How Is A Student Loan Different From A Scholarship?

Graduating from college is an expensive business. From semester fees to dorm costs, the expenses can drive you crazy. Luckily, student financial aid has got you covered. 

Scholarships and student loans can help students survive the financial demands of college. However, they have different functions. For instance, a student loan aims to cover a student’s educational costs, while a scholarship is offered to help students pay their tuition fees. 

When choosing between a student loan and a scholarship, you must consider various factors. That’s because scholarships are only awarded to specific students who have exceptional academic performance. Additionally, your college must be eligible for federal student aid if you want student loan financial aid.

To help you make a clearer decision, let’s explore some differences between a scholarship and a student loan. 

What Is a Student Loan?

Student loans are loans offered to college students by educational institutions or banks. These loans can be used to pay for multiple expenses, including living expenses, tuition costs and so forth.

However, like any other loan, a student loan can have several requirements attached. Thus, you should do proper research before applying for one. That’s because student loans can cause a lot of trouble for students who don’t know much about financial aid. 

For instance, you need to start repaying your student loan as soon as you start earning a salary. When beginning your career, these hefty payments can burden you. 

What Is a Scholarship?

Scholarships are rewards offered to students with good grades. This kind of financial aid can be super helpful in funding a student’s college education as they do not need to be repaid.

Instead, you could receive a scholarship for being a great athlete, securing a sterling GPA, or having other unique abilities or talents. 

You should do some proper research about the types of scholarships and your possible eligibility when applying for them. This can help you receive maximum benefits for your educational cost.  

How Is a Scholarship Different From a Student Loan?

Scholarships and student loans are different in many ways. However, many students confuse these monetary forms of assistance and think they are the same thing. As a result, they struggle to choose between the two available options.

If you’re wondering how a student loan is different from a scholarship, read further:


As mentioned earlier, scholarships are awarded based on a student’s merit, attendance record, and financial need. Thus, you do not need to repay this money after you have graduated. 

In contrast, student loans are a type of financial aid that the student must repay with interest after graduating from college. 


You can receive a scholarship from multiple sources. These include:

  • Universities
  • Colleges
  • Private companies
  • Social organizations
  • Religious organizations 
  • Non-profit organizations
  • Professional bodies

Student loans are usually offered by private lenders (banks) and the federal government. 


To receive a scholarship, you must meet various merit-based criteria. These eligibility requirements automatically narrow down the number of college students who may apply for a scholarship. 

However, any student can apply for a student loan. If they meet a few standard requirements, they can easily qualify to receive the loan to fund their education.  


Scholarships are designed to help you pay your tuition fee. Some scholarships may also offer additional perks like your accommodation. 

Student loans, on the other hand, are offered to help students afford their education.  

What are the Different Types of Student Financial Aid Loans?

There are different types of student loans available. If you do your research properly, you can usually get a good deal. 

Let’s take a look at the two main types of student loans available:

Federal Student Loans

Federal loans are backed by the government and can help you fund your education. They have multiple advantages as they have flexible options for repayment. The best part is that the government may decide to “forgive” (in other words write off) your loan if you take a public service job after graduating. 

Federal loans are accessible at all private universities, trade schools, and colleges. They are offered at a minimum fixed interest rate compared to private loans. Additionally, they can be offered to students or their parents. 

Federal student loans are further categorized into four types:

  • Direct Subsidized Loans

The subsidized loan is offered to deserving undergraduate students who desperately require financial assistance to pay for their education. 

  • Direct Unsubsidized Loans

These loans are offered to professional, graduate, and undergraduate students who meet scholarship requirements. Financial need is not an eligibility criterion for this type of assistance. 

  • Direct PLUS Loans

These student loans are offered to graduate or professional students. Parents who are funding the education of their children can also avail themselves of this type of loan. 

You can get this loan without having to demonstrate financial need. However, the loan providers can check your credit history before lending you the money. If the graduate or professional student has a negative credit history, the providers may demand additional eligibility requirements.  

  • Direct Consolidation Loan

This loan is the consolidation of all federal loans for which you are eligible under one loan service provider.

Private Student Loans

Private loans are offered by banks or any other private financial institution. This type of loan is private as it is not connected to the federal government or other providers.

For instance, credit unions, banks, and institutions that do not offer federal student loans can provide loans. Students can apply for this type of loan to clear their debts or pay their tuition for graduate school. Additionally, private loans can be used for general purposes.

However, these loans are only offered to students with a high income and impressive credit scores. 

Private loans are also offered at a fixed interest rate. Once you acquire the loan, you must repay the money in fixed monthly payments. Unlike federal student loans, you cannot expect any student loan forgiveness provisions when taking out private loans. The positive side of private loans is that you do not have to pay these loans until you graduate.  

Other Types of Student Loans

Student loans can also be available in the following forms:

Degree Specific Loans

This loan is available for undergraduates and graduates for educational purposes. These loans can often include additional benefits for students pursuing dental, medical, business law degrees and other programs. 

State-Specific Loan Programs

The eligibility requirements for these private student loans vary by state and are offered by special state agencies.

Income Share Agreements

The repayment plan for these financial need loans differs from standard private student loans. According to income-driven repayment plans, you must pay a specified percentage of your income for a defined period. 

What are the Different Types of Scholarships?

Students can apply for different types of scholarships based on merit and skills. Before you apply for scholarship money, make sure you carefully evaluate all the available opportunities. Here are some common types of scholarships:

Merit-based Scholarships

These scholarships are based on your academic grades, GPA, ACT or SAT scores, and other achievements. In addition, institutions can also award students if they show consistent excellence in extracurricular activities or participate in impactful services in the community. 

Need-based Scholarships

These scholarships are offered to students with financial needs as demonstrated through a Free Application for Federal Student Aid (FAFSA) application. Usually, schools can determine the financial aid required to cover the student’s tuition fees by evaluating the aid they received in the previous year. They can also check if the students have any unpaid loans.

Athletic Scholarships 

Students who qualify as college or university athletes can receive athletic scholarships. These scholarships can also offer extra benefits like a free room or a stipend for supplies and books. 

Diversity Scholarships

Some universities provide scholarships designed for underrepresented student groups. These can include women and minorities such as African Americans, Asian Americans or Pacific Islanders, Native Americans, and Latinos or Hispanics. 

How Do I Apply for a Student Loan?

Student loans can undoubtedly help you survive college. However, you need to meet certain requirements to acquire the loan. 

For instance, you must enroll in a program which is eligible for funding through a student loan. Additionally, the university or institute you plan to attend should be recognized by the Department of Education. 

However, if your school does not qualify for federal student loans, you can still receive loans from private financial institutions and banks. Usually, these loans have less strict requirements than federal grants. But they can demand higher fees and interest rates. 

To apply for a student loan, you can visit online websites, a private campus location, or the lender’s financial aid office. Then, you must fill out an application form and provide the following items:

  • Social Security number
  • Permanent residency status or U.S. citizenship
  • Details about previously colleges attended since graduating from high school
  • Passport or ID card
  • Latest tax return

Before signing any loan agreement, ensure you understand all the conditions and terms. This way, you can avoid any future inconvenience. 

How Do I Apply for a Scholarship?

Scholarship applications can be a lengthy process. However, they are always worth the effort. You can visit your school’s financial aid office to inquire about available scholarships.

Additionally, you should surf the web and read about different local and international scholarships offered by several institutes. 

You can apply for multiple scholarships at any time. For this purpose, you should research and evaluate the worth of each scholarship. Moreover, make sure to read the scholarship provider requirements carefully before submitting your application. 

Tips to Apply for a Scholarship

To apply for a desirable scholarship, you should follow these tips:

Check Eligibility

Read the scholarship requirements thoroughly. Before applying, ensure that you meet all the criteria required by the sponsor. 

Be Thorough

Your scholarship application should include updated and accurate information. If you are confused about your application, you can contact the scholarship provider’s help desk or consult a professional. This will help you from submitting an incomplete application.

Be Specific

Your scholarship application should indicate why you are a suitable candidate. You must also explain to the sponsors why the award is important to you. You need to share your vision and goals and how you believe the scholarship will help you achieve them. 

Apply for Multiple Scholarships

To ensure you win a scholarship, you should apply for multiple awards. If you fail to receive an award, you can reapply for the scholarship in the second application round. 

Don’t Quit

Institutes usually offer limited awards. Therefore, your chances of getting selected for a scholarship can be low as the competition is tough. However, don’t give up if you don’t receive a scholarship. Instead, maintain a positive attitude and keep applying for others. Additionally, make sure you apply for a scholarship early enough to make yourself more visible.

Remember the Deadline!

Many scholarships have strict deadlines. If you forget about a deadline, you can no longer apply for the award. Thus, when you discover a suitable scholarship, always bear the deadline in mind.

Final Thoughts

Scholarships and student loans are different from each other in many respects. Student loans are financial debts that help you cover your educational expenses, while scholarships can pay the tuition fee. 

Additionally, both financial forms of financial aid are offered by various institutions and have different application methods. 

When choosing between them, you should weigh your options. You can also consult a financial aid advisor to pick the best option.

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