The federal government provides the U.S. Department of Education with an annual allotment of funds intended for use in the Federal Pell Grant program. The U.S. Department of Education distributes the money to colleges and universities on behalf of Pell Grant applicants who qualify for financial aid based on evidence of financial need. If you receive a Pell Grant, you must use the funds for educational purposes, rather than private purposes.
When you apply for and receive approval for a Federal Pell Grant, the U.S. Department of Education will pay the money directly to your college or university. Your school reserves the right to dispense the funds at it sees fit, so long as it either pays you directly or applies the money toward the tuition balance on your account. Some schools may offer you an advance for a portion of your Pell Grant if you need the money to secure off-campus housing, purchase supplies or pay for other educational-related expenses.
If there is a surplus remaining after your school applies your Pell Grant funds toward your tuition and campus expenses, you will receive a disbursement of your leftover Pell Grant money either by a check or electronic funds transfer into your bank account. Your school must provide you with notification of how and when it will distribute Pell Grant overage disbursements, but is required by law to distribute funds at least once per semester. Each school determines its own schedule for distributing Pell Grant balances, but many wait until the end of the class “add or drop" period before dispensing the money.
You can use your Pell Grant to pay for any expenses related to your college attendance. If you received a Pell Grant balance distribution, that means that you have no outstanding tuition balances or other account balances through your college or university. As a general rule, the educational expenses outlined in IRS Publication 970 are a good rule of thumb for determining what expenses can be applied to your Pell Grant. However, you may also apply refunded Pell Grant money to your college dorm and housing expenses and transportation expenses, such as gasoline and bus passes to transport to and from school.
Because the Pell Grant is government-funded and you qualify for the funds based on financial need, the government does not approve of misuse of Department of Education money. Pell Grant fraud includes abuse or misappropriation of grant funds by both educational institutions and students for non-qualifying college expense purposes. The Department of Education, as well as the Office of the Inspector General, reserves the right to audit or investigate fund usage. Should the government suspect that you are misusing your Pell Grant money, you may lose your grant, as well as face penalties or jail time.