Figuring out how to pay for college is like walking through a minefield. You’re scared to even take a step because it may be the wrong one. But you don’t have to be! There are 3 big resources people use to help them pay for college: scholarships, grants, and loans. Let’s go over them.
Scholarships are usually merit-based awards, meaning that you are awarded based on your academic or extracurricular achievements. Private businesses and organizations normally give these out. Charities, non-profits, local Veterans clubs, local businesses, and big chains like McDonalds or Burger King are just some examples of places that offer scholarships.
There are a wide variety of scholarships. Because of this, the qualifications for each one are going to be different. On the upside, you can win one for just about anything such as writing an essay, making a video, being into video games, being a person of color, and more. You can look for them online through scholarship databases like FastWeb or Scholarships.com.
Scholarships don’t need to be paid back. The money is completely yours to use for school. It is important to note that there can be conditions when it comes to how the money is spent. Some scholarships will give you the money and let you decide how to allocate it. Others will require that the money only be used for room and board or your books.
The variety in the different types of scholarships there are means that the application process is different for each one. Most of the time you’ll fill out an online form on their website. But, you may also need to write an essay or even do an interview. The details will be on their website, so, be sure to read and know the terms of the scholarship well.
Unfortunately, there are scammers out there. It’s important then to know how to spot a scam. Some signs include:
Grants are need-based awards usually given out by the government and private organizations. Because they are need-based, students have to demonstrate that they have a financial need.
There are only 4 types of federal grants: the Pell Grant, the Federal Supplemental Educational Opportunity Grant, the Iraq and Afghanistan Service Grant, and the Teacher Education Assistance for College and Higher Education Grant. Each of these grants has specific requirements that you must meet in order to qualify.
Generally, grants do not have to be repaid. Though, if you drop out or change your enrollment or financial status, you will have to pay them back. If that does end up being your case, your school will contact you with details on how to start repayment.
To apply, fill out the FAFSA form every year as soon as it becomes available.
Private grants function a little like scholarships. Different businesses, organizations, non-profits, and other places may offer these. Because of this, the qualifications for each one will vary.
Grants also do not need to be repaid at all, so it’s good money to have for college. You can look for private grants online. Much like with scholarships, there are scammers. Keep in mind the same points about being able to tell the difference between a scholarship and a scam here, too. Details on each private grant’s application process will be on their website.
For more information on grants, feel free to read our article here.
If you want to skip pre-qualification and apply directly with a lender, you can do so by clicking Apply below.
A loan is money that you borrow. Unlike grants and scholarships, you will have to pay this money back with interest. There are both federal loans and private loans available. Depending on what type of loan you get, the terms will be different.
With federal loans, there are two basic types: subsidized and unsubsidized. Subsidized loans are need-based loans typically available for undergraduate students. They usually don’t accrue any interest until after you begin repayment. During that time, the government pays interest on the loan. Unsubsidized loans are generally for both undergraduate and graduate students. Since these are not based on financial need, they are more accessible. Unsubsidized loans usually start accruing interest from the moment it’s disbursed. So, if you receive one in your freshman year, it’ll start accruing interest that same year.
Normally, federal student loan interest rates are fixed and predetermined. For both loans, repayment typically starts once you graduate or drop below half-time enrollment. The government will usually extend a six-month grace period at that time. This means you won’t have to start paying right away. The government offers different types of repayment plans and benefits to make this easier. For example, the income-based repayment plan will adjust your monthly payments based on your income to make it less of a financial strain on you. To apply for federal loans, all you need to do is fill out the FAFSA form as soon as it’s available each year.
Private student loans function a bit differently from their federal counterparts. They’re usually given out by banks or some other financial institution. Unfortunately, they don’t come with as many benefits as federal student loans.
Qualifying for a loan will depend on your lender and your financial situation. Factors like your credit score, your finances, or whether or not you have a cosigner can impact whether you’re approved for the loan. This is because lenders want to make sure that they will get their money back. Those same factors can also determine what kind of an interest rate you get. Unlike federal student loans, interest rates for private student loans aren’t predetermined. They can either be fixed or variable and can vary anywhere from 1% to 13%+.
The terms of repayment are up to the lender. Some may extend a six-month grace period so you don’t have to start paying right away. Others may not. Talk to your lender about the terms of repayment and see what else they offer.
Traditionally, you’d have to apply for each private student loan individually. This can be a hassle. Luckily, you don’t have to work like that anymore. Sparrow makes it easy to apply for private student loans by allowing you to compare real student loan offers through a single request. To get started, just create an account.
For more information on loans, check our article here.
Typically, you’ll want to try to get as many scholarships and grants as you can first since you don’t have to pay those back. Then, if you need more, get federal loans because they come with a lot of benefits and plans that’ll help make repayment easier. If you still need money after that, apply for private loans.
Scholarships, grants, and loans are all great ways to help pay for college. Each one functions differently so it’s important to know the difference. Use this chart to help you as you start making decisions on how to fund your educational career!
Scholarships
Grants
Loans
Who gives them out?
Private organizations and businesses
Federal government and private organizations and businesses
Federal government and private organizations and businesses
Qualifications
Depends on the scholarship
Usually need to demonstrate financial need
Have good credit and financial history or have a cosigner with good credit and financial history
Do I have to repay?
No
No
Yes
How to Apply
Depends on the scholarship but you can use websites like FastWeb and Scholarships.com to help with finding and applying for scholarships.
Generally, all you need to do is fill out the FAFSA. If you’re looking for a private grant, it depends on the grant.
Generally, all you need to do is fill out the FAFSA. If you’re looking for private loans, use Sparrow to compare private student loans and apply.
