Grants vs. Loans vs. Scholarships: What’s the Difference?
Wherever you are on the path of life, if you’ve decided to acquire a college degree, there are a lot of factors to consider and decisions to make. What do you want to major in? What type of degree do you want to achieve? What college would you like to attend?
While all of these are, no doubt, essential factors to consider and important decisions to make, there’s something else that stands high on your list of priorities. It could play a major part in all of your college-related decisions. What is it? Why the cost, of course.
Going to college isn’t cheap. In fact, it can be quite exorbitant. The cost of attending a local community college can run you thousands of dollars, while the cost of attending a secondary or post-secondary institution can amount to tens of thousands of dollars.
Prices aren’t getting any cheaper, either; in fact, they keep on rising. The cost of college and figuring out how to pay for it is really important.
If the funds aren’t readily available to you, that doesn’t mean that you have to give up your dream of attending college and achieving a degree. There are financial aid options available that you can use to assist you with covering the cost of your college education.
The most common options include student loans, scholarships, and college grants. Of the three options, loans should be the last avenue you consider. However, scholarships and grants are more attractive financial aid options.
Has the above information left you feeling a little dizzy and confused? If so, don’t worry because we’ve got you covered! Below, you’ll find a handy guide that explains what student loans, scholarships, and college grants are, as well as the difference between these three financial aid options.
So grab a piece of paper and a pen, print out this page, or just save the link, because the information presented below will help you better understand the different types of financial aid that are available to you so that you can make an informed decision.
Table of Contents
Grants vs. Loans vs. Scholarships At a Glance
- Grants. Grants are gifted financial aid based on your financial circumstances that do not need to be repaid.
- Loans. Loans are borrowed financial aid that must be paid back in full with interest.
- Scholarships. A scholarship is a financial aid that is awarded based on achievements and does not need to be repaid.
1. College Grant’s Explained
What Is a College Grant?
A college grant, as the name suggests, is a type of financial aid that is granted (gifted) to a student. The amount of aid that is granted is based on the financial needs of the student. Designed to assist with the cost of tuition, grants usually do not need to be repaid.
That’s why they are such an attractive option for those who need assistance with paying for college. Grants can be obtained directly from the college or a university, the federal government, the state government, or from private or nonprofit organizations that offer them.
The Pell Grant is an example of a popular grant for college students. These grants are designed for undergraduate students who require significant financial assistance, meaning that they are usually awarded to low-income individuals.
What Are The Eligibility Requirements?
It’s important to note that in order to qualify for a grant, they may need to meet certain eligibility requirements, and those requirements are determined by the institution, government, or organization that is offering the grant.
Do College Grants Have To Be Repaid?
As mentioned above, typically, college grants do not have to be repaid as long as the student continues to maintain the requirements that made him or her eligible for the grant. If, for instance, you decide that you want to stop going to college before you finish your degree, you may have to repay certain grants.
Additionally, if you withdraw early from the program that the grant was awarded for, or if you fail to meet a specific service obligation, you may need to repay the funds that you were gifted via the grant.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is an example of a grant that needs to be repaid if you fail to meet a service obligation or if you withdraw early from the program that you received the grant for.
2. Student Loans Explained
What Are Student Loans?
Student loans are another form of financial aid available for college students. However, it is very important to note that loans should be your last resort. If you require one, you should aim to borrow the least amount of money possible, as you will need to repay the entire loan back in full and, typically, with interest.
Academic institutions, financial institutions, online lenders, and state and local governments all offer student loans. Before going with one of these options, if you have trusted family members or friends that may be able to assist you financially, asking them if they would be willing to loan you the money is recommended.
Often, and unfortunately, institutions and organizations have strict eligibility requirements and charge high interest rates. Predatory lending can involve dubious individuals, institutions, and organizations issuing student loans for the sole purpose of taking advantage of borrowers.
If you do intend on asking family or friends for a loan, do make sure that you have a solid relationship and that you set parameters. You do not want those who you know and trust to end up resenting you. Establish repayment terms, including interest, if necessary.
How Do Student Loans Work?
The terms and conditions of student loans vary and are based on several different factors.
The following are examples of some of the key factors that impact student loan terms and conditions:
- Whether they’re federal (issued by the government) or private (issued by schools or financial institutions)
- Whether the interest rates are fixed or variable
- Repayment terms (how long it will take to repay the loan)
- The amount of money you borrowed
Additionally, you will need to meet certain eligibility requirements to qualify for a student loan, and these requirements vary.
Examples of some of the common eligibility requirements include the following:
- Your personal assets
- Your credit history and score
- The personal information you provided on the Free Application for Federal Student Aid (FAFSA)
How Do You Apply For a Student Loan?
You can apply for most student loans online; however, do check with the issuing institution to confirm. Either way, you will be asked a series of questions on the application, and those questions vary and depend on the loan you are applying for.
Make sure that you answer all questions in full and that you provide any supporting documentation that may be requested.
If you are applying for a federal student loan, you will need to fill out a FAFSA to determine your eligibility. When completing your FAFSA application, you will need to provide the following information:
- Your full name
- Your date of birth
- Your social security number or your alien registration number if you are not a citizen of the United States
- Your driver’s license number, if you have one
- Your federal income tax returns, W2s, and any other records that detail your earnings
- Bank statements and records
- Records of untaxed income, if applicable
- Information related to your assets and investments, if applicable
- An FSA ID for your electronic signature (your username and password will be needed in order to access and submit your FAFSA application online)
If you are applying for a federal loan as a dependent student, you will need to provide the above-mentioned information for your parent or parents, as well. With the exception of the FSA ID, you will also likely need most, if not all, of the above-mentioned information if you are applying for a private student loan.
When applying for a student loan, make sure that you submit all the required information. Failure to do so could delay the process or could disrupt your eligibility.
3. Scholarships Explained
What Is a Scholarship?
Scholarships are another form of financial aid available to assist students with paying for college. Generally, scholarships are an excellent option to finance college, as there are countless options available based on both a student’s financial need and merit.
Numerous sources offer scholarships for college students, and typically, the funds that a scholarship provides do not need to be repaid.
What Types Of Scholarships Are Available?
As mentioned, there are so many different types of scholarships available that are based on either a student’s financial need or merit; in fact, there are thousands of scholarships available! While having a lot of options to choose from is certainly a good thing, the amount of time it takes to research all of the different options can seem like a daunting task.
With that said, you can use the following tips to help you find scholarships that you might be interested in applying for.
- Research scholarship databases. Check online for scholarship databases (do a quick search and you’ll find several options to choose from) and scan through to see if there are any options that align with your background or your interests. You could also ask people you know – friends, family members, guidance counselors, etc. – if they are aware of any scholarships that you could apply for.
- Review your academic achievements. In order to qualify for a scholarship, you will need to meet certain eligibility requirements. Your academic achievements are one of the biggest requirements. Your cumulative GPA and whether or not you made the Honor Roll or Dean’s List, for example, can have a major influence on your eligibility.
- Review your community involvement. There are a lot of merit-based scholarships, too, so consider your involvement with your community. For instance, if you were in the Boy Scouts and you achieved the rank of Eagle Scout, there are numerous scholarships that you may be eligible for. Or if you were an active member of your high school’s Rotary Club and even served as president, there may be scholarships available for you.
- Consider your sports background. Are you athletic? If so, you’re in luck because there are literally countless scholarships available for athletes. Were you the star pitcher on the softball team throughout your entire high school career? Were you the captain of your swim team? Were you the star quarterback? Did you play volleyball or field hockey? You’ll find that there are so many athletic scholarships available.
- Consider your family background. In addition to your academic achievement and your community involvement, you may also qualify for scholarships based on your family background. For instance, if you are the child of immigrants from certain countries or if you have Native American lineage, there may be scholarships available to you. There are scholarships for family members of veterans, too.
How Do You Apply For Scholarships?
Once you have found scholarships that you are interested in and you have confirmed that you do, indeed, meet the eligibility requirements, it’s time to apply. Nowadays, the application process for most college scholarships can be completed online; however, check to confirm that this is, in fact, the case.
Also, if you can complete the application online, you may need to submit physical documents to support your application.
Make sure that you take your time while you are completing the application. Do not rush through. You want to ensure that you answer all questions in full and that you provide all of the information requested.
In addition to filling out the application itself, you may also be required to write and submit an essay, as well as letters of recommendation from teachers, your Scoutmaster, your softball coach, etc.
Some of the key pieces of information and important documents that you may need to provide with your application include the following:
- A copy of your birth certificate
- SAT/ACT scores
- Academic transcripts
- Copies of identification cards
Before you submit your application, be sure to look over everything with a fine-tooth comb, You don’t want to leave out any important information or provide incorrect information because doing so could delay the process or, worse, could nullify your application.
Sarah is an accomplished educator, researcher and author in the field of testing and assessment. She has worked with various educational institutions and organisations to develop innovative evaluation methods and enhance student learning. Sarah has published numerous articles and books on assessment and learning. Her passion for promoting equity and fairness in the education system fuels her commitment to sharing insights and best practices with educators and policymakers around the world.