What are the Differences Between Student Loans and Grants?

Student loans and grants are two types of financial aid that assist people in obtaining a college education. While both means of financing work toward the same end, the structure and obligations assumed by the recipient of the assistance are somewhat different. This includes differences in qualifications for initially receiving the aid, what must be done to continue receiving aid for the duration of the college career, and what type of obligation the graduate has in terms of repaying the funds obtained from the aid.

One of the most obvious differences between student loans and grants is that the former must be repaid while the latter does not need to be repaid. Typically, the terms of repayment associated with college loans make it possible to schedule payments beginning at some point in time after the degree is obtained. Many loan programs of this type do have provisions for the repayment of any funds received through the plan if the student does not complete his or her studies. Depending on the provisions associated with the student loan, those repayment terms may be very flexible, or highly rigid.

With college grants, there is no obligation to repay any funds obtained in pursuit of a college education, provided that the student remains enrolled and active for the entire period covered by the grant. For example, if a student obtains a grant for a specific quarter of study at a given university and decides to drop out along toward the middle of that quarter, there may be a requirement to repay the amount of the grant for that quarter. Typically, repayment must be received before the student is eligible to apply for additional assistance from the grant program during subsequent quarters.

Student loans and grants sometimes differ on the basic criteria required to receive the aid. Loans may or may not require a minimum grade point average in order to qualify for assistance. In contrast, grant programs usually require that the freshman student have earned a minimum grade point average during his or her senior year in high school, and maintain a certain average for each quarter, semester, or block of college in which the student seeks additional funding. Failure to maintain the minimum grade point average is likely to either lead to dismissal from the grant program, or at least require that the student be placed on some type of probation until the average grade point average again complies with the minimum requirements.

Another difference between student loans and grants has to do with the university status of the student. There are loan programs that will provide financial aid for part-time students. Grants are less likely to offer support to students who are not carrying enough of a class load to be considered full-time. While there are exceptions, government education grants in many nations are specifically for helping people who want to pursue an education full-time but do not have the financial resources available.

Prospective students should keep in mind that student loans and grants come in many forms. Some will be adequate to cover basic college expenses, while other programs will only cover a portion. This is important, since some grant programs will not approve financial aid for a student that is already receiving aid from another grant program, a scholarship, or from a student loan of some type.

In contrast, student loans issued by companies or banks typically are unconcerned with the presence of a grant or scholarship that defers a portion of the college expenses. For this reason, compare the terms and conditions related to various student loans and grants before submitting any applications. This will make it easier to focus attention on aid plans that will cumulatively provide enough resources and allow the student to focus on studies without a lot of worry about college costs.