Basically, student loans and scholarships are both ways a student can get funds to help pay for college or tuition fees. But the big difference is that with student loans, you will have to give the money back to the individual who lent you the money, while a scholarship is like a free ride you get for being awesome at school or some other awesome thing you did.
So when you’re trying to figure out how to pay for college or tuition fees, you could check out loan and scholarship programs. Read on to know more about the difference between a student loan and a scholarship, and which one is better.
Student/Education Loan
Student loans come in two forms: federal and private student loans.
Federal student loans, the very common type, come from the Education Department. They have some massive protections, like the ability to switch to a policy that considers your salary and how many people are in your family.
You can also get your hands on private student loans. They may have a cheaper interest rate now and then, but they are not as strict and foolproof as official loans. Plus, you cannot use a federal loan to pay back private student loans. However, private loans are a good choice for anyone who needs additional funds for school after losing out on federal loans.
Scholarship Programs
Scholarships are like free money given out. While some of them have to do with how academically excellent a student is, others have to do with the financial status of a student.
Every scholarship has its way of selecting qualified candidates but you should begin by doing the FAFSA. The FAFSA helps you to apply for most scholarships from the government, state, or school. Some scholarships might need you to give them other things too, like an essay, a recommendation letter, and a resumé.
There are lots of different groups that can give you scholarship funds for your education. The ones who might help you are:
- colleges
- groups
- non-governmental organizations
- startups
- government
The Difference between Scholarships and Student Loans
The differences between student loans and scholarships can be seen in the eligibility process and repayment methods.
1. Eligibility
The qualifications for who is eligible for scholarships are different for every scholarship. They usually depend on factors like how much money a student has, how well a student has done in school, what a student does outside class, where the student comes from, and what that particular student intends to study.
Grants are also available, but they mostly go to students who need funds, not necessarily to academically talented students.
2. Repayment methods
Repayment methods have to do with whether a student will have to pay back the money he/she borrowed. In this regard, Scholarships are thought of as “free money”. Scholarships don’t require that the student pay back the funds, as long as that student keeps fulfilling his/her scholarship criteria and requirements. But student loans are a whole different ball game – they are not gifts or awards, and you’ll have to pay them back in full.
Which is Better: Scholarship or Student Loans?
Getting student loans is not too hard if you just meet the basic standards of doing excellently in class, making academic progress, and getting awards. However, even though certain scholarship programs might demand that you excel academically, their main reason for giving the scholarship is that you have proof of urgent financial need.
Getting your education paid for with a scholarship is way better than taking out student loans because scholarships are like freebies. You don’t get to pay it back. But if you’re not exactly doing well academically, then you’d have to change your mind and work towards being academically exceptional.
In India, most students opt for taking student loans for their education. Some even take loans for studying abroad, even when they have funds to pay for their college and tuition fees themselves. They just want to meet up with the advantages of an overseas education loan.
Bottom Line
A student loan is just money you’ll have to repay. It’s not like a scholarship where you’ll have to work for it. These are, however, the two ways for you to get funds to pay for school stuff, like school supplies and tuition fees. It is important you know the difference between the two so you figure out which one is more suitable for you and your education.
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