The Differences Between Grants Scholarships Work-Study and Loans

The Differences Between Grants, Scholarships, Work-Study and Loans

The LCU Blogging Team
October 10, 2017 at 4:15 AM

If you plan to apply for college financial aid, you’re certainly not alone. After all, statistics show that 85% of four-year college students receive some financial assistance to help pay for their education.

While there are a variety of ways to receive financial aid, the most common types are grants, scholarships, work-study and loans. Here’s a look at all four while highlighting the differences between them and the pros and cons associated with each.


The terms “grant” and “scholarship” are sometimes used interchangeably, but there are differences. Both grants and scholarships come from similar sources, namely, governments, colleges, and private organizations.

Probably the most attractive thing about grants is that they’re “free” money. If you receive a grant, you don’t have to worry about paying it back in the future. Grants are either need-based or merit-based, but most are need-based and focused on your family’s financial situation. In comparison, most scholarships are merit-based.

Qualifying for a grant means meeting certain criteria and filing the FAFSA–an important baseline requirement for receiving any federal aid. Some students are eligible for scholarships who participate in certain activities, while some are offered to students with excellent academic records.

Feel confident about submitting your FAFSA with this checklist

The most common grant, which is for low-income families, is the Federal Pell Grant. There are a variety of grants, however, it’s important to apply for them as soon as possible because there is a limited amount available and they’re awarded on a first-come, first-served basis.

Pros: It’s hard to beat free money, and grants typically require just one application. Some scholarships require a separate application.

Cons: They’re a limited resource, and may run out quickly if you don’t apply promptly.


Like grants, scholarships are sums of money that you don’t have to pay back. In addition, the amount you receive doesn’t accumulate interest and does not require that you pay it back. There are several external scholarships available for students to apply for, from academics to athletics to your favorite hobby.

Scholarships are different from grants in that they have more of an emphasis on student merit. All have a specific set of criteria and are available from not only colleges but also non-profits, businesses, communities, etc.

All students are welcome to apply for scholarships, but remember that competition for specific scholarships may be high. However, unlike loans and grants, which may have additional stipulations attached to them, students may earn multiple scholarships.

Be sure to carefully consider the effort you put into your scholarships, too. Students are much more likely to receive scholarships directly from the university they choose to attend (and with a much higher monetary value) compared to external scholarships from organizations or businesses. These university scholarships often include the opportunity to renew annually whereas one-off external scholarships may only produce funding for one year.

Pros: Not only do scholarships represent free money that doesn’t have to be repaid, there is also no limit to the number of scholarships you may earn.

Cons: The downside is that many external scholarship programs can be very selective or require a lot of effort to receive a substantial sum to pay for school.

Work-Study Programs

Work study is part-time work that’s awarded to students as part of a financial aid package. Students can often find work-study related to their areas of interest. For example, someone studying biology might have a work-study job taking inventory of lab supplies on campus.

Pros: One of the most obvious benefits to working during college is earning extra money for college expenses.

Cons: One drawback to work-study is that because it’s based on financial need, students who have adequate resources for college but who want to earn extra money may not qualify.


A loan is money you borrow that must be repaid. There are four basic types of loans you need to know about regarding your college education financing:

1. Federal need-based loans

This type of loan is funded through the U.S. Department of Education and is the most common loan sought by students. This loan is know as the Federal Direct Subsidized Loan, and they typically have low-interest rates and flexible repayment terms. They’re awarded based on your family’s financial need, and you’ll need to file a FAFSA to be eligible.

2. Federal non-need-based loans

Perhaps better known as Federal Direct Unsubsidized loans, this type allows you to borrow up to $31,000 as an undergraduate. In fact, your parents can borrow up to the full amount of your cost of attendance through the Federal Direct Parent Loan, but you are charged interest while you’re in school. Note: each of these loan programs accrue interest.

3. State loans

This type of loan is offered by the Texas Higher Education Coordinating Board through the state. These loans may vary state by state regarding how much you may borrow and have application requirements.

4. Private loans

Private loans are available through organizations such as banks and credit unions, and sometimes through your college. The lender determines the loan’s terms and you’ll need a cosigner – such as a parent – to get this type of loan.

Pros: Student loans are fairly easy to get and, in many cases, are based on financial need and not academic success. Moreover, you’ll build your credit score if you pay them back on time.

Cons: There are potential drawbacks to loans, including that you’ll have accumulated debt before you finish college and that you must pay them back within a certain time period.

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Essential Checklist for Completing Your FAFSA