If you’re a low-income college student, a Pell Grant can be an invaluable tool for financing your education. Unlike student loans, Pell Grants don’t have to be repaid, and the money can be used for your tuition, fees, and even your room and board. 

But what happens to unused Pell Grant money? If you have cash left over after paying your expenses, you may be worried about losing that money. But in some cases, you can get the remaining funds from the Pell Grant to pay for other related expenses. 

Here’s what you should know about getting a Pell Grant refund. 

What Are Pell Grants?

Pell Grants were specifically created for undergraduate students with a significant financial need that are pursuing a degree. 

Pell Grants are grants issued by the federal government to help borrowers pay for a portion of their education expenses. Award amounts change annually. For the 2020-2021 academic year, eligible students can receive up to $6,345 in Pell Grants. However, the amount you get is based on your income and your school’s cost of attendance. 

You can receive Pell Grants for up to 12 semesters. If you take longer than that to finish your degree, you’ll have to find other forms of financing. 

How Pell Grants Work

If you qualify for a Pell Grant, how the grant is disbursed is dependent on your college. Some schools will apply the money to your account or pay you directly. The college is required to notify you in writing how much you’re receiving in Pell Grants and when payments will be made. Colleges must disburse grants at least once per term, but some schools will have multiple disbursement dates. 

What Happens to Unused Pell Grant Money? 

Depending on the cost of attendance at your school and the other financial aid you receive, you may receive more in Pell Grants than you need. 

After the school applies the Pell Grant to your outstanding tuition and other required fees, you may have balance left over. If some of your grant dollars are unused, the school will issue you a Pell Grant refund. 

You may receive a check for the remaining amount, or the school may transfer it via direct deposit into your bank account or student account. If you receive a Pell Grant refund, you can use the money for your other expenses, such as your room and board and transportation. 

The time it takes for a refund to be issued can vary from school to school. To find out when to expect your refund to arrive, contact your college’s financial aid office. 

FAQ About Pell Grant Refunds

If you are eligible for a Pell Grant, you may have some questions about the refund process. Here are the answers to some of the most common questions: 

1. Do Pell Grant Refunds Impact My Taxes?

If you received a Pell Grant and had money left over after paying for your education expenses, you might need to report that money to the IRS on your tax return. 

You don’t have to report Pell Grants funds that you spend on qualified education expenses. Qualified expenses include tuition, books, supplies, and school-required fees. Other costs, such as your room and board or travel home during the holidays, are not considered qualified expenses. Any money from your Pell Grant used for those expenses will be taxed as income. If you use your Pell Grant for other expenses, keep detailed records so you can file an accurate tax return. 

2. What Happens to My Pell Grant Refund If I Drop Out? 

While Pell Grants don’t usually have to be repaid, there are some exceptions. 

Pell Grants are issued with the understanding that you’ll be attending school on a part-time or full-time basis. If you change your student status, drop out, or take a semester off from school, you may not be able to keep your Pell Grant. Your college may ask you to return the Pell Grant in full. 

3. What Can I Spend My Pell Grant Refund On? 

Pell Grants are tax-free if they’re used for qualified education expenses. According to the IRS< qualified education expenses include: 

• Tuition and fees
• Course-related expenses, such as as textbooks, equipment, and supplies (these items must be required for all students to count as qualified expenses)

Pell Grants can be used for other education-related expenses, such as room and board, travel, clerical help, or other supplies that aren’t required by your school. However, the funds used for these other expenses are taxable as income and must be reported on your tax return. 

Applying for Financial Aid

If you are a low-income student and are planning to go to college, a Pell Grant can be beneficial. You can get over $6,000 in financial aid to pay for your education per academic year, and Pell Grants don’t have to be repaid. If you're eligible for a larger Pell Grant than you need for school, you could even receive a Pell Grant refund and get the unused money to use for other expenses. 

To ensure you’re considered for the maximum amount of financial aid, including grants and federal loans, make sure you complete the Free Application for Federal Student Aid by your school’s deadline. 

Juno can help you to find a student loan or refinance a loan at the most competitive possible rate. We get groups of buyers together and negotiate on their behalf with lenders to save them money on private student loans and private student loan refinance loans. 

Join Juno today to find out more about your options for affordable private student loans to help fund your degree.