Scholarships vs. Student Loans

MoneyFinancial aid is a wonderful resource that you can use to get yourself through school. Whether you absolutely need large loans or choose to apply for small scholarships here and there, it is important to know the major differences between your financial aid options. Here are some key points to keep in mind when comparing financial aid options:


  • Scholarships are usually awarded to students based on merit or an application process.
  • It is typically a fixed amount of money granted for the student to use towards his or her studies. The student does not need to repay this money.
  • Sometimes the funds are given directly to the student to use as he or she deems necessary. Other times – usually when a university provides the scholarship – students can only access funds through their student account. This varies depending on the organization donating the scholarship money.
  • Applications vary greatly for each scholarship. Most require written essays and academic transcripts.
  • An important element to remember about scholarships is that they are not necessarily based on financial need. Many scholarships are available to students based on their academic performance and application, as opposed to income.
  • Some scholarships include perks like membership to the donating organization or post-graduate career assistance.

Student Loans

  • Loans come with more responsibility post-graduation than scholarships because students are borrowing money, not being given a fixed amount.
  • The amount a student can borrow depends on his or her year in school (freshman, sophomore, junior, senior), degree level (undergraduate vs. graduate) and dependency status (independent vs. dependent).
  • The borrowed money must be repaid after graduation. If you have subsidized federal loans, you’re required to pay interest after the grace period which is typically six to 12 months after graduation. For unsubsidized loans, you’ll be required to pay back interest accumulated since you took out the loan.
  • While some loans are administered by the Federal Government, private loans do exist.
  • Students interested in receiving federal student loans must fill out the FAFSA (Free Application for Federal Student Aid).
  • You can borrow money regardless of your income or your parent’s income. However, you will be excluded from these government loans if you’ve been unable to pay them back in the past or have been convicted of drug offenses. Failure to maintain satisfactory academic progress, maintain at least half-time status, or register with Selective Service can also render you ineligible for federal student loans.

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