Scholarships, Grants & Loans
Plain English
Scholarships and grants generally don't need to be repaid; loans do, with interest. Most families use some combination of savings, scholarships/grants, and loans rather than relying on just one source.
What is it?
A scholarship is typically merit- or achievement-based financial aid that doesn't require repayment. A grant is usually need-based aid that also doesn't require repayment. A student loan is borrowed money that must be repaid with interest, whether federal or private.
Why does it matter?
Understanding which category a funding source falls into changes how it should factor into a family's overall college-funding plan — a loan is a future financial obligation, not free money, even though the cash arrives similarly to a grant at the time.
How does it work?
Federal financial aid eligibility (including for grants and federal loans) is typically determined through a standardized application process, weighing household income, assets, and other factors set by current federal formulas.
Risks and limitations
Federal versus private student loans can differ significantly in interest rates, repayment flexibility, and borrower protections. Financial-aid formulas and eligibility rules change over time and depend on current law — verify current requirements rather than relying on a prior year's rules.
Questions to ask a professional
Is this funding source a scholarship/grant (no repayment) or a loan (repayment with interest)? If a loan, is it federal or private, and what are its specific terms? Have all scholarship and grant options been explored before relying on loans?