other funds in addition to the expected family contribution. Some students work while attending school; others get loans or accumulate credit card debt. The U.S. Department of Education awards subsidized Stafford Loans to students with need, and unsubsidized Stafford Loans to students without demonstration of need. Subsidized loans have payments deferred as long as you are a student.