In your search for financial aid to pay for college, you’ve likely come across the terms “grants” and “scholarships”. In fact, these two terms are often grouped together in most discussions related to financial aid, and there’s a reason for this. Grants and scholarships are the only two types of free financial aid available to students looking for additional funds to cover the cost of college.
Any money you receive through a grant or a scholarship doesn’t have to be paid back. It’s yours to keep without paying any interest. This makes scholarships and grants the two best ways of paying for a college education.
While both forms of financial aid are similar in that they are both free, you may wonder what is the difference between grants and scholarships.
Understanding how each one works and the differences between the two is key to maximizing the benefits of both.
What Are Grants?
Grants are a form of free financial aid funded by the state or federal government. They are awarded to students based on need, which means students have to submit proof of limited income to avail of these funds. Grants are offered by the government as a way to help low-income undergraduate students cover the cost of college.
The federal government allocates a certain amount of funds to be awarded as grants during each academic year. Only that amount and no more is disbursed to students for that particular year. The funds are disbursed on a first-come, first-served basis until the funds run out. The earlier you apply for a grant, the higher your chances of receiving the full amount you’re entitled to. The Pell Grant and the Federal Supplemental Educational Opportunity Grant are just two of the tools through which the government disburses grants to students who qualify.
You must file the FAFSA (Free Application for Federal Student Aid) to qualify for any type of federal financial aid. This includes grants as well as student loans, work-study, and institutional aid.
What Are Scholarships?
While scholarships are also a form of free financial aid, they are different from grants. Scholarships may be funded by a number of different sources, from large corporations to small businesses and local communities among others. Most scholarships are based on merit but they are not limited to this one criterion. There are scholarships awarded for just about everything you can imagine, from athletic skills and extracurricular accomplishments to making a prom dress out of duct tape and being taller than a certain height.
Some scholarships are merit-based, either based on your high school grades, athletic ability, or a demonstrated skill. Most scholarships require applicants to meet more than one requirement. For example, you may need to belong to a certain racial or ethnic background, be pursuing a specific field, complete an essay on a given prompt, or maintain a certain GPA.
Scholarships are highly competitive. This is because there can be hundreds of students competing for each. The larger the scholarship award, the higher the competition. You will need to have an outstanding academic record, high GPA and have impressive extracurricular accomplishments to win a large award.
On the other hand, smaller or local scholarships have less competition usually, which means you have a better chance of winning. Of course, you aren’t getting as much money compared to a large scholarship, but winning multiple smaller scholarship awards can add up to a significant amount in the end.
How Scholarships And Grants Are Similar
Grants and scholarships are both free money that are offered to students to help pay their college tuition. One of the most attractive features of scholarships and grants, and the reason why they are so coveted, is that you do not have to return the money. This means there are no interest rates or payments to deal with. If you are awarded a grant or scholarship, you keep whatever money you receive. This can be a huge deal as it means you’ll graduate with less debt.
Another similarity between scholarships and grants is that the funds you receive are only for one academic year. Most are not recurring awards which means you have to apply every year you’re in college to continue receiving aid every year. An exception to this may be a few scholarships, which are recurring. However, even for these, you will have to maintain the scholarship requirements to continue receiving the funds every year.
Difference Between Scholarships And Grants
When you look into what is the difference between a scholarship and a grant, you’ll see that they differ in many ways, from eligibility criteria to the application process.
Funding entity
Grants are funded by the federal government while scholarships may be funded by corporations, small businesses, non-profit organizations or even individuals.
Eligibility Criteria
Grants are typically awarded based on financial need. They are one way that the federal government helps low-income undergraduate students cover their tuition fees for college. Eligibility for scholarships is determined by the information provided on the FAFSA.
Scholarships on the other hand are usually awarded to students based on merit. Each funding establishment sets its own qualifying criteria, which may differ from others. In most cases, applicants have to write an essay on the topic provided in order to win a scholarship award.
Amount Of Financial Aid You Can Receive
With grants, the federal government will determine how much you’re entitled to receive during each academic year. They calculate this number using the information you’ve submitted in your FAFSA. Every student who qualifies for a grant will receive a different amount of grant money based on their personal circumstances.
With scholarships, each funding organization announces a set award amount for each opportunity. If there are multiple winners for a scholarship, all winners will receive the same amount.
FAFSA Requirements
Completing the FAFSA is a mandatory requirement to qualify for grants. The federal government will check your FAFSA details to determine if you’re eligible to this particular form of financial aid.
With scholarships, it depends. Most scholarships from private organizations don’t require it (although filling it out never hurts). However, you will need to submit this application if you wish to apply for merit-based scholarships from your college. Also, if any the scholarship asks for demonstrated need as a requirement, then you do need to file the FAFSA.
Education Level
Most scholarship organizations limit scholarships to the undergraduate level. Once you start looking into graduate school, they become “fellowships”.
Grants, on the other hand, are found in all levels of college education.
Which Is Better – Scholarships Or Grants?
Neither one is better than the other. They are both great forms of free financial aid and are awarded based on different criteria. You can avail of both if you meet the qualifying requirements specified for each opportunity. The more you receive by way of grants or scholarships, the less you’ll need to borrow, allowing you to graduate with minimal student loan debt.
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