Do You Have to Pay Back Pell Grants if You Drop Out of College?

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Updated: August 9th, 2023

The Pell Grant is an invaluable resource for students who are financing their college education. However, college does not always go exactly as planned and sometimes students are unable to finish their degree program. As a student who took advantage of Pell Grant funds, you may be left wondering, “Do you have to pay back Pell Grants if you drop out of school?” The answer can depend on a couple of factors. In this article, we’ll help you find out where you’ll stand with Pell Grants if you drop out.

Also see: What happens to loans if you drop out of college?

What is the Pell Grant?

The Pell Grant is a need-based federal financial aid grant. Students who demonstrate financial need through the FAFSA can receive up to $7,395 per year as of 2023. They do not need to pay this money back, and do not have to pay taxes on it. It also comes with no academic stipulations; there is no minimum GPA or other requirement to earn it. You only need to demonstrate financial need.

Students can use Pell Grants to fund any undergraduate accredited educational program. So, whether you are pursuing a community college degree, a four-year degree, or even a qualifying undergraduate certificate program, you may be able to take advantage of the Pell Grant.

Remember, your Pell Grant eligibility is determined year-by-year; your previous year eligibility has no bearing on whether you will qualify in the following year. So, don’t count on getting the same amount for every year of your undergraduate education; if your finances dip, you may qualify for more, and vice-versa.

Dropping out mid-semester vs. between semesters

So, when considering the question “Do you have to pay back Pell Grants if you drop out of college,” you’ll have to consider one key distinction. This is, are you dropping out of college mid-semester, or instead, choosing not to return for your upcoming semester?

Dropping out between semesters

If you drop out of college between semesters and have not yet paid for your upcoming semester or taken out Pell Grant funds, you have nothing to worry about. You will not have to pay back any of your Pell Grant funds. Since you completed the semesters for which you drew out your funds, you are entirely in the clear.

Dropping out mid-semester

If you are dropping out in the middle of a semester you have not yet completed, things may be a little bit more complicated. That’s because your Pell Grant funds are tailored to fit your enrollment status; they are designated for you to complete a certain course load, and if you do not complete it, you will have to repay the funds.

This can change on a case-by-case basis. Sometimes, even if you don’t drop out entirely, but instead, withdraw from classes and reduce your course load from full-time to half-time, you’ll have to pay back a portion of your Pell Grant.

In any of these cases, you’ll want to be sure that you check in with your school’s financial aid office before making any big decisions. Although the Pell Grant policy is set on a federal level, it is up to the individual schools to execute these rules, and some schools may have different policies on repayment than others.

Will I lose eligibility for future Pell Grants if I drop out?

Dropping out of college or withdrawing from classes does not cause you to lose eligibility for future Pell Grants. However, it’s important to note that students do have a lifetime Pell Grant limit, equivalent to six full years of Pell Grant funding. The vast majority of students complete their undergraduate degree before approaching this limit. But, if you find yourself withdrawing multiple times from school and/or changing majors, it is possible to approach this limit, so be sure to keep this in mind.

Making the decision to drop out

Dropping out of college can be a complex decision that is extremely difficult to make. There are many factors that can go into a decision like this, so students should not take it lightly. Oftentimes, external circumstances can force students to redirect their efforts elsewhere, such as taking care of their family, their own needs, or medical issues. Check out our guide on what to consider when dropping out of college for factors to consider when making your decision. Remember, you can always “drop in” and earn your college degree if that is your ultimate goal.

Key Takeaways

• Pell Grants are available for eligible students enrolled in accredited bachelor’s degree, associate degree, and certificate programs
• Your status as a full time or part time student will impact the amount of funding you may receive
• Students who drop out mid semester may have to pay back the Pell Grant, while those who complete a semester are unlikely to need to pay it back
• Students can use the Pell Grant for six full years of funding

Frequently asked questions about paying back Pell Grants