According to the U.S. Department of Education, a grant is known as “gift aid” or free money towards your college education.
There are 4 types of federal grants:
Federal Pell Grants offer up to $6,500/year, mainly to undergraduate students who demonstrate financial need and don’t have a bachelor’s degree. These grants (originally called Basic Educational Opportunity Grants) are determined by your college’s financial aid office.
Federal Supplemental Educational Opportunity Grants (FSEOG) cover up to $4,000/year, allocated for students who demonstrate considerable financial need. The grant amount is determined by your school’s financial aid office, depending on the college’s available funds. Not all schools participate in the FSEOG program. FSEOG is usually granted in addition to Pell Grant funds that have not met your financial need.
Teacher Education Assistance for College and Higher Education Grants (TEACH) offer up to $4,000/year, given to teachers as long as they teach at a low-income school for 4 years.
Iraq and Afghanistan Service Grants cover up to $5,500/year, established for children of service members who passed away during their service in post-9/11 Iraq and Afghanistan. You must not qualify for Pell Grants due to Expected Family Contribution but otherwise meet all eligibility requirements for the Pell Grant.
There are also state-issued grants that differ between each state government.
Grants are typically non-taxable income. Unless you perform services in return for grant money or use grant money for non-qualified education expenses, you do not have to report grant money on your income tax return.
Pro tip: Do not use Pell Grant money to pay for room and board. That is not a qualified education expense, and thus you have to report that money on your tax return.
What is the maximum grant that one can receive? The maximum grant you can receive is a Federal Pell Grant. If your parent(s) served as a military member in Iraq or Afghanistan and passed away while on active duty, that Pell Grant may balloon. You may be eligible for $6,345+.