The Differences Between a Grant, Scholarship, and Loan

College is expensive, and it’s not realistic for most people to be able to afford tuition costs right out of high school. Fortunately, financial aid is available to those who need it. While this is a convenient way to help get funding for your schooling, you might have questions like, “How do grants differ from scholarships?” or “Are grants the same as student loans?”

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We’re here to answer these questions and more by highlighting each type of financial aid so that you write your own future and make the best decision for you.

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What is a grant? Education grants are available for anyone attending secondary schooling who has a financial need. The two aspects of grants that separate them from other types of financial aid are that they’re not based on merit and don’t need to be paid back. Your need can be based on any of the following:

Family income
Cost of schooling
Disability status

One of the first things a college admissions counselor will tell you to do when applying for school is to fill out the FAFSA forms . FAFSA is the Free Application for Federal Student Aid, where you’ll be reviewed for eligibility to receive Federal Pell Grants. Students can use grants to pay for tuition, housing, books, and other costs associated with going to college. Some students might use their grant money to buy a new laptop and additional software needed for their program. FYI: Even if you don’t get a grant, you can take advantage of exclusive student deals on productivity software, which includes all the popular apps you need to for college.

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What is a scholarship? One of the benefits of getting a scholarship to help pay for your schooling is that, like a grant, it doesn’t need to be repaid. However, scholarships are typically based on merit. Academic scholarships can be awarded for outstanding grades, athletic scholarships to those who play sports for the school, and specific scholarships based on your field of study.

Because scholarships are merit-based, they can be revoked. For instance, a student whose GPA falls below an established threshold can lose a partial or full academic scholarship. The financial aid is meant to incentivize continued outstanding performance.

While it’s common to receive scholarships directly from the college or university you attend, thousands of scholarships are available from private companies worldwide. Students can apply for and receive scholarships from any number of places to help pay for their school—everything from community-minded athletes to aspiring fashion designers to someone who’s left-handed. Search for scholarship opportunities and apply. The award might not cover all your costs for each semester, but every dollar helps when it comes to paying for college.

“Another option to consider… many employers, including popular coffee shops and fast-food restaurants, offer free tuition or tuition assistance even to part-time employees!”

Where do loans fit in? Student loans are the third piece of the puzzle when sorting out finances for college. Most students will have to take out student loans in some form to help pay for schooling because they use up their Pell Grant allotment or they don’t get a scholarship. Similar to grants, student loans aren’t merit-based. They differ in that they’re not based on your financial situation, and they will need to be paid back eventually. Student loans can add up quickly, depending on the school, so it’s not uncommon for those who get them to spread the repayment plan out over the course of 10, 20, or even 30 years. Students can apply for federal student loans using the FAFSA system or get private loans from banks, credit cards, and other private companies.

Choosing a grant vs. scholarship vs. student loan. Choosing a grant, scholarship, or student loan doesn’t have to be a difficult decision. There is a preferred hierarchy among students regarding what kind of aid they receive. While grants can be difficult to qualify for, they’re the preferred form of financial aid because there’s no risk of losing them and there’s no repayment. Scholarships are up there with grants but earning (and keeping) one can be challenging for some students. If all else fails, student loans will always be there for students who need to finance some or all of their tuition costs. The financial burden of student loans can be great after graduation, but many students have found they’re a necessary evil to completing secondary education.

Another option to consider beyond grants, scholarships, and loans, is getting a part time job at a place that pays your tuition for you! Many employers, including popular coffee shops and fast-food restaurants, offer free tuition or tuition assistance even to part-time employees! So, be sure to check out those options, as well.