What Is the Difference between College Scholarships and Financial Aid?

Jessica Ellis
Jessica Ellis

Any person preparing to pay for an education may become confused about the differences between college scholarships and financial aid. While college scholarships and financial aid can both help pay for a college education, they are very distinct terms. College scholarships refer to grants of money for education offered by a school, government, or private foundations that do not need to be repaid. Financial aid covers a much broader range of educational funding, including scholarships, grants, and loans.

Many students apply for loans and other financial aid to pay for college.
Many students apply for loans and other financial aid to pay for college.

A college scholarship can help pay for some or all of the expenses of college. Scholarships are often used to pay for tuition, but some may cover the costs of books, housing, and living expenses as well. Since scholarships do not have to be repaid, they can reduce the tuition burden that students must meet through personal finances or other forms of financial aid, such as loans. Many students are encouraged to seek out scholarship opportunities, so that they can obtain an education without going into debt.

Many students find the financial demands of college challenging and may apply for financial aid or scholarships.
Many students find the financial demands of college challenging and may apply for financial aid or scholarships.

Financial aid, by contrast, comprises all sources of financing available to students. While these resources include scholarships, they may also include government student loans, private loans, fellowships, and grants. Since many students are unable to finance their education solely through scholarships, many do so through a combination of college scholarships and financial aid resources.

One feature that distinguishes college scholarships and financial aid is the grounds on which they are awarded to students. Scholarships are often given out on a basis of merit or personal characteristics. While some scholarships also take financial needs into consideration, they tend to place more weight on the individual characteristics of the student. Some forms of financial aid, such as government student loans, are based entirely on financial need and do not take merit into account. This means that students from wealthy families may be unable to receive some forms of financial aid, but may still be eligible for scholarships.

Another major difference between college scholarships and financial aid is the requirement of a repayment of funds. Scholarships, by definition, do not need to be repaid by the student, unless he or she fails to meet the requirements of the award. Some forms of financial aid, such as student loans, do require repayment of the borrowed amount, as well as interest payments for the life of the loan. Whether an offered award needs to be repaid may be an important consideration in a student's decision to accept or reject some types of financial aid.

Scholarships mainly are used to help pay tuition, but they also may help cover costs of textbooks and other expenses.
Scholarships mainly are used to help pay tuition, but they also may help cover costs of textbooks and other expenses.
Jessica Ellis
Jessica Ellis

With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica is passionate about drama and film. She has many other interests, and enjoys learning and writing about a wide range of topics in her role as a wiseGEEK writer.

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Discussion Comments

MrMoody

@nony - I received a few college scholarship grants when I was back in school, the Pell grant being the most common. I’d love for my son to qualify for those grants today but unfortunately I earn too much. I’m not rich by any means, but there is a certain income threshold and I’m a little above it.

Actually in our state if you make less than a certain amount you’ll get free tuition. It makes me wonder if it’s worth it for me to be making the money I’m making. I’m not a “mooch” by any means but college is not cheap, and even if you’re above that income threshold, it puts a strain on the budget and an undue burden on that young college student when he graduates. It’s almost like graduating with a mortgage.

Here’s hoping for some free money. I may give those online sites a try.

nony

@Charred - I found places online where you can apply for free college scholarships and grants. Some of these are merit-based (they will include an essay, for example) but a few of them are quite random.

Just apply and they toss your hat in the ring and you could win a free college scholarship. It won’t pay your whole tuition; it might be $500 or $1,000 here and there. Little by little it could all add up and that would help defray the amount of loans that you need to take out to pay for your tuition.

Charred

@NathanG - Yes, I graduated with no loans when I went to college. Now, it’s almost impossible to get through college without some kind of financial assistance, unless you’re extremely wealthy (which we are not).

One thing that you want to pay attention to when taking out those loans is whether they are subsidized or unsubsidized. With subsidized loans, the interest will be deferred until graduation. With unsubsidized loans, the interest will begin accruing immediately.

Obviously you want your grants and financial aid loan package to include more of the subsidized than the unsubsidized loans; otherwise, you should at least begin paying down some of the unsubsidized loans while you are still in college.

NathanG

My daughter will be attending college soon and she just received a financial aid scholarship for the school she will be going to. It covers more than half of the tuition, which will be a big help since the tuition is quite high for the school.

We took out various loans, including work-study arrangements, to make up for the balance of the tuition. College nowadays is certainly much more expensive than when I went to school, but I’m glad that financial aid programs and scholarships are available to help students pay their way.

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