Federal Pell Grants remain a popular way to help people pay for college. Since its 1980 inception, the program has helped some 200 million people access higher education. At Campus, an alternative to online community college, a full Pell Grant may pay all your tuition.
But does a Pell Grant qualify as taxable income? Here’s what you should know about Pell Grant tax implications and student financial aid taxation.
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What is a Pell Grant?
The Pell Grant program is the largest federal grant program exclusively for U.S. undergraduates.
These grants generally don’t require repayment. Unless, that is, you leave school before the end of an enrollment period or you received a Teacher Education Assistance for College and Higher Education grant but did not finish your service requisite.
Who Can Get a Pell Grant?
To be considered for a Pell Grant, you must be a U.S. citizen or an eligible noncitizen and show that you need financial assistance. You may not already have a bachelor’s, graduate, or professional degree.
If you’re eligible, the program will factor in your family size, tax status, and federal government income guidelines to determine your award size. It will also factor in the cost to attend your school and specific program and whether you plan to attend school full time.
What’s the Most I Can Get?
Every year, the federal government establishes the maximum award amount. For the 2024-2025 academic school year, that amount is $7,395. The least you can expect is 10% of the maximum, which currently is $739.50.
You must reapply each year that you need financial assistance . Over your lifetime, you’re allowed a maximum of six years of grant funding. After 12 terms of eligibility, you’re no longer eligible for another Pell Grant.
How Do I Apply for a Pell Grant?
Start by filling out a free application for Federal Student Financial Aid , which covers a number of types of financial aid, including Pell Grants. For this grant period, you have a June 30 submission deadline.
Before beginning your application, gather documents and information including your tax records, Social Security number, driver’s license, and details about your family’s assets and income.
Education Grants and Taxes
There are IRS rules on Pell Grants, although they can be complex. Generally, Pell Grants are not taxable if they are used for qualified education expenses. Such expenses include tuition, fees, books, supplies, and any course equipment.
However, any portion of a Pell Grant used for non-qualified expenses, such as travel, housing, or personal expenses, is considered taxable income. That portion should be reported on the “wages and salary” line of your tax return.
But even if part of your grant is taxable, you may not owe taxes if your income is below the filing threshold. There are also tax credits that can help offset the taxable portion. The American Opportunity Tax Credit (AOTC) provides a credit of up to $2,500 for qualified education expenses.
The tax treatment of scholarships is similar, in that such financial aid is generally not considered taxable income. That is, as long as the funds are used for qualified education expenses
To be sure you’re handling your grant and tax situation properly, you may want to consult a tax professional.
In Summary
We at Campus maintain that college should be accessible, which is why our online business degree program is priced below the Pell Grant maximum. Therefore, if you’re awarded a full grant, you may not have to pay any portion of your tuition out of pocket. Other financial aid and grants are also available.
Apply to Campus today.
⚠️ Disclaimer
The information provided in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax laws can be complex and subject to change. Students should consult a qualified tax professional or financial advisor to understand how federal grants and other education-related aid may impact their individual tax situation.
