The Difference Between Scholarships and Student Loans

For vast numbers of students, the reality of colleges is that they are not only about studying. Many have to think about the finances and how to cover ever-increasing tuition fees, buy books, pay for dorms and all the other things they need.

Luckily, the system has provided financial vehicles to help with this, the most popular ones being scholarships and student loans.

The common conundrum is: which to take and what is better for you?

There is no simple answer to this. Rather, it comes down to your specific situation and priorities.

Let’s look at what each is, and the pros and cons that accompany them.

Scholarships: Easier to Handle, Harder to Find and Get

Scholarships are financial help provided by either a government institution or a private provider. The main distinction is that scholarships need not be repaid.

This ‘free money’, however, has a few catches.

First off, they are typically merit-based, i.e. awarded to extraordinary students based on their GPA, and are dependent on these students keeping their grades high. So count on a lot of stiff competition vying for the same award.

Secondly, even when you receive a scholarship, you will typically not ‘see’ the money – the means are usually directly distributed to cover your tuition fees and accompanying expenses, i.e. to the third party.

Lastly, finding and applying for great scholarships is often a gargantuan task if done on one’s own. There are many scholarships out there, but a great portion won’t fit your interests and/or needs. Some of the unverified scholarships can even turn out to be nothing more than spam.

Loans: Easier to Get, Harder to Handle

Loans, on the other hand, are commonly more accessible to students, since they are not dependent on grades, but rather the applicant’s financial status. If you prove you need financial help, your loan is likely to be approved.

The first step to getting a loan is usually filling out the Free Application for Federal Student Aid (FAFSA), although there are private loan providers as well.

Unlike scholarships, loans are a little more flexible in terms of distribution and can be disbursed to your private account.

Where scholarships come with no financial strings attached, loans are quite the opposite: you are expected to repay the loan, fully or partially, depending on the contract you sign with a loan provider. The main concern, of course, is accruing debt over the years.

On the flip side, student loans are a good way to jumpstart your credit score, and often have lower interest rates than other, commercial loans.

Use Strengths and Weaknesses to Determine What’s Better for You

Both scholarships and loans have their strengths and weaknesses.

If you can maintain a strong GPA, and don’t wish to repay anything, scholarships are an obvious choice.

However, if, for whatever reason, you can’t commit to academic excellence, but still need financial help, loans might be the way.

Indeed, some scholarships are not strictly merit-based, though: they can also be launched to support specific groups, and address students’ needs. These are usually known as grants. Grants are also commonly awarded by federal units and governments.

It is important to note that any mishandling of either a loan or a scholarship could affect your credit score negatively.

Whenever Possible, Scholarships Are the Preferred Choice

Typically, people prefer scholarships to loans – it’s better if you don’t have to repay anything. And winning a scholarship does feel great! Just imagine: out of dozens, sometimes hundreds of students, you are the one to receive a prestigious award!

However, since it’s often tasking to search for, keep applying and being rejected, a great number of students simply opt for loans instead.

At ScholarshipOwl and ScholarshipApp, we are devoted to streamlining and simplifying the application process, and providing as many diverse scholarships as we can.

You will find the best of both worlds: easier applying and browsing through scholarships, higher chances of winning, and different requirements to apply for and win them.

Check out our website and blog for more information, and start applying today!