What’s the Difference Between Grants, Scholarships, and Loans?

By Jon O'Donnell Updated on January 10, 2022

Grants, scholarships, and student loans are all types of financial assistance meant to help students meet the cost of higher education.

While grants and scholarships are types of gift aid, meaning they don't have to be paid back, borrowers typically have to pay back student loans in full, plus interest. 

Here's everything you need to know: 

Key differences between grants, scholarships & loans

    • Grants are need-based financial aid that don't need to be repaid.
    • Scholarships are merit-based financial aid that don't need to be repaid.
    • Student loans must be repaid, with interest, within a given loan term.

The differences between grants, scholarships & loans

What is a grant?

Grants, like scholarships, are a type of financial aid. Grant money is primarily given by the federal government, state governments, colleges and universities, nonprofit organizations, or any private organization that has money to give to college students.

Are you eligible for grants?

Unlike scholarships, most grant programs are need-based, not merit-based. In order to qualify for grants, you'll usually have to provide financial information about yourself and your parents or guardians. 

Typically, your eligibility for grants is based on your college's cost of attendance, as well as your expected family contribution (EFC). Some state grants and university grants also have an income cutoff. So, if your family makes too much money, you won't qualify.

Applying for grants

The good news is you have (nearly) one-stop shopping in applying for grants. When you submit a FAFSA (the Free Application for Federal Student Aid) you’re automatically considered for federal grants, such as the Federal Pell Grant, as well as some state and school grants.

New Call-to-action

What is a scholarship?

Like grants, scholarships are another form of free money. In fact, sometimes it can be hard to discern the difference between a grant and a scholarship other than the name. However, in a general sense, scholarships are more likely to be based on factors other than financial need.

The biggest difference between grants and scholarships is where they come from. While grants may come from government entities, scholarships rarely do. Rather, scholarship programs may be offered by schools, individuals, businesses, families, community organizations, or any number of other parties.

Are you eligible for scholarships?

Scholarships usually reflect the core values or interests of the donor — that’s why some scholarships are extremely specialized. For example, scholarships may be based on academic achievement and require a certain GPA, others may be based on athletic ability and excellence in certain sports. You can find scholarships for your geographic location, ethnicity, field of study, extracurricular activities, interests, lifestyle choices … you name it, it's probably a scholarship criteria somewhere. 

Believe it or not, there are even scholarships for performing random acts of kindness and writing about fire sprinkler safetySo, there's definitely a scholarship opportunity out there for you — all you have to do is find it.

Finding and applying for scholarships?

Where can you find scholarships? Filling out the FAFSA may automatically qualify you for some scholarships offered by the financial aid office of the school you plan to attend.

It’s also a good idea to pop into your high school guidance office a few times a month to check on scholarships, especially ones offered by local organizations. Other options are to check with organizations or clubs you're a member of, your parents' or guardian's workplace, and local charitable organizations. 

You can also search online with our Nitro Scholarship Search Engine and customize your search based on your field of study, your state, and other criteria. Be sure to stay up to date with the database and sign up for personalized updates so we can let you know about new scholarships that may apply to you. (We’re always updating our engine with new scholarships for you!)

New Call-to-action

What are student loans?

Student loans are exactly what they sound like. Someone lends you money to pay for college and you agree to pay it back over a period of several years.

However, it’s important to know that not all loans are created equal. Not by a long shot.

There are two types of school loans for student borrowers: federal student loans and private student loans.

Federal student loans are disbursed by the U.S. Department of Education. Student borrowers qualify for either subsidized or unsubsidized loans. Federal student loans are the rock stars of the student loan world for one simple reason: lower, fixed interest rates. However, federal student loans have both annual and aggregate limits. 

So, even with scholarships and grants, federal student loans may not be enough to cover your entire college education. If that's the case, private student loans may be your next best option.

Private student loans are given out by banks, credit unions, and online lenders. Interest rates on private student loans tend to be higher, and many don't offer students the same protections as federal student loans, such as grace periods, income-based repayment options,  and postponement options.

Are you eligible for student loans?

Here again, FAFSA plays an important role. When you apply for FAFSA, you’ll learn if you qualify for federal student loans. These are the rock stars of the student loan world for one simple reason: lower interest rates.

Eligibility requirements for federal subsidized student loans
  • You're a U.S. citizen.
  • You demonstrate financial need.
  • You've applied or enrolled as an undergraduate student. Grad students are not eligible for subsidized loans. 
  • Subsidized loans are available for both part-time and full-time students, thought you must be enrolled at least half-time.
Eligibility requirements for federal unsubsidized student loans
  • You're a U.S. citizen.
  • You've applied or enrolled as an undergraduate student, graduate student, or professional student. 
  • Unsubsidized loans are available for both part-time and full-time students, thought you must be enrolled at least half-time.
Eligibility requirements for private student loans

Most private student loan providers determine loan eligibility based on a defined set of characteristics that paint a picture of your credit worthiness. Each lender is different, but typically, your citizenship, credit history, and annual income of you and/or your cosigner are all taken into account before you're approved for a student loan. 

Applying for student loans

Thankfully, the application process for both federal and private student loans is relatively simple.

To apply for federal student loans, all you have to do is fill out and send in your FAFSA form. You can complete the FAFSA online here.

If you're also applying for private student loans, you can do so directly on the lender's website. Be sure to apply after you've applied and accepted all the grants, scholarships, and federal student loans you can before applying for private student loans.

Still need help after grants, scholarships, and federal loans?

Again, we’re here to help. We’ve done exhaustive research on student loan providers to come up with the best deals we can find from lenders that we trust.

Check out our picks for the best lenders for private student loans.

Now that you know a little more about the difference between scholarships, grants, and loans, don’t you feel more ready to tackle your future? You should. And remember, we’re always here to answer all of your college funding questions.

Additional Nitro Recommended Student Loan Lenders

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  
1.62% - 12.85%1 Variable & Fixed 10 - 15 years

Undergrad Students Learn More

View Disclosure

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  
1.62% - 14.52%1 Variable & Fixed 5 - 15 years

4

Undergrad & Graduate Students Learn More

View Disclosure

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  
1.30% - 11.99%1 Variable & Fixed 5 - 15 years

Undergrad & Graduate Student & Parent Learn More

View Disclosure

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  
6.99% - 12.99%1 Variable & Fixed 10 years

Undergraduate No-Cosigner Student Loan Learn More

View Disclosure

Lender Rates (APR) Loan Types Terms Eligible Degrees Eligible Loans  
1.69% - 11.97%1 Variable & Fixed 5, 10 & 15 years

Undergrad & Graduate Student & Parent Learn More

View Disclosure

Published in: Scholarships, Grants

About the Author
Jon O'Donnell

Jon is a writer and marketer for Nitro who is passionate about bringing transparency to the student loan process along with providing families with the information needed to make smart financial decisions. He also just recently refinanced his student loans allowing him to pay them off 5 years faster all while saving an additional $152/month. As he continues to pay them off himself, he strives to help others do the same. Jon also has a long history of connecting people with educational opportunities to help them improve their careers and their overall personal finances. In his free time you can find him reading travel blogs and researching destinations around the world in search of his next adventure. Read more by Jon O'Donnell