As the student loan crisis continues to rage on, prospective college students are becoming savvier about ways to avoid taking out costly student loans. One of the best ways to graduate debt-free? Try to qualify for as many grants and scholarships as possible.

One of the best grants you can get is the Pell Grant, a federal grant that can provide almost $8,000 a year in aid. While the Pell Grant is a popular award, it’s also commonly misunderstood.

Here's everything you should know about the Pell Grant, including how to get it, how it works and how to qualify for the maximum amount.

What is a federal Pell Grant?

A federal Pell Grant is an award given to a student attending an accredited two- or four-year college. It is a need-based award, which means that students must have demonstrated financial need to qualify.

Pell Grants are distributed by the federal government; states do not provide Pell Grants. The annual maximum amount for a Pell Grant varies and usually increases every year. Pell Grant awards range between $750 and $7,395. Government statistics show that the average Pell Grant awarded is more than $4,000 per year.

How do I qualify for a Pell Grant?

To be considered for the Pell Grant, you must fill out the Free Application for Federal Student Aid (FAFSA). This is also the form you’ll need to complete to receive federal student loans, work-study and even internal college scholarships. The FAFSA asks a wide range of demographic questions, as well as questions about your income and financial assets and those of your parents (for traditionally aged college students).

Also, to qualify for a Pell Grant, you must be eligible for general federal financial aid. This requires:

• Being a U.S. citizen, permanent resident or other eligible non-citizen
• Have not previously earned a bachelor’s degree
• Have a high school degree or GED

You must also complete the FAFSA by the school’s financial aid deadline, which varies from school to school. If you miss that deadline, then you may not qualify for financial aid. Visit your school’s financial aid website to find the exact deadline. If you’re applying to multiple schools, submit the FAFSA by the earliest deadline. Remember that there are three deadlines to keep in mind: school deadlines, state deadlines, and the federal deadline. The federal deadline is usually the latest of the three.

Incarcerated students can still qualify for the Pell Grant if they are enrolled in a prison education program. They can also receive the Pell Grant once they leave prison and attend an eligible school.

DACA students cannot receive a Pell Grant, even if they are eligible for state grants. Even though DACA students are not eligible for federal aid, they should still fill out a FAFSA, since DACA students are eligible for school-based aid at many colleges. Graduate and professional school students are also not eligible for the Pell Grant, but they may qualify for federal student loans.

What schools accept the Pell Grant?

Most types of four-year or two-year schools receive Pell Grant funding, including technical schools. Even cosmetology programs may offer Pell Grants.

If a school is in the federal financial aid program, then they should be able to offer Pell Grants. It’s always best to attend a school that offers federal financial aid. If they don’t, then you may have to resort to costly private student loans to cover tuition.These private student loans have potential downsides, such as not offering income-linked repayment options after graduation.

Pell Grant FAQs

Do I have to pay taxes on my Pell Grant?

The Pell Grant is not a taxable award. If you receive the Pell Grant, you will not have to pay taxes on it. In general, most scholarships and grants will not be treated as taxable income.

The only exception is if you receive a scholarship and use it for an unqualified expense or if the amount you receive is greater than the cost of attendance. In general, you don’t have to worry about paying taxes on your grants and scholarships.

Is there a limit to how many years I can receive a Pell Grant?

Each student can only receive a Pell Grant for a maximum of 12 semesters or about six full years. Once you have reached that limit, you will not qualify for more Pell Grant funding even if you still have demonstrated financial need. If you take classes during the summer, that semester will count toward your 12 eligible semesters.

Can I lose my Pell Grant eligibility?

One of the easiest ways to lose your Pell Grant eligibility is to not submit the FAFSA again or miss a FAFSA deadline. The FAFSA must be completed every year that you want to receive federal financial aid, including the Pell Grant. It is not a one-and-done procedure.

You must also be at least a part-time student if you want to receive the Pell Grant. If you drop below part-time status, then you will lose your Pell Grant money. Every school has its own criteria for what counts as being part-time. Before dropping a class, talk to the financial aid department and make sure this won't interfere with any financial aid.

Also, you must make satisfactory academic progress (SAP) to qualify for the Pell Grant. This usually means taking a certain amount of classes that count toward a major or degree and meeting a minimum GPA.

How is the Pell Grant disbursed?

After you complete the FAFSA, you will receive a financial aid award letter that details the total amount of financial aid you’re eligible for. For example, let’s say that your letter says you’re eligible for a $5,000 Pell Grant. In this case, you would receive $2,500 during the fall semester and $2,500 for the spring semester. If you take summer classes, you’ll get $2,500 for that semester.

Do I have to pay back the Pell Grant?

The Pell Grant is a grant, not a loan. This means it does not have to be paid back after you leave school. Even if you don’t graduate with a degree, you don’t have to pay back the Pell Grant. Failing a class also won’t result in you having to repay the Pell Grant.

The only time when you might have to pay back the Pell Grant is if you drop out in the middle of a semester and have already spent your Pell Grant funds.

How are Pell Grant funds distributed?

If you qualify for the Pell Grant, the money will be sent directly to your school. The school will then apply the funds to tuition, room and board and other expenses. If you have any money left over, then it will be deposited into your bank account. You can then use the funds to cover your other living expenses.

Who determines how much I receive in a Pell Grant?

When you fill out the FAFSA, you will have to include your financial information, as well as your parents’ info if you’re a dependent student. Your assets and income will be used to calculate your Student Aid Index (SAI) number, which is compared against your school’s Cost of Attendance (COA).

In general, if your SAI is higher than your COA, then you won’t receive any Pell Grant funds.

If your SAI is close to zero, then you may receive the maximum Pell Grant amount. If your SAI is between zero and the COA, then you may receive less than the maximum Pell Grant amount.

For most students, their SAI will change year to year, as income levels fluctuate, so their annual Pell Grant may also change.

Do you need to provide supporting information with the FAFSA to demonstrate your financial need?

The FAFSA may ask for proof of income, tax returns, bank and investment account statements. If you want to provide more documentation, you may be able to do so through the school’s financial aid office.

Can independent students receive Pell Grant funding?

When you submit the FAFSA, the federal government will determine if you are an independent or dependent college student. Dependent students are treated like they are receiving financial support from their parents, even if they do not. The majority of undergraduates are treated as independent students.

To be an independent student, you must meet one of the following requirements:

• 24 or older
• Married
• Attending a professional or graduate school
• Veteran or current member of the military
• Orphan or a ward of the court
• Have legal dependents other than a spouse
• Emancipated minor
• Homeless or at risk of becoming homeless

Because the federal government only counts your income, not your parents, when you’re an independent student, you may be eligible for more financial aid, including Pell Grants. You'll also receive more in federal student loan funding.

Can I use my Pell Grant to study abroad?

If you’re studying abroad, you may be able to use the Pell Grant to pay for some of it.

Can I use my Pell Grant for summer classes?

The Pell Grant can be used to pay summer tuition. The amount you’ll receive for the summer semester will be the same that you would receive for the fall and spring semesters, as long as you’re taking a similar course load. However, if you take a part-time load in the summers, then your amount will be prorated. Summer semesters count towards your 12-semester maximum aid eligibility.

Will I still receive the Pell Grant if I transfer to another school?

One of the only reasons that you may lose your Pell Grant funding is if you transfer to a school that doesn't qualify for the federal financial aid program. Before transferring, go here to verify that your new school is part of the program.

If the school isn’t part of the program, then you also won’t be eligible for federal student loans or work-study. Many third-party scholarships also require that you attend an accredited school.

Are all majors eligible for the Pell Grant?

The Pell Grant has many special qualifications, but a specific major or degree program isn’t one of the requirements. You could be getting a degree in underwater basket weaving and still qualify for the Pell Grant, as long as you meet the other criteria.

Remember, only undergraduate students can qualify for the Pell Grant. The only exception is if you're receiving a post baccalaureate teacher certification. In that case, you may still receive the Pell Grant if you qualify financially.

I didn’t qualify for the Pell Grant. Can I appeal the results?

If you think that you are eligible for need-based financial aid and didn’t receive any, you can try to write an appeal to your school’s financial aid department. But this isn't like talking to a manager at a restaurant or department store.

You will need to have concrete proof to show that you are entitled to need-based aid. For example, if one of your parents lost their job after completing the FAFSA, you can show a termination letter from their employer. Or if your parents are getting divorced, you can show that their expected contribution is less than it appears to be on the FAFSA.

Will my Pell Grant be the same while I’m in college?

Because the Pell Grant depends on your FAFSA results, the amount you receive can change every year. Plus, the annual maximum amount of the Pell Grant usually increases, so you may receive more funding every year.

There is no way to predict how much you will receive in future years. While it’s tempting to count on the Pell Grant, you should also be prepared that you may not receive it every year.