What are the Differences Between Student Loans, Grants and Scholarships?
Whether you're fresh out of high school or planning to continue your education after years in the working world, figuring out how to pay for college can be a challenge. Average tuition rates for public four-year colleges come to $7,605 a year for in-state students, according to 2010 data from the College Board. Private, non-profit four-year colleges charge an average of $27,293 for one academic year. Understanding the types of financial aid available -- loans, grants and scholarships -- can help you develop a plan of action when preparing to head to college.
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Student Loans
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Student loans are a form of financial aid that you will have to pay back. They can be used to pay for tuition, fees and educational expenses. You must repay the loan and any accrued interest after you graduate following a grace period. The Department of Education is the lender for Stafford student loans. Getting a subsidized Stafford loan requires financial need. Interest is not charged on subsidized loans while you're in school at least half-time or during grace or deferment periods.
Grants
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Unlike loans, grants do not have to be repaid. Post-secondary institutions, the government and many organizations offer grants to students. Unlike many scholarships, this type of financial aid typically requires that you have financial need for the award. One of the most well-known examples is the federal Pell Grant, which covers tuition costs for lower-income students and families. As with all financial aid programs, you must make satisfactory academic progress to maintain eligibility for this grant.
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Scholarships
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Scholarships are similar to grants in that they also provide funds for tuition that don't have to be repaid. Most scholarships, however, focus more on academic merit and personal achievement than financial need. Many scholarships are geared towards students in specific programs, such as teaching or the sciences. Your previous academic record, involvement in extracurricular activities, work experience and volunteer work are some examples of possible criteria for scholarships.
FAFSA
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Many financial aid programs require you to complete the Free Application for Federal Student Aid, or FAFSA. The FAFSA is a federal application, but many other programs use the information on the document. It does require you to disclose your criminal history, but having a record doesn't necessarily disqualify you for aid. Other required information includes your citizenship status, income, assets and academic status. The form can be completed online through the federal Department of Education's website, or you can obtain a hard copy at your college's financial aid office.
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