First, there are some basic differences between grants and loans. You are required to pay back a loan, often with interest. You are not required to pay back a grant, but there are very few grants available to individuals. Most grants are awarded to universities, researchers, cities, states, counties, and non-profit organizations. Loans are generally the best bet for individuals.
Federal Pell Grants
A Federal Pell Grant, unlike a loan, does not have to be repaid. Pell Grants are awarded usually only to undergraduate students who have not earned a bachelor's or a professional degree.
(In some cases, however, a student enrolled in a post-baccalaureate teacher certification program might receive a Pell Grant.) Pell Grants are considered a foundation of federal financial aid, to which aid from other federal and nonfederal sources might be added.
Federal Pell Grants help financially needy undergraduate students, who have not earned a bachelor’s or professional degree, meet the cost of postsecondary education. In limited cases a Pell Grant may be awarded for attending a post-baccalaureate teacher certification program.
General Program Requirements
In order to qualify for this benefit program, you must be a student pursuing a postsecondary educational degree or certificate.
How much can I get?
A Federal Pell Grant, unlike a loan, does not have to be repaid. The maximum Pell grant for the 2010-11 award year (July 1, 2010, to June 30, 2011) is $5,550. The amount depends on your financial need, costs to attend school, status as a full-time or part-time student, and plans to attend school for a full academic year or less.
If I am eligible, how will I get the Pell Grant money?
Your school can apply Pell Grant funds to your school costs, pay you directly (usually by check), or combine these methods. The school must tell you in writing how much your award will be and how and when you'll be paid. Schools must disburse funds at least once per term (semester, trimester, or quarter). Schools that do not use semesters, trimesters, or quarters must disburse funds at least twice per academic year.
The Pell Grant program is a type of post-secondary, educational federal grant program sponsored by the U.S. Department of Education. It is named after U.S. Senator Claiborne Pell and originally known as the Basic Educational Opportunity Grant program. Grants, which do not require repayment, are awarded based on a "financial need" formula determined by the U.S. Congress using criteria submitted through the Free Application for Federal Student Aid (FAFSA).
The Pell Grant is covered by legislation titled the Higher Education Act of 1965, Title IV, Part A, Subpart 1; 20 U.S.C. 1070a.
Because of the high levels of need required to obtain a Pell Grant, receipt of them is often used by researchers as a proxy for low-income student attendance and to indicate the economic diversity of the student body.