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What are Government Grants?

By Ken Black
Updated May 17, 2024
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Government grants are funding awards that may come with conditions, or may come free of any obligation at all. Those grants that do come with conditions are often called forgivable loans, as the principle amount is not forgiven until those terms and conditions are met. Many different types of entities receive government grants, including individuals, companies, non-profit organizations, along with state and local governments.

Individuals most commonly receive government grants through the financial aid process in order to pay for college. The most common type of grant received is the Pell Grant, which is available to many of those seeking their first undergraduate degree. The grant can be used by those enrolled in an undergraduate program and who can demonstrate they have the need for financial help.

The Federal Government also commonly provides research incentives in the form of cash contributions. These government grants may go toward the development of a new vaccine, or toward research into some other medical or environmental issue. Often, these grants are made to companies or non-profit organizations, but they can also be made to individuals. While the government often does not require guaranteed results in order to award the grant, performance may affect future grant awards.

In addition to Federal Government grants, other governments, including state and local governments, may offer grant money as well. In most cases, government grants help meet a need in a certain area. For example, there may be a need for a low-income housing project in a certain city. The developer may not be willing to take on the risk of the entire project, or may not have the financial resources to do so. Therefore, he or she may seek government aid to help with the situation. Development grants are very popular state government grants.

Government grants may help in development and research situations where there may be very little chance of making a profit without them. The grant will often not make a project profitable by itself, but it can improve the bottom line when used with other sources of funding. This can make an otherwise unattractive project very appealing. The government benefits by having an improvement made to meet a need or add to the overall quality of life.

There is some criticism of certain government grants, and some people complain about earmarks in spending bills, many of which take the form of grants. Whether or not those criticisms are valid is a choice each individual must make. This often depends on the situation and the debate around a particular grant or project. Some grants, such as student aid grants, and those funding medical research, often receive very little criticism.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By Terrificli — On Dec 30, 2014

@Vincenzo -- But, taxpayers do get paid back for advances. Government research grants have paid for advances in medicines for cancer treatment, AIDS and other illnesses. Government grants have paid for research into things like hydrogen powered vehicles and we all know the desire for alternative fuel sources, right?

There are times when government grants pay for a lot of bad research, but we get great things when they fund scientific advances that no one would look into otherwise.

By Vincenzo — On Dec 29, 2014

@Markerrag -- A major problem is that the government pours millions or billions of dollars into research and then a private company makes a huge profit after using government money for research. I would feel a lot better if we taxpayers were paid back somehow for financing research that makes private companies wealthy.

By Markerrag — On Dec 29, 2014

There are times when those grants can lead to something that could be very profitable. Grants are often targeted toward researching cures for deadly diseases, for example.

We may be years away from finding some cures to a lot of deadly diseases and that is why grants are needed to finance things that could benefit society one day. Private companies only want to fund for those things that pay off immediately and are not likely to pay for long term research. Without government grants, we might not have a lot of advances that we take for granted.

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