How Is A Student Loan Different From A Scholarship?


With college education costs rising massively in the 21st-century, students who qualify to take part in higher education need financial aid to see them through university or college. Students rely on student loans and scholarships to pay for the rising cost. Financial aids for higher education come from student loans and scholarships mostly. In higher education studies, students use financial aid to pay up to 92% of their total education costs. A student loan is a grant given to students in higher education institutions by the government, a bank, or a lender and accrues some interest. A scholarship is a merit-based grant that is given by a college, government agencies, and non-governmental organizations and is non-refundable. A student is only given a scholarship if they meet criteria set by the well-wisher. If you are about to apply for financial aid for your higher education and wondering whether to apply for a scholarship or a loan, read through this article to get to understand all you need to know between student loans and a scholarship.

How Is A Student Loan Different From A Scholarship?

How is a student loan different from a scholarship?

Both scholarships and student loans aid students raise their higher education costs, but they are very different kinds of grants. A scholarship is non-refundable and merit-based, while a student loan is repayable with some interest. There are reasons that will determine if a student is eligible for a scholarship or a student loan. These financial aids can have many benefits to the learners; they pay for a part of their tuition fees, can be used for their upkeep, can be used for getting personal effects, and even covering their medical expenses during their stay at the higher education institutions. Let us now go through some of the facts which you should know about student loans and scholarships before you apply for one to act as an aid for your higher education costs.

Student scholarships

A scholarship is a grant that is merit-based and can be from a government agency, a university, or other non-governmental organizations, the grant is an award to the student and is non-refundable. Scholarships cover the student’s financial requirements like accommodation, food, and tuition fees. For a student to get a scholarship they should meet the set criteria set by those giving the scholarship.

There are different types of scholarships and they include, easy scholarships, which are easy to apply for and only ask for some basic information about yourself and a few questions. Easy scholarships have a lot of competition reducing the chances of getting one. The second is the rigorous and exclusive scholarships. These ask a lot of your information and might include writing an essay. The third type of scholarship is the niche scholarship, which is available for students based on niches like sports, hobbies, religious, and ethnic backgrounds.

Student loans

A student loan is a grant that is given to students in their higher education studies by the government, a bank, or any other lender to help them cover their education costs and the loan is repaid with some interest. If you get a student loan during your college education, you will finish with a lot of debts. You are supposed to start repaying after you land your first job.

There are four different types of student loans

Direct subsidized student loans

These loans are awarded based on the size of family income and are only granted to students who show they need financial aid after they fill out the FAFSA form. The government will pay for some interest on these loans.

Direct unsubsidized student loans

The loans given are not based on financial need but based on the tuition costs of the student. All undergraduate and professional students are eligible for these loans and the government does not pay any interest on these loans.

Direct PLUS student loans

To get these loans the student should have a good credit history, and they cover any costs that are not covered by other financial aids that the student gets.

Direct consolidation loans

Students are allowed to combine all their loans into a single loan with the help of a loan servicer.

The differences between scholarships and student loans

Scholarships and student loans help students raise money to cover their higher education expenses, however, they are very different in many ways. Here are some of the major differences between scholarships and student loans.

How to get?

To apply and get scholarships students will follow simple steps that include meeting all the set eligibility requirements, then submitting the required materials like personal information documents, while others might require writing an essay. All the applications are reviewed and those that best meet the selecting criteria are chosen.

To apply for student loans all interested students should start by filling out the FAFSA form each year they need a loan. The FAFSA forms are always available for filling each year starting from October 1st. The sooner you fill the form after 1st October the better because some student forms are offered based on a first come first serve. After you fill out this form, it is reviewed to determine the amount and type of loan you will get.


Scholarships are grants that are given to students to aid with their expenses in college but they are not repaid to the organizations that offered the grant. They are very important because students who get scholarships from universities do not have the fear of having many debts when they finish school.

Students’ loans are repaid to the lender with some interest when the student finishes school and starts working. Student loans put students at some risk because they are in large debt when they finish school and start working.


Scholarships might be need-based but they are highly merit-based. Applying students will compete against each other and only those who best meet the set criteria will be eligible for the scholarship. To be eligible for scholarships you will be asked to bring materials like your academic certificates and your qualifications. Students with the best qualifications and academic certifications might win scholarships.

Student loans are highly need-based. Students’ eligibility is based on the financial information of those applying and their family and the amount needed to cover their expenses in those respective colleges. There is no competition against others when applying for student loans, so long as you fill out the FAFSA form, it is reviewed, and based on your needs you will be allocated a loan amount based on the review.

  • Another difference is that you will not know the amount you will get from a certain loan until you apply for it and get it. You will also be unable to predict what will happen during repayment but with scholarships, there are no surprises and you might predict what you will get from it remember there is no repayment which means there is no fear of what will happen in the future.

Advantages associated with student loans and scholarships

Student loans

  • It is available to most students taking their higher education studies.
  • Student loans are need-based and mostly help all needy students.
  • Students’ loans are flexible to use.
  • Repaying your student loans on time can help you build your credit score; this will prove to be useful to you in the future when you are applying for other types of loans when you have families.
  • They help you pay for your university expenses without money upfront.
  • When we compare student loans to scholarships, it is easier to apply for and get loans because they do not involve any competition with other applicants. It is also involving a simple application process.


  • Scholarships are free, and there is no need paying back.
  • There is no limit to the amount you can earn up to the total school expenses.
  • There is a diverse variety of scholarship types that you can apply.
  • There are also easy scholarships available that require little more than an application.
  • You can apply for some scholarships multiple times.
  • You can renew some of your scholarships.
  • Scholarships allow many students to graduate without any debts.

Disadvantages of student loans and scholarships

Student loans

  • Getting a student loan incurs a debt that must be repaid in the future when you start working.
  • Students’ loans are associated with interests that keep on accruing and you might find yourself paying more than what you got.
  • Failing to repay any student loans regardless of the reason will harm your credit score in the future.


  • Scholarships application and winning one are based on merit and are very competitive.
  • The application process might involve other tedious exercises like writing essays or doing some short videos on some topics.
  • Scholarships are not offered directly through filling out the FAFSA form like student loans.

Scholarships and student loans offer students who are in higher education institutions financial aid that helps them pay for their college expenses and tuition fees. However, student loans and scholarships are very different, with the biggest difference being that student loans are repaid with some interest while scholarships are gift grants to students and there is no need of repaying them in the future. Both scholarships and student loans have their pros and cons, with the greatest shared advantage between the two being that they help students pay for their financial expenses in college. Students who have any financial need and they are in college are therefore advised to apply for scholarships and loan grants to help them see through their college studies.

Frequently Asked Questions
  1. What expenses are covered by student loans?

Student loans will cover expenses on tuition fees, personal effects, accommodation, books, and stationery, plus any other higher education expenses.

  1. What is the main difference between student loans and scholarships?

The main difference between these two grants is that a student loan is repaid with some interest while a scholarship is never repaid and is seen as a gift grant/award to the student.

  1. What are the disadvantages of applying for student loans?

The disadvantages of student loans include, they incur debts, and interest accrues, and they might affect your credit score if you will not pay on time.