A Pell Grant can be used for any expense your school includes in its official Cost of Attendance. That covers tuition and required fees, books, supplies, and equipment (including a computer for coursework), housing and food, transportation, personal expenses, dependent care, and disability-related costs.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance Your school applies the grant to tuition and fees first and refunds the rest to you to spend on the other categories. The maximum award for the 2026–27 year is $7,395, and you generally don’t repay it.2Federal Student Aid. 2026-27 Federal Pell Grant Maximum and Minimum Award Amounts
Tuition and Required Fees
These come out first, before you see any money. Mandatory fees can include registration, lab fees, technology fees, and student activity fees. If your school requires all students to carry health insurance, those premiums count too.3Federal Student Aid. Cost of Attendance (Budget) The school subtracts these charges from your grant automatically.
Books, Supplies, Equipment, and a Computer
Your Cost of Attendance includes an allowance for books, course materials, supplies, and equipment your classes require. It also includes a reasonable allowance for a personal computer you’ll use for coursework, including one bought before the term starts (for example, during the summer before a fall semester).1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance Students in technical or vocational programs can use funds for specialized tools, software licenses, or program-specific equipment.
If your Pell Grant leaves a credit balance on your account after tuition is paid, your school must give you a way to get books and supplies by the seventh day of the term. That usually takes the form of a bookstore voucher or an early partial refund.4eCFR. 34 CFR 668.164 – Disbursing Funds You can opt out and buy materials on your own.
Housing, Food, Transportation, and Personal Expenses
Money left over after tuition is refunded to you, and you decide how to allocate it across the remaining approved categories. Federal law includes an allowance for food and housing in your Cost of Attendance.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance On campus, the allowance is based on your school’s housing and meal plan charges. Off campus, your school sets a standard allowance for rent and groceries. Students living at home with parents still receive a living expense allowance; it cannot be set at zero.
Transportation is a separate category. Your school sets a reasonable allowance that can cover gas, transit passes, parking, or travel between campus, home, and work. A miscellaneous personal expenses allowance is also included for students attending at least half-time, covering everyday costs like toiletries and clothing.
Your school does not track your individual purchases once the refund is in your hands. What it does track is whether your total aid exceeds your Cost of Attendance, which is a separate problem covered further down.
Dependent Care and Disability-Related Costs
If you have children or other dependents, your Cost of Attendance includes an allowance based on estimated actual childcare expenses, factoring in the number and ages of your dependents.1Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance That can cover daycare, after-school programs, or other care that lets you attend class and study. Childcare varies widely by location, ranging from roughly $500 to over $2,000 per month depending on state and age of child, so this piece of the budget can be substantial.
Students with documented disabilities can have additional expenses folded in, including specialized equipment, personal assistance, adaptive technology, and disability-related transportation. These costs are included only to the extent they are not already covered by another agency.3Federal Student Aid. Cost of Attendance (Budget)
Study Abroad
Pell funds can go toward an approved study abroad program as long as the coursework earns credit toward your degree at your home school. Your financial aid office will set the Cost of Attendance for the program, and your grant travels with you for that term.5Office of the Law Revision Counsel. 20 USC 1070a – Federal Pell Grants: Amount and Determinations; Applications
What You Cannot Spend a Pell Grant On
Because approved spending is tied to the Cost of Attendance, anything outside those categories is off-limits. Common prohibited uses:
- Buying a car, motorcycle, or other personal vehicle, even to commute
- Entertainment: concert tickets, streaming subscriptions, vacations, leisure travel
- Paying off credit card balances, personal loans, or other non-education debt
- Non-required equipment your courses don’t mandate, such as optional software or luxury electronics beyond what you need for schoolwork
No one audits your grocery receipts. But if your total financial aid exceeds your Cost of Attendance, you have an “overaward,” and your school or the Department of Education will require you to return the excess.
The Tax Catch
Approved does not mean tax-free. The IRS treats Pell Grants the same as scholarships.6Internal Revenue Service. Publication 970 – Tax Benefits for Education Grant money is tax-free only when spent on:
- Tuition and fees required for enrollment
- Books, supplies, and equipment required for your courses
Everything else is taxable, even though it’s an approved use. That includes room and board, transportation, and personal expenses.7Internal Revenue Service. Topic No. 421 – Scholarships, Fellowship Grants, and Other Grants Many students whose tuition is fully covered by their Pell Grant spend the entire refund on living costs, which makes the whole refund taxable.
If you owe tax on part of your grant and the taxable amount was not reported on a W-2, you report it on Line 8 of Form 1040 and attach Schedule 1. You may need to make estimated tax payments during the year if the amount is large enough. IRS Publication 970 walks through the calculation.
When You Might Have to Give It Back
If you drop out or stop attending before completing 60% of the term, you may owe back part of your Pell Grant. The Department of Education uses a formula based on how far into the term you made it. Withdraw 30% of the way through the semester and you earned 30% of your grant; the other 70% is unearned and subject to return.8Federal Student Aid. General Requirements for Withdrawals and the Return of Title IV Funds Past the 60% mark you have earned the full amount and owe nothing back on timing alone.
When an overpayment happens, your school sends a written notice asking for repayment. Overpayments under $25 don’t have to be repaid. For larger amounts, failing to repay or arrange a repayment plan makes you ineligible for all federal student aid, not just Pell, until the debt is resolved.9eCFR. 34 CFR 690.79 – Liability for and Recovery of Federal Pell Grant Overpayments If the calculation looks wrong to you, you can object in writing and the school must consider your information before finalizing the amount. Unresolved debts are eventually referred to the Department of Education for collection.