Chapter 5 · Concept 39 of 50
Grants, Scholarships, and Loans
Understanding Free Money vs. Borrowed Money
College financial aid usually offers a combination of funding types in one package; these include both gift aid (which does not need to be repaid) and self-help aid (which does need to be paid back).
As a useful tip, accept all grants and scholarships but use loans only if necessary, starting with subsidized federal loans.
- Grants: Grants are typically awarded based on financial need (as determined by the FAFSA). They are essentially “free money” and do not require repayment. Grants are the best type of aid because they reduce college costs without creating future obligations.
- Scholarships: Scholarships are usually awarded based on merit, such as in recognition of academic performance, athletic ability, leadership, or specific talents. Scholarships are also considered “free money,” this time earned through achievement. Additionally, they do not require repayment. However, most scholarships require you to maintain a minimum GPA in order to keep them. Scholarships directly lower the amount to pay or borrow.
- Loans: Loans are borrowed money from either the government or private lenders that must be repaid with interest. Loans reduce future income through monthly payments.
As a useful tip, accept all grants and scholarships but use loans only if necessary, starting with subsidized federal loans.
HARD LESSON
u/DebtFreeDegree • 10.2k points • 7 days ago
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