Federal Pell Grants provide low-income college students monetary aid to offset educational expenses. As the name implies, Pell Grants don't have to be paid back. If a student qualifies, the money is awarded by the U.S. Department of Education to the student, but funneled through the school the student attends. From there, the school disburses the funds, which are applied to educational expenses, including room and board.

Learn How Your Bill Gets Paid

Schools may disburse Pell Grants by giving the funds to the student; automatically applying funds to a student's account; or applying the funds, then giving the excess to the student. However, the typical practice, according to Anne C. Gross, vice president of regulatory affairs for the National Association of College and University Business Officers, is to automatically apply the grant to cover tuition and on-campus room and board, a practice allowed by law. Indeed, off-campus students looking to use the Pell for rent should note that Gross says she's never heard of a school passing a Pell Grant along to a student without first taking out money for tuition and fees. Pell Grants are not intended to be housing grants, per se, although those costs are allowable.

Anticipate Possible Remaining Balance

When schools disburse Pell Grants, they can determine in what order expenses will be paid, according to Haley Chitty, director of communications for NASFAA, the National Association of Student Financial Aid Administrators. If the grant is large enough and room and board are paid first, the student may have a zero balance. It could go the other way, though, with tuition being first paid off. If the remainder of the grant isn't enough to then cover room and board, other forms of available financial aid may be applied, such as housing scholarships or an offer of work-study.

Understand Disbursement Process

The order of how the Pell Grant is disbursed to room and board or tuition is largely beside the point. In practice, Gross points out, financial aid is applied to the total of money owed to the school by the student, not toward individual items counting toward the total cost of attendance.

Pay Educational Expenses First

If the student gives a school permission, it can automatically use leftover Pell Grant funds to cover other educational expenses besides tuition and room and board. Examples of these other expenses are books and lab fees. For students who live off campus, it means that after tuition, signing a consent to pay other expenses with grant funds might exhaust the excess, with none left to use toward off-campus living expenses.

Grants for Room and Board

Pell Grants can work like housing scholarships that cover a meal plan and room costs. Students living on campus typically apply their Pell Grant to dorm expenses. Since schools typically pay themselves first, students living off campus must, in general, hope that tuition doesn't exhaust the grant so that excess money can go toward off-campus housing. Some off-campus housing, though, can be automatically paid along with tuition. If the school manages off-campus apartments as part of Residential Life, then Pell grants for room and board are allowable. Students should check with their schools to see if such contracted off-campus housing exists.

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