How is a student loan different from a scholarship? When you reach that age and applying to colleges, most fear the moment that they will need to actually pay for the studies. Usually, they are faced with 2 options:
- Taking out a loan
- Applying for scholarship
These are very different methods of going to school, and we will outline the difference between the two below.
Going off to college can be a fun-filled, exciting experience filled with anticipation and expectations.
There are so many things to be decided, and so many new journeys to be mentally prepared for.
However, tuition fees aside, the added expensive traveling, lodging, books, transportation, and extracurricular can build to become quite a figure. That’s a lot of zeroes in all the wrong places.
Many students all over the globe are robbed of this incredible academic expedition for the simple reason that they cannot afford to go to a good college.
Many also undermine the overall importance of a college degree and believe it is an unnecessary expense burden.
Some high school graduates find paying jobs soon after high school, and because they are unable to motivate themselves to leave the financial independence that these jobs bring them, they opt not to go to college.
Poverty can often breed more poverty. Many young adults in the first and third world countries start working and earning by themselves and feel tizzy with the newfound fiscal freedom.
They find it exceptionally hard to forgo this lifestyle and quit to pursue a full-time degree.
Misjudging the opportunity cost, these individuals who have a high school education at best find it challenging to find jobs that grow as they do.
Most have no choice to work minimum wage jobs that insufficient to fulfill a family’s growing needs.
The price tag of quality education may deter some students from embracing the prospect with open arms.
As expensive as a tertiary degree can be, especially from an institute of esteem, you will make one of the best decisions with your life.
This is not an advert to inflate college applications but rather sincere advice to people who would thrive at college and deserve a college degree just as much as the next person.
To afford a college degree from a private educational institute, you have two basic options.
They include i) applying for a scholarship or financial aid and ii) applying for a student loan.
Due to imperfect knowledge, many talented students are stripped of the opportunity to pursue a higher college degree. This can cause the exploitation of the less endowed masses.
This article will explain the differences between a scholarship and a student loan to level the educational playing field and which might be better suited to your academic requirements.
- 1. Loans Increase the Cost of College, Scholarships Reduce the Cost of College
- 2. Loans Are Easier to Receive While Scholarships Have Many Applicants
- 3. Loans Are Credit Based and Do Not Depend on Academic Achievements
- 4. Students Can Receive Multiple Scholarships at The Same Time
- 5. Scholarships May Sometimes Not Cover Costs Entirely
- Weighing the Two Options
- Applying for A Scholarship
- Applying for A Loan
1. Loans Increase the Cost of College, Scholarships Reduce the Cost of College
Taking on a student loan means that while a bank or a lender may pay your college tuition or semester fee, they are not doing it for free.
It is basically a delay in the payment of the college tuition until you start earning by yourself.
This money that was lent to you by a lending institute also comes with an added cost.
A small interest rate accrues on loan according to the duration since you have taken the loan.
A problematic aspect of opting for loans is that it may accrue to become a shockingly large sum to be paid, even at intervals.
Expenses only grow as we get older, and you are already in debt before you have even begun your life.
Scholarships, on the other hand, reduce your total tuition. In this case, a donor generously pays your fee off for you, without the condition that you may have to pay it back.
This is ideal for students who were in no position to afford college otherwise. This is known as a need-based scholarship.
Another kind of scholarship is a merit-based scholarship. This is awarded to those students who are exceptionally talented and have high academic prospects.
The type of scholarships may vary according to the institute, area of study, race, the region of origin, and even gender.
These scholarships are granted as accolades to the brightest minds or the lithest athletes to attract them to pursue a college degree.
In this scenario, colleges sometimes try to persuade students to select their alma mater personally.
2. Loans Are Easier to Receive While Scholarships Have Many Applicants
A huge pro of choosing to apply for a loan is that it is relatively easy to receive one.
Loan applications are usually submitted to banks, financial institutes, or private lenders.
These parties are actively seeking potential customers to lend money too.
College students are ideal as they need monetary needs and do not have a permanent job to facilitate themselves.
These lenders can give substantial loan packages with easy, low-interest instalments that many students actually prefer.
Many students face a simple conundrum because while their families are not financially strong enough to send their children to college, they are also not poor enough to qualify for a need-based scholarship.
This means that their applications for most scholarships are rejected to help support applicants from conditions far worse.
Even merit-based scholarships are few and awarded only to the exceptionally brilliant minds. The probability of a person winning such a scholarship is low.
3. Loans Are Credit Based and Do Not Depend on Academic Achievements
Organizations and affluent individuals who offer scholarships often have certain conditions that an applicant must meet to be considered for the scholarship.
A STEM scholarship may require the person applying to be pursuing a degree in one of the four academic schools, namely Science, Technology, Engineering, and Math.
A business student, for example, may not be eligible for the scholarship.
In the same vein, scholarships for southeast Asians or African Americans are announced annually.
The essential criterion you must meet is to be of the race the scholarship is offered to. Additionally, hundreds and thousands of applicants apply every year to be granted one of these awards.
The competition is fierce, and it may be difficult to outshine the rest of the equally talented pool of applicants.
If the odds are too intimidating to you, student loans may be a great option. Unlike scholarships that are mostly need-based or merit-based, loans only look at your credit score when analyzing your loan application.
This means that even if you cannot find the right scholarship for you, you need not worry. A student loan application is always an option.
4. Students Can Receive Multiple Scholarships at The Same Time
The great thing about scholarships is that you may meet the criteria for more than one.
You may be a female who is black and has an interest in the field of STEM. Each of these attributes has special scholarships designed for them.
There is a high chance that you may eligible and the best candidate to receive a multitude of scholarships from independent organizations and even your prospective alma mater.
Similarly, you can be granted a couple of need-based scholarships as well. The important is to sit and research as many scholarships that you may be eligible for.
The process is time-consuming and may be vigorous and nerve-wracking too. However, if you are not looking to incur a student loan debt as soon as you graduate, this is the most viable option for you.
Loans, on the other hand, are only offered to one person at one time. As students do not have any real income to write home about, they should not opt for many loans at the same time.
Most graduate students spend years trying to pay back one student loan. They work overtime and postpone milestones of their lives like buying their own car or house, just to meet the installments’ dates.
It is in the student’s best interests to only take on one loan when they are in an undergraduate degree program.
5. Scholarships May Sometimes Not Cover Costs Entirely
Scholarships, sometimes, in the hopes of helping as many students as possible, offer percentage financial assistance to students.
This means that most students who are granted the scholarships are informed that the grant covers a certain fraction of their college education cost. The rest of the fee needs to be arranged by the student.
This can cause problems for students who were hopeful that the scholarship would cover all their expenses. No one can be blamed for this situation, and yet the problem remains.
These students then decide to collect the rest of the money with loans. However, receiving a scholarship may reduce your chances of being granted a loan.
Even if you are given a loan, it may come with steeper interest rates and shorter gaps between one installation and the next.
The situation can be difficult for students and their families to gauge.
Weighing the Two Options
While you receive the student loan in the shape of a check, scholarship money is usually an unseen amount that is deducted from the final ledger of your tuition fee.
It may also present itself sort of like a discount on your semester fee.
On the other hand, loans can lead to temptation, and when the lump sum amount of money is in your hands, it is easy to be lead astray.
However, remember that this someone else’s money, and they will be asking for it back in a few years.
You will probably have to pay them back more than what you received- that’s how interest rates work and how your lenders benefit from you giving you the loan you needed.
While loans may be easy to receive, they are strenuous to pay back, and many students often fail to pay the loan back, or at least have a very hard time doing so.
On the other hand, scholarships are ideal because they are basically paid-off college degrees that come to you free.
The risk involved here is that there are too many candidates for one small annual grant, and the chances of the application receiving can be too low to be real.
Another issue involved is that the eligibility criteria for most scholarships, need-based or merit-based, is tough to meet, and only the most supremely capable individuals qualify for the grants.
Scholarships are also sometimes conditional, like the maintenance of GPA or your aggregate athletic abilities.
If you fail to meet the grant requirements, your scholarship may very well be canceled, leaving you at a loss for options.
Applying for A Scholarship
There is no fixed rule for how to apply for grants. While some only require you to fill out a form, others may request a professionally written piece of work or research in a certain field for you to follow.
Try to ensure it is valid to accept scholarship details and offers and note that you shouldn’t have to pay to find grants or other financial assistance.
Visit this site to learn more about scholarships.
Applying for A Loan
The best approach for students seeking loans is to use low-interest, fixed-rate programs established by government agencies.
These loans usually have terms that are easier to meet with fixed and stable interest rates. These are also some of the easiest loans to get.
The three types of loans that a student can apply for and receive are as follows:
- Governmental Loans for Needy Students
This type of loan is funded by the Department of Education in the Government of the United States.
To be illegible for such a loan, the students need to fill out a FAFSA form. This will help receive the much-needed student aid they have been trying to acquire.
To assess their eligibility for student financial assistance, the Free Application for Federal Student Aid is a form submitted by current and potential college students in the United States.
You can find the form here.
- Federal Non-Need Based
Students and parents, who cannot afford to pay the full cost of education, alongside tuition and all other expenditures, have access to unauthorized-need-based loans.
These loans are geared at those families with children who, considering the number of their personal assets, have not qualified for need-based loans.
- Lending by the State
These loans are offered especially by the state the student is a resident of. These are applicable to be used in colleges that are in the same state.
Find out more about these loans here.