Foreign income now counts for Pell Grants – what expats need to know
As part of sweeping education changes in H.R.1 (the “One Big Beautiful Bill”) signed on July1, 2025, Pell Grant eligibility rules are getting a major overhaul – starting with the 2026–27 academic year.
For US students abroad and their families, this means key financial details – especially foreign income – will now shape aid eligibility more than ever.
Foreign income inclusion in AGI for Pell eligibility
What’s changing?
Foreign earnings no longer exempt: Income earned or taxed abroad – whether taxable in the US, excluded, or offset by foreign tax credits – now counts toward your Adjusted Gross Income (AGI) when determining Pell Grant eligibility.
Who this affects:
- Dependent students: Includes parents’ foreign income.
- Independent students and spouses: Includes their own foreign earnings.
Why this matters
Previously, US expat families could report only domestic income, often making them appear poorer and more likely to qualify for maximum Pell Grants.
Now, even modest overseas earnings – diplomatic stipends, foreign consulting fees, or remote work for a non-US employer – could bump AGI and reduce or eliminate eligibility.
New Student Aid Index (SAI) ineligibility cap
- The bill sets a hard cutoff: Students with an SAI equal to or exceeding twice the max Pell Grant ($14,790+ for 2025–26) can’t receive any Pell funds.
- Why this hurts expats: Once AGI inflates with foreign income, that bump directly impacts SAI – leaving no room for negotiation.
Fuller enrollment and credit minimums
More credits required
- For Pell eligibility, full-time status now means 15 credits per term (up from 12).
- Students below half-time (less than 7.5 credits) will be disqualified from receiving Pell.
Effect on overseas or hybrid programs
Many international or flexible-degree programs don’t operate on the standard 15-credit semester model.
Students in 12-credit international terms or modular programs could lose aid due to this technicality.
Additional implications for expats
1. Dual-income confusion
If parents both work abroad – say one with a UK salary and another with a remote US contract – their combined foreign income will push AGI up faster than under previous rules.
2. Currency fluctuations
AGI will include foreign income converted at IRS-approved rates.
Sudden exchange rate changes might disrupt Pell-qualified AGI bands across tax years.
3. Future grant adjustments
Both Pell maximum award and SAI cutoff levels will be indexed over time – but foreign income inclusion means household budgeting could shift mid-stream.
Action tips for US students and expats
- Run a “FAFSA trial” early. Estimate AGI – including foreign income – to see if Pell eligibility holds.
- Organize overseas income docs. Gather certifications – tax returns, employer letters, W-2/1099 equivalents – for foreign pay sources to support your FAFSA if ever audited.
- Check enrollment credit consistency. Ensure your international program clocks 15 credits per term or find ways to supplement.
- Plan borrowing around changes. If Pell eligibility may end, explore US-based private loans (note interest and repayment terms carefully), international scholarships, or employer tuition support.
Final thoughts
These Pell Grant updates reflect a growing intent: ensure federal aid only supports students whose full global household income indicates real need.
For Americans abroad, the rules remove previous financial “loopholes.” But with early planning, documentation, and awareness of credit-hour definitions, Pell eligibility can still be within reach.
