What Is Title IV? Grants, Loans, and Work-Study

Title IV of the Higher Education Act of 1965 is the federal law that creates and funds every major federal student aid program, including Pell Grants, Direct Loans, Direct PLUS Loans, and Federal Work-Study. When a college financial aid letter mentions “Title IV aid,” it means money that flows from these programs through the U.S. Department of Education. For the 2026–27 award year, the maximum Pell Grant is $7,395, and undergraduate borrowers can take out between $5,500 and $12,500 per year in federal loans depending on their year in school and dependency status.¹

What Title IV Covers

Title IV set up the legal framework for federal financial assistance to students at eligible postsecondary schools, and it sets the rules for which institutions can participate. Eligible schools include public universities, private nonprofit colleges, and for-profit career and technical schools. To participate, a school must be legally authorized by its state to offer postsecondary programs, hold accreditation from a recognized accrediting agency, and receive certification from the U.S. Department of Education.²

Participation is voluntary for schools, but without it, their students cannot access federal financial aid at all. If you want to confirm a school participates, the Department of Education maintains a searchable database of eligible institutions.

The programs funded under Title IV break into three categories: grants, which you don’t repay; loans, which you do; and work-study, which pays you wages for a job while you’re enrolled.

Federal Grants: Pell and FSEOG

Grants are the most valuable form of Title IV aid because they carry no repayment obligation. Two programs deliver most federal need-based gift aid.

Pell Grants

Pell Grants go to undergraduate students with financial need, and every eligible student who applies receives one. Funding isn’t limited by the school’s budget. The maximum award for 2026–27 is $7,395.¹ Your actual award depends on your financial need, enrollment intensity, and cost of attendance. Part-time students receive a proportionally smaller grant.

There is a lifetime cap. You can receive Pell funding for the equivalent of six full-time academic years, tracked as 600% of Lifetime Eligibility Used. Each full-time year counts as 100%, and part-time semesters count proportionally less. Once you hit 600%, Pell funding stops regardless of need.³

FSEOG

The Federal Supplemental Educational Opportunity Grant provides between $100 and $4,000 per year to undergraduates with the greatest financial need.⁴ Unlike Pell, FSEOG is campus-based. Each participating school receives a fixed allocation and distributes it until the money runs out. Applying early through the FAFSA improves your chances because schools award these funds on a first-come, first-served basis.

Federal Student Loans

When grants and work-study don’t cover the full cost, federal student loans fill the gap. They carry lower interest rates and stronger borrower protections than private loans, but they must be repaid with interest. Before your first disbursement, you sign a Master Promissory Note, a legal agreement to repay all loans made under it for up to 10 years of borrowing.⁵

Direct Subsidized Loans

Available only to undergraduates with demonstrated financial need. The government pays the interest while you’re enrolled at least half-time, during the six-month grace period after you leave school, and during any approved deferment.⁶

Direct Unsubsidized Loans

Open to undergraduate and graduate students regardless of financial need. Interest starts accruing from the date of disbursement, and you owe all of it. If you don’t pay interest while in school, it capitalizes into your principal balance, which increases the total you owe over the life of the loan.⁶

Direct PLUS Loans

PLUS Loans cover costs not met by other aid and are available to parents of dependent undergraduates and to graduate or professional students. They require a credit check and carry a higher interest rate than other Direct Loans. Borrowers with adverse credit history can still qualify by obtaining an endorser or documenting extenuating circumstances.⁷

Interest Rates and Fees

Federal student loan rates are fixed for the life of each loan but reset annually for new loans based on the 10-year Treasury note yield. For loans first disbursed between July 1, 2025, and June 30, 2026, the rates are:⁸

Undergraduate Direct Loans, subsidized and unsubsidized: 6.39%
Graduate Direct Unsubsidized Loans: 7.94%
PLUS Loans, parent and graduate: 8.94%

Statutory caps prevent rates from exceeding 8.25% for undergraduate loans, 9.50% for graduate unsubsidized loans, and 10.50% for PLUS Loans.⁹

Every federal loan also carries an origination fee deducted proportionally from each disbursement. The fee is 1.057% for Direct Subsidized and Unsubsidized Loans and 4.228% for PLUS Loans.⁶ On a $10,000 PLUS Loan, roughly $423 is withheld before the money reaches you, but you still repay the full $10,000.

Annual and Aggregate Loan Limits

Federal law caps how much you can borrow each year and over your entire education. Annual limits for Direct Subsidized and Unsubsidized Loans combined depend on your year in school and whether you’re dependent or independent:⁶

First-year dependent undergraduate: $5,500 (no more than $3,500 subsidized)
First-year independent undergraduate: $9,500 (no more than $3,500 subsidized)
Second-year dependent undergraduate: $6,500 (no more than $4,500 subsidized)
Second-year independent undergraduate: $10,500 (no more than $4,500 subsidized)
Third-year and beyond dependent undergraduate: $7,500 (no more than $5,500 subsidized)
Third-year and beyond independent undergraduate: $12,500 (no more than $5,500 subsidized)

Aggregate limits cap total outstanding federal loan debt at $31,000 for dependent undergraduates, $57,500 for independent undergraduates, and $138,500 for graduate students, which includes any undergraduate federal loans.⁶ No more than $23,000 of the undergraduate aggregate can be subsidized, and no more than $65,500 of the graduate aggregate can be subsidized.

Federal Work-Study

The Federal Work-Study program gives students with financial need part-time jobs to help cover education costs. Positions can be on campus or off, and many involve community service or work related to your field of study.¹⁰ Unlike loans, Work-Study earnings come to you as wages. You decide how to spend them.

Like FSEOG, Work-Study is campus-based. Your school gets a set allocation and awards it until funds run out. There’s no fixed award amount; your allocation depends on your need and when you apply. Undergraduate students are paid hourly, and graduate students may receive a salary.¹¹

Who Qualifies for Title IV Aid

Eligibility has several components, and missing any one disqualifies you from all Title IV programs.

Basic Requirements

You must be a U.S. citizen, U.S. national, lawful permanent resident, or other eligible noncitizen, with a valid Social Security number. The Department of Education verifies citizenship status through the Social Security Administration.¹² You must be enrolled or accepted for enrollment in an eligible degree or certificate program at a participating institution, and you cannot be in default on any existing federal student loan or owe a refund on a federal grant.

Two older requirements no longer apply. The FAFSA Simplification Act removed both the Selective Service registration requirement and the drug conviction question from Title IV eligibility.¹³ Neither factor affects your ability to receive federal aid.

Dependency Status

Your dependency status determines whether the FAFSA uses your financial information alone or includes your parents’ data. Most students under 24 are dependent and must report parental income. You’re automatically independent if you’re 24 or older, married, a graduate student, a veteran or active-duty military member, have dependents of your own, or were in foster care or a ward of the court after age 13. Students who were legally emancipated or determined to be unaccompanied homeless youth also qualify as independent.

If none of these apply but your family situation is genuinely unusual, such as abandonment, abuse, or estrangement, you can request a dependency override through your school’s financial aid office. Expect to provide a personal statement and supporting documentation from a third-party professional such as a counselor, attorney, or social worker.

Satisfactory Academic Progress

Staying eligible after your first semester requires meeting your school’s satisfactory academic progress standards. Every school sets its own policy, but federal rules require it to include maintaining a minimum GPA and completing credits at a pace that lets you finish your program within 150% of its published length.¹⁴ For a four-year degree, that means finishing within six years’ worth of attempted credits. Failing either standard puts your aid at risk, though most schools offer an appeal process for extenuating circumstances.

How to Apply Through the FAFSA

Every Title IV program starts with the Free Application for Federal Student Aid. The 2026–27 FAFSA is available online at studentaid.gov.¹⁵ The federal deadline for the 2026–27 cycle is June 30, 2027, but state and institutional deadlines are often months earlier, some falling as early as February or March.¹⁶ Filing as soon as possible protects your shot at campus-based aid like FSEOG and Work-Study, which run out.

After you submit electronically, the FAFSA typically processes within a few days. You then receive a FAFSA Submission Summary showing your Student Aid Index, a number schools use to gauge your eligibility for need-based aid. The lower your SAI, the more need-based aid you qualify for. Your FAFSA data goes to every school you list, and each one uses it to build a financial aid offer showing the grants, loans, and work-study you’re eligible to receive.¹⁷

Compare offers carefully. Two schools might list the same total dollar amount but differ dramatically in how much is free money versus borrowed money. A $20,000 package that’s half grants is far better than a $20,000 package that’s mostly loans.

If your financial circumstances have changed significantly since the tax year used on the FAFSA, such as a job loss, pay cut, divorce, or large unreimbursed medical bills, you can ask your school’s financial aid office to adjust your information. Financial aid administrators have the legal authority to modify your SAI based on documented special circumstances.¹⁸ Bring documentation like termination letters, medical bills, or divorce decrees.

What Happens If You Withdraw

Dropping out or stopping attendance before finishing at least 60% of a payment period triggers a federal calculation called the Return of Title IV Funds. The math is straightforward: the percentage of the period you completed equals the percentage of aid you earned. If you attended 40% of the term, you earned 40% of your Title IV aid, and the remaining 60% must be returned.¹⁹

After the 60% mark, you’ve earned 100% of your aid and owe nothing back. For loans, the unearned portion gets folded into your regular loan repayment. If you’re thinking about withdrawing early in a semester, understand that you may owe money back to the federal government right away, on top of any balance you owe the school.

Tax Rules for Title IV Aid

Grants and scholarships are tax-free only when used for qualified education expenses: tuition, required fees, and books or supplies required for your courses. Any portion spent on room, board, travel, or other living costs counts as taxable income and must be reported on your tax return.²⁰

This catches students by surprise. A $7,395 Pell Grant used entirely at a community college with $3,000 in tuition and fees would leave $4,395 taxable. At low income levels the tax may be minimal, but failing to report it can trigger IRS notices. Federal student loans are not taxable income because they create a repayment obligation.

Your school reports tuition payments and scholarship amounts to the IRS on Form 1098-T. Those figures also affect whether you can claim the American Opportunity Tax Credit, worth up to $2,500 for undergraduates in their first four years, or the Lifetime Learning Credit. Scholarships and grants reduce the qualified expenses you can use to calculate these credits, so run the interplay between your Pell Grant and a tuition tax credit through carefully at tax time.²⁰

Repaying Federal Student Loans

Repayment typically begins six months after you graduate, leave school, or drop below half-time enrollment. For existing borrowers with loans disbursed before July 1, 2026, several repayment plans remain available: the standard 10-year plan with fixed monthly payments, a graduated plan where payments start lower and increase over time, and an extended plan stretching up to 25 years. Income-driven plans, including Income-Based Repayment and Pay As You Earn, set your monthly payment as a percentage of your discretionary income and forgive any remaining balance after 20 or 25 years of qualifying payments.

The SAVE Plan is effectively unavailable. Following court injunctions and a proposed settlement agreement, the Department of Education is no longer enrolling new borrowers in SAVE and is moving existing SAVE enrollees into other plans.²¹ Borrowers currently on SAVE are in a general forbearance where interest accrues but no payments are due, and the time spent does not count toward forgiveness.

Public Service Loan Forgiveness

If you work full-time for a government agency or qualifying nonprofit, Public Service Loan Forgiveness can eliminate your remaining Direct Loan balance after 120 qualifying monthly payments, roughly 10 years. Only Direct Loans qualify, though you can consolidate older federal loans into a Direct Consolidation Loan to become eligible.²² You must be on an income-driven or standard repayment plan and make payments while employed by an eligible employer. Full-time AmeriCorps and Peace Corps service also counts.

1
Federal Student Aid. 2026-27 Federal Pell Grant Maximum and Minimum Award Amounts
2
Federal Student Aid Handbook. Chapter 1 Institutional Eligibility
3
Federal Student Aid Knowledge Center. Pell Grant Lifetime Eligibility Used (LEU)
4
Federal Student Aid. FSEOG (Grants)
5
Federal Student Aid Partners. MPN Basics
6
Federal Student Aid. Subsidized and Unsubsidized Loans
7
Federal Student Aid. PLUS Loans
8
Federal Student Aid. Federal Student Aid Interest Rates and Fees
9
Knowledge Center. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026
10
Federal Student Aid. Work-Study Jobs
11
Federal Student Aid. 2024-2025 Federal Student Aid Handbook – Volume 6 – Chapter 2 – The Federal Work-Study Program
12
Federal Student Aid Handbook. U.S. Citizenship and Eligible Noncitizens
13
Federal Register. Early Implementation of the FAFSA Simplification Acts Removal of Requirements for Title IV
14
Federal Student Aid. Staying Eligible
15
U.S. Department of Education. U.S. Department of Education Announces Earliest FAFSA Form Launch in Program History
16
USAGov. Free Application for Federal Student Aid (FAFSA)
17
Federal Student Aid. FAFSA Application
18
Federal Student Aid. How Do I Report My Familys Special Financial Circumstances on the FAFSA Form
19
Federal Student Aid Handbook. General Requirements for Withdrawals and the Return of Title IV Funds
20
Internal Revenue Service. Publication 970 Tax Benefits for Education
21
Federal Student Aid. IDR Plan Court Actions – Impact on Borrowers
22
Federal Student Aid. Public Service Loan Forgiveness (PSLF)