Are you confused about the reasons that make student loans and scholarships different from each other? Read this article to find out more about student loans and scholarships.
Every year, a large number of students get admission in the higher education system of different universities worldwide. Most students have to bear expensive annual educational expenses. These expenses are different for both public and private educational institutes.
The annual expense bill constitutes everything like books, tuition fees, room, board, transportation and all other education supplies. When the final bill comes. Most students find it really hard to bear expenses. And they try to look for different ways to easily pay their educational expenses.
If you are a student, then there are a number of different ways to help you cover your expenses. The most famous ones are student loans and scholarships. But, what is the difference between these two? Let’s understand student loans and scholarships in detail.
Student Loan What Is It?
If you are a student, who cannot afford to pay for his tution fees, then student loans are the solution for you.
Student loans are the ones in which the amount required to cover your educational expenses is credited directly to you. This helps you in paying for not only your educational institution fees but also afford to buy necessary educational supplies like books, tuition, food costs, accommodation fees, etc.
Student Loan Deduction What Is It?
You need to pay back the amount that you get in the form of student loans to your lender along with the interest rate. But, as these loans are for students so the interest rate is lower if compared to other types of loans. Moreover, one more option to pay back your loan is extended repayment. Depending upon the type of loan that you have, you can request your lender to extend your repayment duration.
Similarly, a scholarship is a form of financial aid awarded to students to pursue further education, this scholarship is awarded based on many criteria like talent, merit, leadership skills, and other unique attributes. The Scholarship provider uses this as marketing tactics or it reflects the values and social responsibility of the scholarship provider.
What Does Scholarship Mean To You?
If you have genuine financial problems that you can explain with proofs to the scholarship giving company, then it means a solution to all your educational expenses.
Similarly, if you are a bright student who has extraordinary grades, remarkable GPA and overall good academic record, then also getting a scholarship means the fruit to the hard work and efforts that you have put in throughout all the years of your academic period.
The Differences Between Student Loans And Scholarships
So, what is the one thing that completely distinguishes students loans and scholarships? With the student loans, you cannot decrease your college fees. They can only help you in making your fees affordable for you. THis means that you have to pay all your student loans back to your lender.
On the contrary, scholarships are awarded to you if you pass its certain basic requirements. You can avail the scholarship on the basis of need or merit. This means that scholarships are more helpful in making your college fees affordable as they cover your cost completely and you do not have to pay the bills back to the lender.
However there are other minor differences too between student loans and scholarships that we have discussed below:
Getting Your Loan Amount
The first difference between the both is in different ways of getting an amount of loan money for your educational fees.
With Student Loans
If you take student loans to finance your fees, then the total amount of your fees is divided on the basis of per semester or per year. Then, your lending company will pay the amount to your respective college or university. Sometimes, the amount that your loan providing company pays is enough to cover your total college fees while in other cases it depends on the type of loan that you have applied for.
In some cases, your student loan includes different types of educational supplies like your stationary, books, cost of food, accommodation, etc. In other situations, your lender will give you an estimated amount to use it for your educational expenses apart from tuition fees.
If we talk about scholarships, then the amount you receive for covering your educational fees depends upon your scholarship provider.
Majority of the time, you get scholarships directly from your college or university. In these cases, the finance department of your educational institute is responsible to cover these expenses and directly pays for them.
But if a third party has provided you scholarship then your lending company will send money directly to your college or university. In other cases, your lender may give you the scholarship amount. Both of these conditions totally depend on your lender.
Qualifying For The Money
Both student loans and scholarships differ when it comes to qualification criteria. We have discussed the differences between the two below:
With Student loans
If you want to apply for student loans, then the federal institution is responsible for funding these loans.
If you want to make the entire loan process run smoothly, then check for the eligibility criteria and requirements of a federal institution beforehand.
Now, the first step is to complete the application of FAFSA which is the short for Free Application for Federal Student Aid. The acceptance of your application totally depends on the factor that how perfectly you match the eligibility criteria and financial requirements of the institute.
Once you have successfully passed the basic criteria of getting the student loan, then there are certain other factors too. For example, if you have applied for a private student loan. Then it is necessary that you prove why you are the most deserving among other applicants to receive this loan. Not just this, you also have to ensure your lenders that you are capable of paying back you loans within the set time period along with the interest rates.
Your lender will perform a detailed analysis of your profile and double check all the information that you have provided for example about your income and credit score.
If we talk about the qualification criteria of scholarships, then it is simpler than student loans. Every lender that offers scholarship has a pre set list of requirements and eligibility criteria that you need to meet. For example, if you are applying for a merit-based scholarship then there are GPA criterias set.
The qualification criteria for each scholarship is determined by the scholarship program and the respective sponsorer. There are different types of scholarships. Each has its own unique and different set of eligibility requirements. For instance, if you have applied for a need-based scholarship, then you can pass this criteria only if you have a certain amount in all your bank accounts that matches with the financial requirements of the particular scholarships.
Can You Apply For Both Student Loans and Scholarships?
In case you are wondering whether or not you can apply for both student loans and scholarship at the same time then the answer is yes, you can!
Even if you have qualified for a scholarship, you can still apply for a student loan later. However, if you want to avail this option, then you must be aware of different risks that are involved. For example. If you get a scholarship, then this may or may not affect your eligibility criteria for getting a loan.
When you apply for a specific college, university or educational program, that specific institute will determine your financial requirements to cover your educational expenses. If you receive a scholarship, then your educational costs will be decreased. This reduction in your total educational costs will eventually make you less eligible for financial assistance.
It is very rare that a student qualifies for a scholarship based on his financial conditions but the amount that he receives is lower than his requirement. To solve this issue, there is another scholarship commonly known as first dollar scholarship. In this type of scholarship, when a student is unable to meet his finances, he will be given a particular amount based on the scholarship program to fill the remaining gap between his actual finances and the scholarship amount offered to him.
So let’s have a quick recap about the things that you need to remember about both student loans and scholarships. Student loan deduction what is it? Just like any other loan, in this kind of loan, you have to return the total amount of money that you have taken to cover your educational expenses. You have to make the payments along with the interest rate that you agreed for when you applied for the loan.
Unlike other loans, it is easier to get accepted for getting student loans. Why so? As it does not matter on what type of educational institute you belong to. You may be a student of any private or federal college or university, all you need to get qualified for student loans is creditworthiness.
The differences between student loans and scholarship are both major and minor but they are not difficult to understand. Once you have gained basic knowledge about the two, you can easily analyze your eligibility criteria for both. Moreover, you can also check which one is most suitable for you based on your financial situation and affordability range.
We are certain that if you are a student, this article has cleared out all the confusions you had before regarding student loans and scholarship.