This publication describes how an institution of higher education calculates and pays federal Pell awards to eligible students and how it reports those payments to the Department of Education. The discussion covers what the school must do to process an eligible student's Pell award after the school has received documentation of the student's eligibility. Chapter 1 presents Pell-specific student eligibility requirements that schools need to be aware of, including general financial aid requirements, specific Pell requirements, requirements for special programs, and documentation of eligibility. Chapter 2 explains the formulas used for calculating the amount of a Pell award, and covers choosing a formula, determining enrollment status, calculating the cost of attendance, determining the annual award and payment periods, calculating the bill for a payment period, and checking remaining eligibility. Chapter 3 explains the Department of Education's new reporting system and its requirements concerning origination records, disbursement records, deadlines, the multiple reporting record, and requesting funds. Chapter 4 discusses the rules governing Pell disbursements, such as timing of payments and students who withdraw and later return. Finally, Chapter 5 considers how to handle changes after disbursement, such as recalculations or overpayments. (DB)