Navigating Award Eligibility: An Update on Education Funding for Postsecondary Institutions

Postsecondary institutions seeking to participate in federal student financial aid programs must navigate a complex landscape of regulations and requirements. This article provides an overview of the application process, key considerations for eligibility, and important updates regarding financial aid awards, particularly focusing on the Federal Pell Grant program. It also addresses the role of award letters in communicating financial aid information to students and families.

Applying for Eligibility: The E-App and Title IV Programs

Institutions aiming to participate in Federal Student Aid (FSA) programs, as outlined in Title IV of the Higher Education Act (HEA), must first apply for and receive approval. This process involves submitting an Eligibility application via the E-App. Postsecondary institutions use the E-APP to apply for designation as an eligible institution, initial participation, recertification, reinstatement, change in ownership, to update a current approval, or report information. This includes those seeking initial participation, recertification, reinstatement, changes in ownership, or simply needing to update their current approval status. The information provided in the E-App encompasses critical details about the institution, including its name, address, locations, programs, officials, authorizing agencies, owners, and servicers.

Before embarking on participation in FSA programs, institutions should thoroughly familiarize themselves with all applicable FSA program requirements, including administrative and other obligations related to tracking student and program eligibility. Some requirements necessitate substantial lead time for implementation, emphasizing the importance of early planning. Once participating, institutions must maintain adherence to academic, financial, and administrative standards. The Department of Education also strongly encourages institutions to review resources like the Training Video: Applying for First-Time Approval to Participate in Title IV FSA Programs and student financial assistance regulations.

The Department of Education collects information in order to determine if the institution is eligible, and if applicable, certified to participate in the Title IV, HEA programs, as mandated by the Higher Education Act and Title 31 as amended by Section 31001 of Public Law 104-134 of the Debt Collection Improvement Act of 1996. Section 498A(a)(3) of the HEA requires the Secretary to establish a central database of information on institutional accreditation, eligibility, and certification that includes all information available to the Department and make this information available to all institutions of higher education, guaranty agencies, states, and other organizations participating in the programs authorized under Title IV of the HEA, as per Section 498A(c).

The Application requests the Social Security numbers (SSNs) of the owners of the institution. The SSNs are used to determine institutional eligibility and to verify identities and are collected under the authority of the Debt Collection Improvement Act of 1996, Pub. L. 104-134.

Federal Pell Grant Updates for the 2025-2026 Award Year

The Department of Education has released information regarding the Federal Pell Grant maximum and minimum award amounts for the 2025-2026 award year (July 1, 2025, through June 30, 2026). This allows institutions to inform students and families about potential Pell Grant eligibility as they prepare to complete the 2025-2026 FAFSA® form in December 2024.

The Pell Grant program is subject to congressional appropriations. Public Law 118-158, the American Relief Act, provides further continuing appropriations for the fiscal year ending September 30, 2025, and for other purposes. The Department publishes the Federal Pell Grant maximum and minimum award amounts by February 1 in accordance with section 482 of the Higher Education Act of 1965, as amended (HEA). However, the current funding law may expire on March 14, 2025, unless Congress acts to extend it and the Pell Grant appropriation, or a similar measure, must be extended through September 30, 2025, to fund the award levels described herein for all eligible students in 2025-2026.

Determining Pell Grant Eligibility

Maximum and Minimum Pell Grant eligibility are determined based on tax filing requirements, family size and composition (i.e., single parent or non-single parent), federal poverty guidelines, and state of residence. If a student qualifies for a Maximum Pell Grant, the SAI is not used to determine the amount of that grant. An SAI-calculated Pell Grant is determined by subtracting the student’s calculated SAI from the annual published maximum Pell Grant amount, then rounding to the nearest $5. If the SAI-calculated Pell Grant is less than the published minimum Pell Grant amount, the student is ineligible for an SAI-calculated Pell Grant. However, the student may still be eligible for Min Pell if they meet the minimum Pell Grant eligibility requirements.

Key Changes from the FAFSA Simplification Act

The FAFSA Simplification Act has changed the process for determining the amount of a student’s Scheduled Pell Award. The Department will no longer publish a Pell Grant Payment and Disbursement Schedule for use in determining a student’s Pell Grant scheduled award for the award year.

Important Considerations for Awarding Pell Grants

Award Year: The maximum and minimum Pell Grant amounts apply to the 2025-2026 award year.
Minimum Award: Under section 401(a)(2)(F) of the HEA, as amended, the minimum Pell Grant award is ten percent of the maximum award amount for the award year.
Rounding: Under section 401(b)(1)(B)(ii), Federal Pell Grant awards should be rounded to the nearest $5.
150% Rule: Although $7,395 is the maximum Pell Grant scheduled award for the 2025-2026 award year, institutions are reminded that a student may be eligible to receive Pell Grant funds for up to 150 percent of the student’s Pell Grant scheduled award for an award year.
Cost of Attendance: As a reminder, when determining a student’s scheduled award, the Title IV cost of attendance (COA) is always based on the costs for a full-time student for a full academic year, regardless of the actual enrollment intensity (the number of credits or hours the student is enrolled) or actual time the student will be enrolled during the award year. A student’s annual Pell Grant award is the Pell Grant award amount adjusted based on the student’s enrollment intensity. It is also important to note that the statutory restrictions of using only certain cost components in determining the COA in some circumstances still apply.
Lifetime Limit: A student’s eligibility to receive a Federal Pell Grant award is limited by the statutory provision in section 401(d)(5) of the HEA that sets a lifetime Pell Grant eligibility limit of 12 semesters (or its equivalent).

The Department of Education will provide institutions with information about system, web, and software modifications that will reflect the 2025-2026 Pell Grant maximum and minimum award amounts in future electronic announcements.

The Role of Award Letters in Financial Aid Communication

Financial aid offices rely on award letters to communicate crucial information to students and their families. Financial aid offices use the award letter to provide students and their families with information about the composition of the financial aid package, the cost of attendance, and the institution’s financial aid policies and procedures. These letters detail the composition of the financial aid package, the cost of attendance, and the institution's financial aid policies and procedures.

Regulatory Requirements and Best Practices

While the Department of Education does not mandate specific content for award letters, several information dissemination regulations can be effectively satisfied through their use. There are no regulatory requirements for the content of an award letter because there is no regulatory requirement to have an award letter. There has been no such requirement since February 3, 1988, when schools were last required to obtain a signed award letter from the student indicating the student’s acceptance of campus-based awards. Thus there is no requirement that schools send award letters to their students, no requirement that the schools maintain a signed copy of the award letter in their file, and no required elements of the award letter.

Nevertheless, most schools still send award letters to new and returning students because it is an effective tool for providing families with information about the financial aid package and the costs associated with their children’s education. In addition, many schools use the award letter to satisfy other regulatory requirements.

These include:

Notice of Amounts and Types of Title IV Aid: 34 CFR 668.165(a)(1) requires schools to notify students about the amount of Title IV aid the student and his or her parents will receive from each Title IV program before any aid is disbursed. The school also must provide information about the disbursement method and schedule, and itemize subsidized and unsubsidized education loans separately.
Notice of Right to Cancel a Loan: 34 CFR 668.165(a)(2) requires schools to notify students and parents of their right to cancel all or a portion of an education loan disbursement and have the funds returned to the lender. This notice must be sent within 30 days before or after the school credits the student’s account with the loan proceeds. Although the timing may permit the inclusion of this information with the award letter, it is better to have this notice accompany the promissory note or each disbursement.
Student Account Authorization: 34 CFR 668.164(d) requires schools to obtain authorization from the student and/or parents to use Title IV funds for any purpose other than current charges for tuition and fees (and, if the student has signed a contract, for room and board). This includes depositing the funds to a bank account designated by the student or parent and applying the funds to pay for other authorized educationally-related charges. Such an authorization cannot be mandatory. The student or parent must be able to cancel or modify the authorization at any time. Additional requirements relating to the authorization are described in 34 CFR 668.165(b).
Financial Assistance Information: 34 CFR 668.42(a) and (b) and Section 485(a) of the Higher Education Act require schools to provide current and prospective students with information about available federal, state, local, private and institutional student aid programs. 34 CFR 668.42(c) requires schools to provide students with information about the rights and responsibilities of students receiving financial aid. In particular, it requires disclosure of the criteria for continued eligibility for each program in the financial aid package and especially the school’s Satisfactory Academic Progress (SAP) policy. It also requires the school to provide students with information about the terms and conditions of their student aid, including disbursement methods and frequency, the terms of education loans, and the terms of any work-study job. Section 485(e) of the Higher Education Act also requires certain disclosures regarding athletic scholarships, grants and other forms of athletic aid offered by the school. Although most schools handle these requirements through a financial aid section of the college catalog, many will include basic information about the school’s SAP policy and requirements for continued eligibility with the award letter.
Institutional Information: 34 CFR 668.43 requires schools to make available to students certain information about the school, including cost of attendance information (including tuition and fees, books and supplies, room and board, and transportation) and the school’s refund policy. The school must also provide a statement concerning the impact of study abroad on eligibility for Title IV student aid (i.e., if a program is approved for credit by the home institution, it counts as part of their enrollment at that school for Federal student aid purposes). Although this information only needs to be made available upon request, many schools find it helpful to include cost of attendance information in the award letter.
State Grant Assistance: Section 487(a)(9) of the Higher Education Act requires schools to notify borrowers about their eligibility for state grant assistance from the state in which the school is located (and contact information for further information about other states for students from other states).

In addition to meeting regulatory requirements, many financial aid administrators incorporate the following elements into award letters as a matter of best practice:

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The amount of institutional aid, in addition to Title IV and state aid
The cost of attendance, SAI, financial need and unmet need
The school’s outside scholarship policy
The school’s SAP policy
Availability of unsubsidized Stafford and PLUS loans
Availability of tuition installment plans
Notice of the right to request a professional judgment review of unusual circumstances that may affect the family’s ability to pay

Most schools will send a revised award letter whenever the student’s SAI or cost of attendance changes. Some schools will only send a revised award letter when the amount of financial aid or the composition of the financial aid package changes.

Key Information to Include in Award Letters

SAP Policy: Since many students will not read the full SAP policy, it is important to provide them with a short summary that emphasizes the consequences of failing to maintain satisfactory academic progress.
Packaging PLUS and Unsubsidized Direct Loans: Because there is a growing tendency of families to overlook unsubsidized Stafford and PLUS loans in favor of the more expensive private education loans, it is important to ensure that the families are aware that these sources of education financing are available. However, packaging these optional loans by listing a specific amount on the award letter may lead to confusion and over-borrowing. When schools tell families about their maximum PLUS loan eligibility, they have a greater tendency to borrow the maximum instead of a lesser amount. It is important to emphasize that these loans are available to help the family finance the family contribution and to explain that the Stafford Loan is less expensive than the PLUS loan which is less expensive than most private education loans.
Cost of Attendance, SAI and Financial Need: Since cost-of-attendance information is only required upon request, there is some debate about whether it is worth including it on the award letter. Likewise, since schools are not required to tell families their SAI, financial need, and unmet need, some schools choose to exclude it from the award letter.

The main argument against including cost-of-attendance information in the award letter is that it may confuse some families. This can include confusion about the family’s out-of-pocket expense, confusion about which amounts get paid to the school, confusion about whether the amounts are actual figures or estimates, and confusion when comparing costs. There is, however, less confusion if the award letter itemizes the major components of the cost of attendance that apply to the student, such as tuition and fees, room and board, and transportation, in addition to giving the overall total.

Some schools do not include cost-of-attendance information on the award letter because it makes it apparent that the school is not meeting the full demonstrated financial need (i.e., the school is gapping the student). Instead, they substitute a worksheet the family can use to figure it out on their own.

However, the purpose of the award letter is to provide the family with clear and understandable information about the costs they will incur by attending the institution. If some students find the information confusing, it is a sign that the clarity needs to be improved, not that the information should be omitted or obscured. Families need cost of attendance information to help them plan for college costs.

Accordingly, the best award letters provide overall cost-of-attendance information along with a breakdown into the major categories of the student budget (e.g., tuition and fees, room and board, transportation, etc.). They also provide overall student aid information along with a breakdown into the major types of student aid (e.g., grants, scholarships, work-study, and loans). The award letter also should provide a summary of the family’s out-of-pocket cost, distinguishing it from the SAI, and identify what amount will need to be paid to the school. If the school practices gapping, it should state this explicitly and identify the amount of the unmet need in the award letter. Otherwise, families will find the award letter confusing because the totals do not add up.

It is a good idea for the school to identify certain elements of the student budget as estimated costs. Moreover, rather than detail transportation costs down to the cent, some schools will round them to the next closest multiple of $25.

Leveraging Technology for Enhanced Communication

Many institutions are now using secure websites to provide students with access to their financial aid information. They will then send subsequent award letters only to students who have not given consent. This web site lets them review the status of their awards, see a list of missing documents, accept or reject or reduce their loans, verify their SAP status, review their cost-of-attendance information (and any adjustments), review their loan history and tell the school about outside scholarships. The web site also may include information about the student’s account and any scheduled disbursements.

The secure web site should record the date and subject of any messages sent to the student and also keep a log of when the student used the web site.

Addressing Auditor Concerns

It is not unusual for a school to encounter an auditor from the US Department of Education who insists on seeing signed award letters in the students’ files. Apparently some auditors are unaware that this has not been a requirement for more than a decade. The proper response to such a request is to bring them up-to-date on the regulatory requirements, noting that the US Department of Education switched from an “opt-in” requirement to an “opt-out” requirement (as per 34 CFR 668.165(a)(2)) in 1988.

Additional Resources: The Education and Training Voucher (ETV) Program

The Education and Training Voucher (ETV) Program provides awards of up to $5,000 per year to students who age out of foster care and students who are adopted after age 16. Awards are sent directly to the college or university and can be used to pay for tuition/fees, room/board, book/supplies and personal/living expenses.

ETV funds can be used during the summer if the student has not received the entire $5,000 during the prior academic year. Priority for funding will be given to previous recipients then new undergraduate applicants. If funding is available after July 1 of each year, graduate level applicants may be awarded in date-received order. If a student is eligible but no funding is available, he or she will be put on a waitlist.

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