If you do not fully understand the purpose of grants and how they work, it would be helpful to clear up a few misconceptions. Grants are not simply free money, but by their nature, they seldom have to be repaid. Grants are not loans, benefits or entitlements. Grants can be awarded by federal, state or local governments, private organizations or individuals. Each federal grant is authorized by a law of the United States and awarded to provide financial assistance from a federal agency so the recipient can support or fulfill a public purpose.
The Nature of Grants
With every grant awarded comes the burden of accountability. Grant money is awarded to a recipient for a specific purpose, whether it is for education, research, an artistic endeavor, home improvement or any of dozens of other beneficial endeavors. In return, the grant-maker always requires some form of assurance that the grant funds are used properly. If so, then grants do not have to be repaid.
Sources of Grants
The U.S. government is one of the largest providers of grants, providing more than 1,000 grant programs annually in a variety of categories that are issued through 26 different federal grant-making agencies. The Department of Health and Human Services manages the Grants.gov website which serves as a centralized information center for all U.S. government grants. Like government grants, private grants do not have to be repaid. Private foundations providing grants can be located through The Foundation Center (foundationcenter.org), Community of Science (cos.com) or through the Sponsored Project Information Center (SPIN), available through most public libraries.
There are situations in which you may have to pay back some or all of the grant you received. These problems are usually caused by one of two reasons. Either you were given more money than you were eligible to receive, commonly called an "over-award," which happens most often when a calculation error occurs, or you made an early withdrawal from the program or did not fulfill the obligations of the grant for which the funds were awarded to you.
Loan Repayment Grants
One area of confusion for students who have graduated or left college after financing their education with a student loan, is the use of a grant to repay all or a portion of that student loan. Although "student loan grants" are awarded for the purpose of retiring the student loan, the grant does not need to be repaid.