The Difference Between Grants, Scholarships, Student Loans, and Their Benefits for College

As the cost of higher education continues to rise, one of the most important parts of college planning has just become an even bigger deal than before. Before looking at all of your options for where you want to go, you must learn how college financial aid actually works. We know that receiving a college acceptance letter is very exciting, but that college may not be the right one; depending on the financial aid circumstances, you could find yourself in.

Good news for you, Send Your Kids to College is always here to assist you when you need it. By having us teach you about the basics of college planning, students can make smarter choices that protect both their educational and financial futures. In this blog, we will take a look at the differences between grants, scholarships, student loans, and other forms of college financial aid, along with their benefits.

Understanding College Financial Aid

Too many families make financial decisions without fully understanding the difference between grants, scholarships, student loans, work-study programs, and other forms of financial aid. This can result in an uncontrollable amount of debt, missed opportunities to get free money from a scholarship, or accepting financial aid packages that aren't in anyone’s best interest long-term.

Financial aid is any funding that helps students pay for college expenses. Financial aid packages will include a combination of grants, scholarships, and student loans. The key is understanding that not all types of financial aid do the same thing. Some forms of aid are essentially free money (scholarships), all from just signing up, while others must be repaid with interest. Knowing the difference can save students thousands of dollars over the course of their college education.

College Grants

Grants are one of the most valuable forms of financial aid. They are well known for having a great policy of not needing to be repaid. Certain states, colleges, and nonprofit organizations also offer grant programs with their own eligibility requirements. There are also several different types of grants: a federal Pell grant, a Federal Supplemental Educational Opportunity Grant (FSEOG), or a Teacher Education Assistance for College and Higher Education (TEACH) Grant. 

To learn more, go to the official student aid government website here! We’ve also written a blog about a new change to Pell grants that will affect how you receive scholarships! Very important, so give it a read!

Students need to remember that eligibility for grants begins with completing the Free Application for Federal Student Aid (FAFSA). Send Your Kids to College has a high level of experience with FAFSA on our website, which has helped so many students over the years. Families who believe they won't be able to qualify for financial aid should submit a FAFSA form, since many colleges and states also use it when awarding institutional aid and scholarships. And it’s FREE!

College Scholarships

Scholarships are one of the biggest forms of financial aid, and like grants, are common for not needing to be repaid for anything. However, unlike grants, scholarships are awarded based on academic achievement, merit, leadership, community involvement, athletic activities, or even a student's intended major.

A huge misconception about scholarships is that they are only available to students with the best grades. In reality, thousands of scholarship opportunities exist for any kind of student. You can have diverse backgrounds, different interests, specific career goals, and more. Applying for scholarships does take time and patience, but every dollar earned through a scholarship is a dollar that doesn't have to be borrowed later on; it’s all rightfully earned.

Send Your Kids to College has all kinds of scholarship opportunities! We have local WNY scholarship resources as well as resources that extend out to national scholarships. Read more into these when you can!

Student Loans

Student loans should be viewed differently from grants and scholarships. Loans are a form of borrowed money that must eventually be repaid, with interest if required. Federal student loans offer more borrower protections and flexible repayment options than private student loans, making them the preferred borrowing option if loans become necessary. 

Now, before you accept any student loan, both students and parents should ask the following questions: How much do I plan to borrow? What will my monthly payments be after graduation? What is the interest rate that I will have to pay? Can I afford repayment based on my expected career goals? Borrowing only what is truly needed, not just the maximum amount that’s offered, can make a significant difference after your graduation.

If you want to learn more, we have several parts of our website dedicated to student loan resources. You can check what the federal student loan rate is, and you can also read up on how to avoid a student loan crisis.

Education Into College Planning Can Prevent Costly Mistakes

The transition into college is exciting! The stress of it all is that it is going to come with a lot of important financial responsibilities. Students and parents who understand financial aid before enrolling are better equipped to compare different options and make the best choice of their opportunities.

For parents, having the College Money Talk gives you any amount of preparation that can prevent years of financial stress after graduation. This part of our website is something we always promote to parents. The unique part of it is that it gives examples of what parents and their kids have said to us over the years to give you an idea of how you can best prepare. It’s one of our most helpful resources!

Your college education begins with understanding the financial decisions that make it all possible. By taking the time to learn about college financial aid NOW, students and parents can avoid any costly mistakes that will negatively affect the future of their lives. If you want to learn more and have any questions, give us a call or reach out to us through our contact form! We look forward to helping you plan!

College Financial Aid FAQ

What questions should I ask before accepting any college financial aid package?

Before accepting any college financial aid package, take time to understand exactly what you're being offered. Ask yourself if a grant, scholarship, or student loan is best. Look at how much will need to be borrowed, what your monthly loan payments will look like after graduation, the interest rates on any loans, and whether those payments will affect your career goals. Ask as many questions as possible!