Have you or someone you know been awarded a grant to help finance your education? The important question to ask is: Do you have to pay back grants? The short answer (most of the time) is NO.
Welcome to the Complete Guide on Federal Grants for Students. This guide walks you through the different types of grants you can receive, explains how grants work, and will end answering common questions regarding federal grants such as, “do you have to pay back grants?”
Table of Contents
- How Does Financial Aid Work?
- Federal Student Grant Programs
- Scenarios When You Will Have to Pay Back Grants
- Do You Have to Pay Back Grants?
How Does Financial Aid Work?
This guide looks specifically at federal government financial aid. This type of aid is typically need-based and you must apply for it through the Free Application for Federal Student Aid (FAFSA) form. Financial aid is money to assist students with paying for the high costs that come with attending college or career school.
Students will fill out their FAFSA form while applying to college. The FAFSA form is a pretty easy form to fill out and should take just under an hour to complete the first time and 45 minutes for students who need to renew their FAFSA form the following years.
Financial aid can come in the form of scholarships, student loans, and grants. Each of which are designed to help students pay for their education.
|Type of Financial Aid||Cost||Eligibility|
|Scholarships||You do not have to pay back scholarships as long as you meet the provided requirements||Based on academics, sports, or participation in other organizations|
|Student Loans||You will have to pay back loans with interest||Based on financial need|
|Grants||You do not have to pay back grants as long as you meet the provided requirements||Based on financial need and other criteria you might have to meet|
Scholarships are gifts of money to be used towards paying for education. They do not need to be paid back.
Scholarships often come in the form of being merit-based while others are financial need-based. Merit scholarships can come from strong academic achievement (high standardized test scores or high grade point average.) Merit Scholarships could also be based on a special skill or community service interest. Merit-based examples include being an outstanding member of a sport, club, or organization and earning significant achievement within that group.
The Federal Student Aid website has a page for finding and applying for scholarships if you are interested in receiving free money towards college!
The first and most important thing is that these are LOANS which means that they must be paid back (with interest).
Federal financial aid in the form of student loans is money borrowed from the government. You are expected to pay the loans back after you finish or leave college. There are 2 main types of federal student loans:
- Direct Subsidized Loans are eligible for college or professional students (undergraduate or graduate) and are need-based. Direct subsidized loans are provided to students based on financial need (determined from FAFSA application) and will not accrue interest while you are enrolled in college. The interest begins to accrue after you finish or leave college. You start paying these loans and their interest after you stop attending college or graduate.
- Direct Unsubsidized Loans are eligible to all college/professional students and are not need-based. Because direct unsubsidized loans are not based on financial need and are available for all students, they do accrue interest (while you are enrolled in college). The interest is added to the principal for the total amount you must repay. You start paying off these loans and their interest after you stop attending college or graduate
Unlike student loans, which are the most common source of financial aid used by students, grants are not financial aid that is implied to be paid back. A grant can be thought of as a gift of money to be used for education and does not have to be paid back.
Think of receiving a grant as having a person give you money and that person wants to make sure you get value from the money (by receiving an education). If you waste the money, then that person will not be very impressed and will want some of their money back.
The US Government often issues these grants of money to students based on financial need.
Federal Student Grant Programs
Federal student grants can be broken down into 4 major grant programs:
- Federal Pell Grant
- Federal Supplemental Educational Opportunity Grant (FSEOG)
- Teacher Education Assistance for College and Higher Education (TEACH) Grant
- Iraq and Afghanistan Service Grant
|Federal Grant Program||Grant Information||Annual Award|
|Federal Pell Grant||• Awarded to undergraduate students with exceptional financial need that haven’t already earned a bachelor’s, graduate, or professional degree||Up to $6,345|
|Federal Supplemental Educational Opportunity Grant (FSEOG)||• Awarded to undergraduate students with exceptional financial need that haven’t already earned a bachelor’s or graduate degree.|
• Not all schools offer this grant
• Funding depends on availability at the school
|Up to $4,000|
|Teacher Education Assistance for College and Higher Education (TEACH) Grant||• Awarded to undergraduate, post-baccalaureate, or graduate students enrolled in programs for teaching in a high-need field at an elementary or secondary school|
• Must agree to serve for a minimum of 4 years (within 8 years of finishing the program that the grant was provided for) as a full-time teacher that serves low-income students at a participating school
• Failure to follow the requirements above will result in the grant being converted to a Direct Unsubsidized Loan that you must repay
|Up to $4,000 per year with a maximum limit of $16,000|
|Iraq and Afghanistan Service Grant||• For students whose parent or guardian was a member of U.S. armed forces and died performing their military service in Iraq or Afghanistan|
• Must be ineligible for a Federal Pell Grant (less financial need than required for Pell Grant)
• Must have been younger than 24 years old or already enrolled in a college or career school at time of parent’s or guardian’s death
|Up to $5,983|
Source: Federal Student Grant Programs
Scenarios When You Will Have to Pay Back Grants
There are 4 scenarios where you do have to pay back all or part of your grant.
- Early Withdrawal from College
This scenario happens if you withdraw early from your college program that the grant was given to you for. This gives students a slight incentive to work harder in school and finish what they started.
Federal grants require that you pay back half of the value of the grant that you did not utilize.
Imagine if you are given a Pell Grant for $1,000 to be used towards paying 1 semester of college tuition. Then, you decide that college is not the right fit and you drop out halfway through the first semester. In this case, you have not earned the full education the grant was meant to help you receive and you will be asked to pay back part of the grant. In this scenario, you will have to pay back 50% of the grant value for the education you did not receive.
- Switching Your Enrollment Status
If you switch your enrollment status in college after you accepted a federal grant, then you will be required to pay back the extra part of the grant that you no longer will be using.
Grants are given out based on need. If you scheduled your first year of college to be a full-time student and received a federal grant to help you pay for this year of school, then you would be given an amount based on the assumption that you will be enrolled full-time.
If you then decide at the start of the semester that you want to switch your enrollment status to part-time, you now have more grant money than the government had determined you would need. In this scenario, you are required to pay back the difference of the grant equal to full-time minus part-time enrollment value.
- Your Determined “Financial Need” Changes
If you receive an outside (private) scholarship or grant, you have now reduced your current financial need for student aid.
An example of this would be that you receive a merit based academic scholarship from your college after you have already accepted a federal grant for the year. This new scholarship now reduces your total cost of college, therefore, you have less financial need the government wants to aid.
In this scenario, the government will ask that you pay back a portion of the grant they originally provided you. Students are required by federal regulations to notify their financial aid office of any outside scholarships and/or private loans that may affect their financial need eligibility.
- Do Not Follow the Requirements of a TEACH Grant
If you do receive a TEACH Grant, you also must agree to the terms and conditions listed in the earlier table on the 4 types of federal grants.
If you fail to meet these requirements for the TEACH Grant, then the grant value will be converted into a Direct Unsubsidized Loan that you will have to repay.
Do You Have to Pay Back Grants?
Short Answer: NO
Long Answer: Usually No. However, the 4 scenarios above explain when you will have to pay back part or all of your federal grants to the government.
To conclude the complete guide on federal grants, as long as you:
- Plan on remaining in college for the whole period you are given a grant
- Do not change your enrollment status
- Do not receive any additional grants/scholarships that change your financial need
- Follow the terms/conditions required in a TEACH Grant
You will not have to pay back federal grants used to help you pay for college!