Scholarship vs. Grant vs. Loan: What Is the Difference?

 Posted on June 24,2025 in Uncategorized

Figuring out how to pay for college or graduate school can feel like navigating a maze. With tuition costs climbing higher and higher each year, many students and families find themselves searching for ways to afford an education without going into deep debt.

Scholarships, grants, and loans are three of the most common types of financial aid, but they are not the same. Understanding how these all differ is essential when planning for school expenses. 

If you are looking for scholarships to alleviate your college fees, visit the OVC Scholarship Network to find opportunities that are a good fit for your personal circumstances.

What Is a Scholarship?

A scholarship is a financial award given to a student to help pay for education-related expenses. Scholarships do not need to be repaid. They are typically awarded based on merit, which may include:

• Academic performance

• Athletic ability

• Artistic talent

• Leadership skills

• Community involvement

Some scholarships are also need-based, meaning they are awarded to students with demonstrated financial need.

Scholarships can come from various sources, including schools, nonprofit organizations, private companies, or religious groups. Each scholarship has its own eligibility requirements and application process.

What Is a Grant?

A grant is also free money for education, but unlike scholarships, grants are usually based on financial need rather than merit. Grants are most often awarded by:

• Federal and state governments

• Colleges and universities

• Nonprofit organizations

The most well-known example is the Federal Pell Grant. This is available to undergraduate students who have not yet earned a degree and meet specific income requirements.

To apply for most grants, students must complete the Free Application for Federal Student Aid (FAFSA), which determines eligibility for various forms of aid.

How Is a Loan Different?

A loan is borrowed money that must be repaid with added interest. Loans can come from:

• The federal government, such as Direct Subsidized or Unsubsidized Loans

• Private lenders, such as banks or credit unions

Federal loans often offer more flexible repayment options and lower interest rates than private loans. However, regardless of the type, student loans can become a long-term financial burden if not properly managed.

If you are not careful, student loans can cause problems in the future. Here are a few important things to know:

• You usually start paying back your student loans after you graduate, leave school, or take fewer classes than what is considered part-time.

• Interest adds up over time, so you end up paying back more than you borrowed.

• Missing payments can hurt your credit score and may lead to serious legal issues.

Which Option Is Best for Students?

When comparing these three options, scholarships and grants are almost always preferable because they do not require repayment. Loans should generally be used only after all possible scholarships and grants have been exhausted.

To make the most of financial aid opportunities, students should:

• Research and apply for scholarships early and often

• Complete the FAFSA as soon as possible each year

• Consider financial aid packages when choosing a school

• Be cautious about how much student loan debt they are willing to take on

Contact the OVC Scholarship Network For Scholarship Questions

Navigating the differences between loans, grants, and scholarships can be overwhelming, but taking the time to do your own research can be helpful. It is crucial to be prepared and make informed decisions that fit your specific needs. To learn more about scholarships and find online opportunities, visit the OVC Scholarship Network.