What’s the difference between a Loan, and a Grant?
If you’re like most students, you depend on financial aid to pay for your college expenses. But financial aid comes in many forms – grants, work study and loans – and it is important to know the differences.
A grant is a sum of money awarded to you based on financial need or other criteria, such as academic merit or music or athletic abilities. In this latter case, these funds are sometimes referred to as scholarships. This is the optimal kind of aid because you don’t have to pay it back. There are many sources of grant and scholarship aid including the federal government, state agencies, colleges and universities, and private organizations.
Work Study is a form of aid that requires you to work in return for wages to help cover some of the cost of college attendance. Usually, this aid comes from federal and institutional matching funds.
Loans are funds that you and/or your parents borrow to help fill the gap between college costs (tuition, fees, room and board, books, etc.) and the amount of money contributed directly from your savings or other sources like grants, scholarships and work study aid. There are many types of loans including Direct Stafford, Perkins, Parent Plus and alternative private loans. Some states also sponsor loan programs. These funds must be paid back with interest. Usually repayment begins after you have completed school and a grace period, but sometimes it is expected right away. It’s important to read your loan agreements carefully before accepting them.
The types of grants and loans you are receiving are spelled out in a Financial Aid Award letter that you receive from your institution. The table below gives you some examples of common grants and loans, their source and whether or not the amounts have to be paid back or not. This is not a comprehensive list, so please check with your institution’s financial aid office if you are unsure or have questions about your award.