Ask a Hero: They Told Me I Have to Repay My Federal Grant — But How?

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Dear Student Loan Hero,

My college’s financial aid office just told me that I have to pay back my Pell Grant, or at least a portion of it. The problem is I already spent the whole grant on school books and supplies. Without any extra money lying around, what do I do?

Dear Student Loan Borrower,

We spend a lot of time and space on this website encouraging borrowers to pursue scholarships and grants before resorting to student loans. After all, gift aid rarely needs to be repaid.

But do you sometimes have to pay back government grants? Unfortunately, yes. Like losing a private scholarship, a federal Pell Grant repayment isn’t as rare as you might think. About 8% of grants included an “improper” payment amount and therefore required an adjustment, according to the Department of Education.

I’m sorry to hear that this is the case for you. Among the reasons the government might do this are if the grant recipient …

  • Withdrew from school
  • Became a part-time student
  • Earned other aid that reduced their Pell Grant need
  • Received a Pell Grant “overpayment” because of an administrative error

Whatever the cause, it’s important to act with urgency. If you haven’t already, respond to your school’s financial aid office and keep the communication lines open. Let them know that you’re willing to pay back your Pell Grant.

If you don’t act within 45 days, your college could forward the “debt” to the Department of Education, effectively the “lender,” which could then place it in collections. If that happens, you could lose access to federal student aid and see your credit report take a hit.

You mentioned that you don’t have the cash to repay the Pell Grant immediately. Explain your limited finances to your school, and ask to work out a delayed repayment arrangement. Your arrangement might call for a series of monthly payments until the grant is fully repaid.

Coming up with your agreed-upon monthly payment could become your next challenge. To overcome that one too, consider these helpful guides:

Dealing with federal Pell Grant repayment is no fun. With a repayment arrangement and burst of income, however, you can move on, free and clear.

Good luck in life and repayment,
Andrew P.
Student Loan Hero

Read more in the Ask a Hero series.

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