College students can receive large financial aid packages, including federal student grant programs, federal student loans, and scholarships. But, of all of the financial aid you receive, everyone always wants to know, do you have to pay back grants?
The answer is possibly. It depends on your situation and if you satisfy the requirements for your federal and state grants.
Continue reading this post to fully understand which grants you may be obligated to repay, and to know which ones may offer you some free government funds towards your tuition!
What Are Grants?
Grants are a form of financial aid, but they aren’t federal student loans. Instead, the grant money you receive is like free money or gift money, but with a twist.
Grant money is usually for applicants of federal student aid who demonstrate financial need and won’t require repayment IF you meet the requirements. However, if you don’t meet the requirements, you may need to repay some or all of the federal grants you received.
Is Grant Money Free?
Free money grants are available if you meet the financial aid requirements. However, if you don’t satisfy all conditions of the federal student aid offered to you, there’s a chance you’ll have to repay the grants if you don’t have the right student status.
It’s important to understand the fine print and what federal aid holds you to so you don’t have to pay back the grants. In summary – there is no such thing as a truly free grant, you must satisfy the criteria to be eligible.
Grants vs. Scholarships vs. Student Loans vs. FAFSA
There’s a lot of confusion regarding federal financial aid because there are so many options. Unfortunately, some people think it’s all just free money from the government. College students often confuse grants and scholarships and don’t understand how they relate to federal student loans or the FAFSA.
First, let’s look at ‘free’ grants, or as some people refer to them as free government grants. You may secure free grants from your school’s financial aid office and not need to repay them. This means you satisfied the requirements set forth by your school, and you earned the funds. If you don’t meet the requirements, though, you may have to repay the federal student aid provided to you.
Scholarships are similar to grants because they are ‘free money,’ but again, they aren’t free. First, you must earn scholarships by meeting the academic or physical requirements. For example, you may get a scholarship for your grades or for the sport you play. You may also find outside scholarships from organizations you belong to or even your religious groups.
You can find potential scholarships by talking to the college you want to attend, visiting your local library, or doing a search online for grants and scholarships in your area. Grants and scholarships are different because grants are based on financial need, and scholarships are on merit.
Student loans, unlike grants, are not free money. You always have to repay federal, state, or private student loan debt. Most student loans accrue interest but aren’t due while you’re in school. It’s highly recommended that you keep up with the loan’s interest while in school, even if you pay interest only. Once you leave school, you’ll typically have a 6-month grace period before you’ll have a regular monthly payment of principal and interest.
The FAFSA or Free Application for Federal Student Aid is one thing grant money, scholarship, money, and student loans have in common. This application is now a requirement to graduate high school in many states.
The application helps the Department of Education decide how much financial aid you’re eligible for based on your family’s assets, your parent’s income, and your contribution to your education expenses. The FAFSA is required to determine your eligibility for grants, federal student loans, and any other federal or state financial aid. Some colleges may require a completed FAFSA form for scholarship money too.
Types of Grants
There are five main categories of grants that provide federal aid and sometimes state aid for college students.
Federal Pell Grant
Otherwise known as the Basic Educational Opportunity Grant, the Federal Pell Grant is available to all students who demonstrated financial need when completing the FAFSA. For the 2021-2022 school year, the maximum Pell grant award is $6,495. Your exact award depends on the cost of your school. Pell grant money is only for undergraduate students.
You can receive the Federal Pell Grant for up to 12 semesters. Here are the factors considered when determining if you’re eligible for a Federal Pell Grant:
- Your income (if applicable)
- Parent’s income
- Parent’s assets
- Parent’s liabilities
- Number of children in college
- Whether you attend full-time or part-time
- Cost of the school
Do You Have to Pay Back a Pell Grant?
Most students don’t have to pay back a Federal Pell Grant unless they do any of the following:
- Withdrew from the program they were approved for and that the Federal Pell Grant money was provided
- You dropped from full-time to part-time enrollment
- You received outside scholarships that lowered the financial need for your college education
FSEOG- Federal Supplemental Education Opportunity Grant
The Federal Supplemental Education Opportunity grant is award money for those with exceptional financial needs. This grant program is for undergraduate students or students pursuing a graduate degree. Each applicant may receive up to $4,000, but the amount awarded depends on the school’s funds.
You do not have to repay the grant funds unless you have any of the circumstances discussed above regarding the Federal Pell Grant and repaying grant funds.
TEACH- Teacher Education Assistance for College and Higher Education Grant
The TEACH grant, which you probably suspected, is for teachers. The gift aid helps undergraduate students or those pursuing a graduate degree. Students may receive up to $3,722 per year, but there’s a catch. Graduates must agree to work at a low-income school after graduation, or the grant turns into a student loan.
To qualify for the TEACH grant, you must:
- Complete the FAFSA form
- Attend a school that offers the TEACH grant
- Enroll in an eligible program
- Maintain at least a 3.25 GPA
- Take TEACH grant counseling, so you understand the obligation
Here’s where the TEACH grant differs from other grant programs. This grant is fully repayable if you don’t meet the following requirements:
- Work full-time at a low-income school at either the elementary or secondary school level
- Teach in a field in high need
- Complete all four years within 8 years of graduating
If you do not meet these requirements, the grant funds become direct unsubsidized loans. Interest accrues from the date of each grant disbursement date. You’ll make monthly payments to the loans, paying the loans back like any other student loan debt.
If you change your mind and want to satisfy your service requirements, you may request to do so if you’re within the 8-year timeline of graduating college.
State Issued Grant
Many states have state grants too. To be eligible, you must complete the FAFSA, as you would for federal grant programs. The federal government forwards the form to your state agency to determine if you are eligible for a state-issued grant.
If you think you’re eligible for a state-issued grant, check with your state agency. Ask if they allow just the FAFSA form or if you must complete a separate application to get their specific grant too. If you’ve already applied to a college, you can also ask the school’s financial aid office how you become eligible for state grants too.
Typically state grants do not need to be repaid unless you violate the terms of service as outlined in the agreement.
Iraq and Afghanistan Service Grant
If one of your parents served in the U.S. Armed Forces and died due to 9/11 in Iraq or Afghanistan, you may be eligible for these federal grants. There’s a catch, though. You can’t qualify for a Federal Pell Grant. In other words, you don’t demonstrate the financial need for the federal grant but still deserve some financial aid.
To qualify, you must have been younger than 24 years old when your parent died or at least enrolled in college part-time when your parent died.
The maximum award is $6,124.79 per year. Like all grant programs, you can qualify for the Iraq and Afghanistan Service Grant by completing the FAFSA form.
How to Get a Grant
If you’re looking for free money to cover your college tuition, it’s important to know how to get a grant. Fortunately, it’s easy to apply for federal grants and state grants, all with one form. It all comes down to how early you complete the FAFSA form and provide all the required information to process your form.
Here are the simple steps to apply for grant programs for higher education:
- Complete FAFSA
Almost every piece of financial aid you’d be eligible for starts with FAFSA. This is how schools and government agencies decide your expected family contribution and how much financial aid you qualify for, whether federal grants, state grants, specialized grants, or federal student loan options.
- Submit FAFSA early
You can start your FAFSA form on October 1 every year. However, grants are first-come, first-serve, so the earlier you get your application, you will likely take advantage of federal grant programs.
- Understand your financial aid offer
Do You Have to Pay Back Grants?
Unlike student loan debt, most grant programs don’t need to be repaid as long as you meet the requirements. Each grant program has different requirements, though, so make sure you talk to the advisor at your school to understand what’s required of you.
A very common question that students have is “Do grants have to be paid back?”. Keep reading to understand which types do!
What Grants You Don’t Have to Pay Back
You don’t have to pay back any grants if you stay in school and use the funds for qualified education expenses. But, if you drop out, cut back from full-time to part-time, or don’t satisfy the grant’s requirements, you may have to pay back your free grant money.
The one grant with the strictest payback requirements is the TEACH grant. This grant is for graduates becoming teachers, and it requires four years of your service at a low-income school to repay the loan. If you don’t satisfy the service requirement, the grant turns into a loan that you must repay with a regular monthly payment.
Do You Have to Pay Back Grants if You Fail?
You don’t always have to pay back a grant if you fail. The U.S. Department of Education looks at the big picture. Failing one class may not be the end of the world, requiring you to repay a grant. You must maintain a passing grade status for your overall GPA. If you offset an ‘F’ with an ‘A’ in another class, you’d be okay.
If you fail because of lack of attendance or you drop out of school, then yes, you will have to pay back your grants.
Do You Have to Pay Back Grants if You Drop Out?
When you drop out of college determines if you must pay back grants. If you drop out before the 60% mark, then you will have to pay back grants for dropping out. But, if you drop out after the 60% mark, you do not have to repay the grant.
Do You Have to Pay Back Financial Aid?
It depends on the type of financial aid you’re receiving. In most cases, yes, you do have to pay back financial aid if it was given to you as a loan. However, you likely do not have to pay the money back for grants, scholarships, and other forms of financial aid.
When You Would Have to Repay Your Grant
There are three distinct events that, if they occur, you must repay your grant:
No Longer in Financial Need
Grants are based on financial need. If you no longer demonstrate financial need, you may have to repay the portion of the grants you received when you were not financially needy.
Enrollment Status Change
If you drop from full-time to part-time enrollment, you may have to repay the portion of your federal grant you are no longer eligible to receive.
Leaving School Program
You receive grant funds based on your financial need and the program you apply for. If you leave the program, you may find that you have to repay your grant.
Federal grants can be a welcome addition to your federal aid provided by the federal and state government. Fortunately, unlike student loan debt, you don’t have to repay grants in most cases. But, of course, there are those situations you must watch out for, aka read the fine print, to ensure you don’t have to repay the federal government for the money they provided you to go to school.