How is a student loan different from a scholarship?

December 10, 2022
By AdmissionSight

How is a student loan different from a scholarship?

If you are considering going to college, then one of the most crucial questions that you are certainly asking yourself is “how am I going to pay for it?” You may have come across student loans and scholarships when conducting research into the various types of financial aid that are available to assist you with paying for your education.

With an annual growth rate of 6.8%, the expense of a college education has more than doubled since the turn of the 21st century. As a direct consequence of this, a significant number of college students have come to rely on various forms of financial aid in order to keep up with the escalating prices.

On the other hand, the difference between the two can also mean the difference between paying for college now or accruing debt as a student in the future. So, how is a student loan different from a scholarship?

What is a student loan?

To begin with, before we go over how is a student loan different from a scholarship, let us look at what is the definition of a student loan.

To put it another way, a student loan is any loan that is taken out in order to finance the costs of attending college. Student loans are available from a wide variety of financial entities, including the United States Federal Government, some banks, and others. In point of fact, your school may be able to provide you with a student loan.

There are many things you need to think about and take into consideration before you put your name on the dotted line of a loan agreement. The terms and conditions of each student loan program are distinct from one another. Because of this, you need to do extensive research into the many possibilities.

What are the types of student loans?

So, what are the different types of student loans? Both subsidized and unsubsidized student loans are available to college students today.

The best choice for a loan would be one that was subsidized for students. The lending organization will provide you with a subsidized loan amount in accordance with the extent of the financial assistance you require.

The repayment program constitutes the most essential component of this type of loan. When you graduate, only then will you begin to accrue interest on subsidized loans. In addition, you won’t have to start making payments for the loan until you’ve been out of school for at least half a year.

a business woman looking at the camera while her colleagues are at her back

The second kind of loan, which is called an unsubsidized student loan, is not as lenient as the first. The total amount of the loan is decided by the lending institution depending on the cost of attendance. In most cases, this will result in a greater amount that can be borrowed.

Unfortuitously, a loan that is not subsidized will require payments on a monthly basis and will start accruing interest right away. Despite the fact that you can delay making payments until six months after graduation, the interest on the loan will still continue to accrue.

How to apply for a student loan?

Moreso, how do you apply for a student loan? As was just indicated, the majority of student loans in the United States are given out by the federal government. The application process for a federal loan is also very simple.

It is necessary to submit an annual Free Application for Federal Student Aid (FAFSA) in order to be eligible for federal loan offers. The fact that the FAFSA application can be used for more than simply student loans is the program’s standout feature. You only need to submit one application to be considered for student grants, scholarships, and loans. Your college or institution will let you know about any scholarships or grants for which you are eligible.

Moreover, the provision of student loans is not a service that is exclusive to the government. There are a few other financial firms that provide student loans. You should also compare the loans offered by your financial institution as well as those offered by any credit unions you belong to.

When evaluating various loan options, it is important to evaluate the interest rates as well as the repayment schedules. Do not enter into a contract for a loan that will be too challenging to repay. In addition to this, you should try not to borrow any more money than is absolutely required. Get all of the scholarships and grants you are eligible for first, then consider taking out a loan.

What is a scholarship?

Now, let us go over what is a scholarship. To a large extent, grants and scholarships are interchangeable terms for the same thing. In contrast to student loans, these grants do not require you to make any payments, you will not be required to repay any scholarships that you are awarded.

Young woman applying for a scholarship using a laptop.

The application process is one more way in which student loans and scholarships are distinct from one another. Scholarships are given out based on a combination of the applicant’s financial needs and merit, as opposed to student loans, which are granted on the basis of the applicant’s credit score and the cost of attendance.

What are the types of scholarships?

So, what are the types of scholarships? As was briefly noted before, there are hundreds, if not thousands, of different organizations that provide financial aid in the form of scholarships to students who are either planning to attend college or are already enrolled.

Your level of financial hardship will determine the amount of funding allotted to you through a Pell Grant. Your school will keep you informed of any Pell Grants that are awarded to you, just as it does with your student loans.

How to apply for a scholarship?

How do you apply for a scholarship? You will hear time and time again as you get ready for college that you should submit applications for as many scholarships as you can. Take heed of what they have to say. The greater number of scholarships you are awarded, the less money you will need to spend for school either out of pocket or by taking out student loans.

Even better, submitting an application for a scholarship does not cost you anything. As you look into different scholarship opportunities, you will see that each application is different from the others. Most will ask you to submit requirements that will enable them to identify if you stand out among other applicants.

Even while there are certain scholarships that require you to send in additional materials along with your application. This indicates that the selection of the scholarship recipient is based entirely on luck rather than on the merits of the applicants. Although they are the least difficult scholarships to apply for, winning one of them is quite difficult.

You should also submit an application for any scholarships that may be made available by the university that you intend to attend. Because only a limited number of people are eligible to earn these scholarships, there is a greater possibility that you may be selected to get one of them. It is expected that academic merit and participation in extracurricular activities will be considered for awarding these scholarships.

When applying for scholarships, it is imperative that you pay close attention to the dates that are listed. To be considered for a scholarship, your application must be received before the deadline. If you do not submit your application by the specified time, you will not be considered for the scholarship. This guideline is applicable to scholarships offered by both the government and individual universities. There is rarely a second opportunity to submit an application for these!

How is a student loan different from a scholarship?

Now, let’s get down to business and make a side-by-side comparison of how is a student loan different from a scholarship.


The obligation to make monthly payments is potentially the most significant distinction between a student loan and a scholarship.

When we talk about student loan repayment, it is necessary to repay any and all student loans. Though it’s possible that the schedule will be different for each type of loan.

For instance, you won’t have to start making payments on direct federal loans, regardless of whether they are subsidized or unsubsidized, until six months after you either graduate from the school or drop below half-time enrollment. It’s called a grace period, and it buys you some time to look for work before you have to start making payments.

Direct PLUS loans typically have an immediate repayment requirement, with the first payment being due sixty days after the loan was disbursed. On the other hand, the borrower has the option of requesting a deferral of the loan payments until the end of the grace period.

Additionally, immediate payment is required for private loans. It is up to the individual lender to decide whether or not they will permit deferment or forbearance of payments.

View of college students studying in a room with a table.

If you are eligible for a loan forgiveness program, you may not be required to repay any of your existing federal loans at this time. After making the required number of payments under the Public Service Loan Forgiveness Program, for instance, workers in public service roles have the opportunity to have their loans discharged completely. It’s very uncommon for private loans to be forgiven, but it’s not impossible.

On the other hand, when we talk about repayment of a scholarship, the majority of the time, they do not need to be repaid. Once you have been declared the winner of the money, you are free to keep it. Because of this, they are an extremely helpful tool for reducing the total amount of debt that you will have when you graduate.

However, there are a few notable exceptions. For instance, some scholarships are awarded on an annual basis provided that the recipient maintains a certain grade point average and is enrolled in an appropriate number of credits. Should you fail to meet those requirements, you run the risk of having your scholarship revoked. It’s possible that you’ll have to pay back some of the money in certain circumstances. It is determined by the terms of the contract that you sign.

Inappropriate use of the funds, such as spending it on a trip during spring break rather than on tuition, may also result in the awarding organization demanding that the money be returned.

When applying for a scholarship, telling lies, providing false information, or plagiarizing work is, without a doubt, grounds for having your award revoked, in addition to the other consequences.


Scholarships and student loans each play a unique and important part in the overall financial aid package. Therefore, the requirements for qualification and the application process will be different.

When we talk about eligibility, student loans are distributed on the basis of need. Your financial information, as well as that of your family, as well as the amount that you anticipate your education will cost, will be taken into consideration by both the government and private lenders.

There is no requirement to contend with other people for student loans, and the available funds are never depleted. To determine whether you are eligible for federal, state, or private student aid, you need only fill out the Free Application for Federal Student Aid (FAFSA) each year or approach a private lender directly.

View of a mother teaching er kid in the living room.

On the other hand, scholarships are awarded on the basis of financial need, but the vast majority are given out based on merit. This means that you will be competing with other students for the available funds. The competition is won by the best or most appropriate students.

The application process differs from scholarship to scholarship. Transcripts and a list of extracurricular activities outside of school may be requested by some. Some people might be interested in watching videos or reading essays on a subject. In addition, certain scholarships require each of the aforementioned items.

Can scholarships pay off student loans?

Now that we have gone over how is a student loan different from a scholarship, the next possible question is: are students able to use scholarships to pay off student loans?

Sadly, not all scholarships can be applied toward the reduction or elimination of outstanding debt. This is due to the fact that the majority of scholarships are intended to either be awarded exclusively to applicants who are already enrolled in college or to be specifically applied toward the applicant’s already existing tuition costs. However, there are many opportunities that can be used for student loans, so you should not feel disheartened if you are looking for ways to reduce your debt if you are in this position.

If you attend a public college or university, you can expect to pay an average of $37,396 for tuition alone; this does not include living expenses or any other fees. It is difficult for students to keep hold of scholarship funds until the beginning of the loan repayment period, which comes after a grace period of six months. When there is still outstanding tuition and other educational costs to be paid, students simply do not have the financial resources to put money aside from scholarships in order to repay student loans later, after they have graduated.

Although there are some federal grants available that borrowers can use to pay off their student loans, these grants typically come with their own set of requirements and restrictions that must be adhered to in order to be eligible. Financial aid in the form of grants can help you decide which path to take in your professional life.

Graduation cap and coins on a table with a book.

So, the question now is, how is a student loan different from a scholarship? To put it another way, student loans have to be paid back, while scholarships do not have to be. Student loans are available even to those who might not be quite as talented in the academic or athletic arenas as those who are eligible for scholarships, which are frequently granted on the basis of one’s performance in those particular arenas. Thus, it is mandatory to make careful consideration and good preparation.

On the other hand, going to college is not just about preparing financially, you might have the means to cover the cost, but a great deal comes with landing an admission. You should not forget that there are still requirements that you need to focus on in order to be accepted into the college of your dreams. With this regard, AdmissionSight got you covered.

Over the past decade, AdmissionSight has become an industry leader in helping students gain admission to selective institutions throughout the world. One of the best records in the business, we have seen 75% of our students accepted to elite institutions including Stanford, MIT, UChicago, and Caltech. Please feel free to contact us right away to schedule your preliminary consultation.


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