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

Jon O'Donnell Updated on June 10, 2021

If you’re applying for college for the first time, you probably have tons of questions. And that’s before you even start thinking about financial aid …

But you have to figure out financial aid eventually, right? If you’ve reached that point on your college to-do list, we’re here for you.

By the time you’re done reading this article, you’ll be so well-informed you’ll be answering your friends’ questions about their financial aid plans. Or, at the very least, you should feel a whole lot better about yours.

Let’s dig in.

What is a grant?

The definition of grant, according to our friends over at Merriam-Webster, is to “bestow or transfer formally.” So what does that mean in terms of your college plans? It means that if you get a grant, someone is bestowing money upon you. It’s basically a gift of money that you don’t have to pay back.

Grants may be given out by the federal government, state governments, colleges and universities, or any private organization that has money to give to college students.

Most grants are need-based, meaning you'll usually have to provide financial information about yourself and your parents or guardians in order to qualify. There’s good news and bad news about that.

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 Pell Grant, as well as some state and school grants.

The bad news is the FAFSA can be a bear to fill out. (Fortunately for you, we created a cheat sheet in the form of a handy, free online guide.)

However, the FAFSA is worth your time, no matter how long it takes to fill out. In addition to grants, FAFSA also qualifies you for certain scholarships and federal subsidized and unsubsidized loansIf you skip the FAFSA, you may be leaving money for college on the table. Why would you want to do that?

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, scholarships may be offered by schools, individuals, businesses, families, community organizations, or any number of other parties.

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 merit, participation or excellence in certain sports, geographic location, ethnicity, field of study, extracurricular activities, interests, lifestyle choices … you name it, it probably exists as a scholarship criteria. 

Believe it or not, there are even scholarships for random acts of kindness and for writing about fire sprinkler safety.  

Where can you find scholarships? Filling out the FAFSA may automatically qualify you for some scholarships that are offered by 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 local scholarships.

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!)

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What are 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.

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.

So after you’ve collected all the free money you can get in the form of grants and scholarships, federal loans are the next piece of your student loan puzzle.

But, much like our favorite rock stars at the end of a concert, federal loans often leave you wanting more. That is, they may not be enough to cover your entire college education. If that’s the case, you might want to look into private student loans. How do you pick one of those? In a nutshell, you want to find a reputable lender that offers you a great interest rate, with easy repayment terms. That should be easy enough to sort out, right?

We’re kidding. Finding the right lender for your student loan can be a challenge, especially if you’re new to the process.

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 how college funding works, don’t you feel better about your future? You should. And remember, we’re always here to answer all of your college funding questions.

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

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