If you have unused Pell grant funds, the institution can either hold them for prospective eligible academic expenditures or give them to the student. If you have remaining funds, you are due for a Pell grant refund, with the option to select what method you want to collect them.
You could either keep the cash in your student account for possible future expenditures or request that the unused grant money be mailed to you or transferred to your bank account.
A school may occasionally sign a voucher so that the student can still use the finances at the college bookshop. The core issue is that the institution cannot hold your Pell grant refund captive. You can continue to use your Pell Grant funds, but rather than being free money, you must disclose it on your taxes as income.
Pell Grants are designed for undergraduate students who have a considerable monetary need and are seeking a degree. Pell grant is the federal government’s biggest grant program and is typically the first form of financial assistance that a student can get.
To be eligible, you should first complete the Free Application for Federal Student Aid (FAFSA). You will not be able to obtain any assistance unless you use this form to apply. Each school year, students and their parents will complete a FAFSA, as modifications in income increase or decrease the value of aid available.
Pell Grants are federal government grants that assist borrowers to pay for a fraction of their educational expenditures. Every year, the award amounts shift. Pell Grants are available for up to 12 semesters. If you take more time to complete your degree, you will need to find alternative funding.
Possessing unutilized Pell Grant funds is not a prevalent issue. Many Pell grant beneficiaries spend all their Pell grant money on education expenses and therefore have to depend on federal student loans to cover the leftover costs. According to a study conducted by the United States Department of Education, 70% of all undergraduates obtain some level of monetary assistance, with 44% receiving Pell grants.
Pell Grant funds are only available if you are registered full-time or part-time in an undergraduate course. When that is no longer applicable, no more Pell Grant money will be appended to your file since you’ll have no existing educational expenditures to deal with.
What You Should Know About Pell Grant Refunds
If you are a Pell Grant recipient, you could have a few concerns regarding the refund request. Here are some vital things to note:
Pell Grant Refunds Impact Your Taxes
If you obtained a Pell Grant and had funds left over upon paying for your educational expenditures, you may be required to report it to the IRS on your tax return. You are not required to report Pell Grant funds spent on eligible academic expenditures.
Cost of attendance, books, materials and school-required fees are examples of eligible expenditures. Some costs, including your room and board or holiday travel home, are not deemed eligible expenditures. Any Pell Grant funds utilized for these kinds of expenditures will be taxed as ordinary income. Maintain records when you use your Pell Grant for several other expenditures in order to file a correct tax return.
What Happens When You Drop Out
Although Pell Grants are typically not required to be reimbursed, there are certain exemptions. You might lose your Pell Grant if you modify your student status, drop out, or consider taking a semester off from school. Your college may request that you refund back the entire Pell Grant.
Pell Grant Refund Eligible Expenses
If Pell Grants have been used for eligible educational expenditures, they are tax-free. Eligible academic expenditures, according to the IRS, include:
- Fees and tuition
- School books, materials, and equipment are examples of course-related expenses (these items will have to be mandatory for all students to be deemed eligible expenditures)
- Pell Grants can be utilized for other educational expenditures including room and board, travel, clerical assistance, or other materials not considered necessary by your college/university. The cash utilized for these other expenditures, on the other hand, is subject to taxation as income and therefore should be disclosed on your tax return.
What Are the Best Places to Put Unused Pell Grant Funds?
Obtaining more monetary support than you need can be beneficial, particularly if it is in the form of free money rather than student loans. As a student, you could put this money to good use in a variety of ways. You may:
- Pay for vehicle maintenance.
- Purchase new school supplies for the forthcoming school year.
- Pay your expenses if you reside off-campus.
- Pay your phone bill.
- Purchase a planner or calendar to assist you in managing your activities throughout the year.
- Purchase books that are not required for your course.
- Pay for gas to get to find employment or a volunteer position.
- Put everything in a savings account to be used to file your taxes.
Even if you must disclose your extra Pell Grant money as income on your taxes, it still provides you with a significant economic reward. It will be similar to receiving some income without having a job. Once you realize how significantly a tiny amount of cash can help you get ahead immediately after college, taxes will no longer appear to be a problem.