How Is A Student Loan Different From Scholarship?

Student loans and scholarships are forms of financial aid that are provided to students based on several factors.

The big difference between student loans and scholarships is the fact that you must pay back the money you get from student loans.

How is a student loan different from a scholarship has been a big question on the mind of a high school student seeking financial aid to continue his/her college education.

If you are looking for options to raise finance for your college or university education, you may want to consider taking a student loan or applying for a scholarship.

This article will guide you in making the right decisions on how best to raise finance for your education through either taking a student loan or taking a scholarship.


Exactly what it sounds like, someone lends you money to pay for college and you agree to pay it back over a period of several years.

There are two types of loans for student borrowers:

  • Federal student loans
  • Private student loans.

Federal student loans

Federal student loans are disbursed by the United States Department of Education.

Student borrowers qualify for either subsidized or unsubsidized loans. Federal student loans are lower, with fixed interest rates.

Federal student loans have both annual and aggregate limits.

Private student loans

Private student loans are given out by banks, credit unions, and online lenders.

Interest rates on private student loans tend to be higher, and many don’t offer students the same protections as federal student loans, such as grace periods, income-based repayment options,  and postponement options.



To be eligible for the federal subsidized student loan, make sure:
  • You’re a U.S. citizen.
  • You demonstrate financial need.
  • You’ve applied or enrolled as an undergraduate student. Grad students are not eligible for subsidized loans.
  • Subsidized loans are available for both part-time and full-time students, though you must be enrolled at least half-time.
To be eligible for the federal unsubsidized student loans
  • You’re a U.S. citizen.
  • You’ve applied or enrolled as an undergraduate student, graduate student, or professional student.
  • Unsubsidized loans are available for both part-time and full-time students, though you must be enrolled at least half-time.
To be eligible for the private student loans:

Most private student loan providers determine loan eligibility based on a defined set of characteristics that paint a picture of your creditworthiness. Your citizenship, credit history, and annual income of you and/or your cosigner are all taken into account before you’re approved for a student loan.



To apply for federal student loans, all you have to do is fill out and send in your FAFSA form.

To apply for private student loans, you can do so directly on the lender’s website.



Pros of student loans.

  • Student loans provide large amounts of money.
  • Student loans are easier to get.
  • Student loans can be diverted into other expenses and meet other financial needs.
  • Students can build credibility when they pay their student loans on time.

Cons of student loans

  • Student loans need to be repaid as and when required.
  • Interest rates are high which can make repayment very difficult.
  • To cover the cost of the student loans, students sometimes take additional jobs.
  • There is a heavy penalty for not paying back the loan as and when required.


The scholarship is another form of free money you get based on financial needs or other factors.

Scholarship programs may be offered by schools, individuals, businesses, families, community organizations, or any number of other parties.



Some scholarships may be based on academic achievement and require a certain GPA, others may be based on athletic ability and excellence in certain sports.

There are several scholarships opportunities available for your geographic location, ethnicity, the field of study, extracurricular activities, interests, or lifestyle choices.



When you fill out the FAFSA, may automatically be qualified for some scholarships offered by the financial aid office of the school you plan to attend.

Another best way to find scholarship opportunities is to search online for the one that you are eligible for and you meet the eligibility requirements, you can then go ahead and apply for such scholarships following the application processes and providing the right application requirements.



Pros of scholarships

  • Scholarships don’t need to be repaid.
  • Scholarships provide access to better education for a larger number of students.
  • There are always several scholarship opportunities you can apply for.

 Cons of scholarships.

  • Students don’t get qualified for scholarships in most cases because of the criteria involved.
  • There are always several applicants for scholarships and only a few are lucky to be awarded.
  • Competition is high for most scholarships because of the large amount involved.
  • There are often conditions required to be qualified for and maintain scholarship awards.


Scholarship and student loans are aimed at providing financial support for your education; however, they do not come with the same eligibility requirements.

Let’s have a look at “how is student loan different from scholarship” by comparing the two.

Student loans

Student loans are loans; this means that you borrow a certain amount of money from a lender to finance your education. While a scholarship is an award for academic excellence or other achievements, meaning your scholarship provider pays for your education without needing you to pay them back.

A student loan is a type of borrowed money you get as a student to pay for your education.

A student loan can be used to cover tuition, school supplies like books, lodging fees, and food expenses while attending school or university.

Student loans are meant to be payback according to your student loan policy and contract you receive from your loan provider.

You can get a student loan from the federal government or a private lender, and these entities coordinate with your school or university’s financial department to pay off your educational fees.

Getting a student loan usually depends on financial needs and specific eligibility criteria. Demonstrating financial need, that your income may be insufficient to fund your education, may get you qualified for a student loan with the federal student loans.

Private student loans require specific eligibility criteria which may include a good credit history to ensure you can fulfill your student loan repayment duties.



A scholarship is an award you earn from a scholarship provider when you meet their specific standards and eligibility criteria.

Scholarships are granted to students who display certain and satisfying attributes, which include; academic excellence, athletic prowess, and leadership potential.

The most popular type of scholarship you can get as a student is an academic scholarship. This type of scholarship requires academic excellence to qualify. Your academic performance will be assessed before granting financial aid to fund your education.

There are other scholarship types like athletic scholarships, community service scholarships, employer scholarships, and need-based scholarships.

Unlike student loans, you get your scholarship money from your scholarship provider and you don’t have to pay them back at any time ever.



A student loan is paid back while a scholarship is something you earn. Both student loans and scholarships are financial aid programs you can apply for as a student to fund your educational needs, from tuition fees to school supplies. You must understand the difference between the two to understand which program is best for your situation to pay for your education.

I hope this guide is able to answer your questions on “how is a student loan different from a scholarship”

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