How Is a Student Loan Different From a Scholarship

Are you looking for some scholarships or loans to support your studies but don’t know the differences between them? If yes, then you have luckily arrived at the right place.

Here we have gathered all the information you need to know about the student loan vs. scholarship. Although both are equally useful for assisting with your academic fee, they differ in terms of repayment, receiving methods, eligibility criteria, and application process.

First, let’s know what a student loan and scholarship are, and then we will head toward how a student loan differs from a scholarship.

How Is a Student Loan Different From a Scholarship
How Is a Student Loan Different From a Scholarship

What Is a Student Loan?

As its name shows, the student loan means the money a student borrows from government agencies, banks, or other private lenders to cover their education expenses with a guarantee of repaying it. Now there are two given types of student loans.

Government student loans

These are the loans awarded by the educational departments of the government to deserving students. To get it, you (the student) should be eligible for either a subsidized or unsubsidized loan.

Moreover, these loans are a bit limited, and demand fixed interest. Therefore, if you want a loan whose interest does not increase with time, you can find it a good option. These loans can also extend the repayment time if you face any critical financial issues.

Private student loans

A private student loan means a loan you (a student) get from private money lenders, banks, or other credit unions.

You have to return private student loans with interest larger than the government loans. You are also not facilitated with some benefits like a moratorium, extended period or fixed interests, etc.

What is a scholarship?

Student scholarships are financial awards to help students meet their educational expenses. A good point of the scholarship is that you don’t have to return the money to the providers.

The scholarships vary widely regarding the provider, eligibility criteria, and awards. Thus they can be merit, academic, or financial-based. Besides these, you can also get a scholarship based on your other side talents.

You can get a scholarship from organizations, the government, or well-known individuals. All you have to do is search well and apply for the scholarship that suits your academic needs.

Meanwhile, it might be helpful for you to know that the scholarships awarded by the government are preferable to the others because they have a wide range of benefits, including covering your tuition fee and other academic expenses. At the same time, the other scholarships may only cover your tuition fee.

Also Read: Do You Have To Pay Back a Scholarship?

Main Difference Between Scholarship vs Loan

The main difference between scholarships and loans is that scholarships are free and can be granted on a merit-based, while student loans are much easier to get, but you have to pay back the granted money.

Although student loans and scholarships help students pay their academic fees, there are still some differences between them. They differ in 4 primary ways of receiving money, repayment, the application process, and eligibility criteria. Now we will look at each difference in detail.

Scholarship vs Loan
Scholarship vs Loan

1. Repayment procedures

The significant difference between a scholarship and a student loan is the returning money to the providers. Let’s see now which ones you have to refund and which you don’t.

Student loan

The repayment term means whether the student will return the money they have borrowed or granted.

Here in the case of the student loan, you have to return the money to the organization, banks, or any other provider with its demanded interest.

Repayment is considered one of the drawbacks of student loans because some students cannot afford to repay it even when the deadline approaches, so a student loan can be viewed as a temporary aid to help you continue your studies.


As we said above, the scholarships are awards. Therefore they are granted to help deserving students cover their academic expenses. That is why you don’t need to repay the scholarships to the providers.

However, for its continuity, you should follow the guidelines provided along with your scholarship.

2. Process of receiving money

Below you will get to know how a student loan is different from a scholarship regarding their receiving procedures.

Student loan

The second difference between student loans and scholarship is their processes of receiving money.

The student loans are dissevered according to your tuition fee depending upon whether you have a semester or annual system. This money is mostly directly transferred to you. So, where to spend this money is up to you.

In most cases, students unconsciously spend the money somewhere else and then regret at the time of paying fees and meeting other academic expenses. That is why student loan is not preferred much. However, it is a good option if you can honestly spend it or the provider transfers the loan directly to your institution.


When it comes to scholarships, they are paid directly to your institution. So there are very few chances of its misusage, which is an advantage of scholarships over student loans.

Since exceptions are always here, your scholarship can also be directly paid to you. But it all depends upon the provider and your school or college.

3. Application process

The student loan and scholarship are different from each other due to their application process in the following way.

Student loan

Getting a student loan also requires you a proper application process irrespective of the kind of provider. Let us see the application procedures for the two types of student loan cases.

  1. In the case of a Federal student loan, you must first fill out the FAFSA and then submit it. This form determines your eligibility for the financially needed loan. After you submit this form, you will receive information about various student loans in the letter offered by your institution.

    It suggests loans according to your financial needs and your academic status. Here you have an open choice to choose the right student loan.
  2. Private student loans also require a uniform and specific application process to avoid any inconvenience. Accordingly, it also alters depending upon the personal loan lenders.

But mostly, the lenders will ask for submitting your genuine information, followed by a co-signer. The lenders demand a cosigner to make sure you can repay the loan within the suggested deadline.

After the information and other clerical steps, you are provided with a list of student loans according to your needs. You can then pick any of them as per your interest.


The application process for every scholarship varies greatly and mainly depends upon the selection criteria of the scholarship provider. In most cases, you must submit your academic data, proof that you are a financially deserving student, applications, etc.

Nowadays, students applying for scholarships may also be asked for some projects or productive videos that explicit their talents. In short, high-paying scholarships require more credentials than those that offer just academic help or cover your tuition fee only.

4. Eligibility criteria

Whether a student loan or a scholarship, each has its specific eligibility criteria. Let us see how scholarship and student loan differ in terms of their selection requirements.

Student loan

Since there are two types of student loans, thus their eligibility criteria also differ in two ways. The below section will find the eligibility criteria for private and federal student loans.

  1. First of all, federal loans also vary from organization to organization. But a common thing between all federal loans is that they determine your eligibility criteria based on your FAFSA.

    These loans do not need your academic records or credit background. All they need is your financial requirement for the loan and a promise of repaying it within your time frame.
  2. The private lenders also have peculiar eligibility criteria for every student, irrespective of financial conditions. They do not need any information about your financial history when lending the money.

But private lenders need your credit background. Additionally, a trustworthy cosigner is what you should have for getting a beneficial student loan from a private lender. These two things can prove helpful for you to get student loans at comparatively lower interest rates.


The eligibility criteria for the student scholarships differ from student to student and the organization. However, generally, for availing of a scholarship opportunity, you are required to have the following:

  • Academic excellence.
  • Co-curricular participation.
  • Financial status.
  • Your current location.
  • Permanent location.

But overall, you should keep in mind that the factors for the eligibility criteria of a scholarship are not limited to just the above 5. Therefore you could be asked for something else as well to prove your eligibility for the scholarship.

In the situation of a needy scholarship, mostly the organizations or the government choose talented students for the scholarships. These students should be financially deserving to get more of the scholarship or increase their chances of winning it.

However, there are merit-based scholarships also for financially deserving yet hardworking students. They have their selection criteria, but the basic requirements are the same as any general scholarship. To win the merit scholarship, your academic record matters more than your financial status.

Frequently Asked Questions

Can I use a scholarship to meet my daily expenditures?

The scholarship is the award any organization or government gives you to cover your educational expenses. Therefore you can’t spend it on your daily needs.

Are scholarships easier than student loans to get?

No. Because if scholarships were easier to get, then the students loan on the national level would not have crossed $1.7 trillion.

Do I have to start returning the private student loan as soon as I get it?

It depends upon the type of loan you get and also the lender. But generally, you have about 6 months to return the private loan.

Can I get a student loan if I have a student scholarship?

You can. But it is not recommended because mostly your scholarship can be canceled in case they get to know about your other financial aid.

Final Thoughts On Scholarship Vs Loan

To sum up, we hope you find this helpful article to clear your thoughts on a student loan vs. a scholarship. Now you can choose the right option after going through this article. As for our research, students mostly prefer scholarships to loans because scholarships don’t ask for repayment. So, now it is up to you which option suits you best. Good Luck!