Grants vs. Loans
Although most people realize that the major difference between grants and loans is whether or not you must repay the money, there are other factors that distinguish a grant from a loan.
Repayment
Obtaining grants is more favorable than taking out loans to pay for your education simply because you are not required to repay grants. This money is a gift to you from the sponsor. A loan is money that you borrow and must begin to repay with added interest either while you are attending school or a short period after you graduate.
Application Process
One application is used for both federal grants and federal loans. The first step to any form of financial aid is to complete and submit the FAFSA (Free Application for Federal Student Aid). Your college will determine grant or loan eligibility based on the Student Aid Report generated after you complete the FAFSA.
If you do not qualify for federal aid or want to seek grant or loan sources other than the federal government, you will need to do some research to determine what types of grants or loans are available. Applying for a loan will require you to submit information such as your income, current debt, and social security number for the purpose of obtaining your credit score. Applying for a grant may include submitting your income as well as writing an essay or grant proposal.
Eligibility
Federal grants are awarded based on financial need. Other grants may be awarded based on the applicant’s ability to research or provide a service that is beneficial to an organization’s objective. Loan eligibility is usually determined by your credit score and your total estimated cost of attendance. You may also have to have a creditworthy cosigner in order to receive a loan.
Limitations
Grants may have a time limitation, such as a grant that is awarded only to first-year students, and may require a student to maintain a certain grade point average. Loans are usually available throughout the student’s academic career but may impose a minimum number of hours that a student must complete each academic period.
Obviously, grants are ideal but not always available. Remember that it is always recommended that you read the fine print when accepting any grant or loan so that you are aware of the any terms or limitations.
