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If college is part of your student's future, chances are you've discussed the different financial options you have when it comes to paying for it. Scholarships, grants, and loans are the main methods you can consider to help pay for your child's college education. However, there are several factors that set these three financial tools apart. This guide will break down each college tuition option and give you the insight you need to make the best choice for your unique situation.
Scholarships are money-based awards specifically intended to help students pay for education and college-related expenses. The criteria for being awarded a scholarship can vary between different programs. Many scholarship programs have specific qualifications that students must meet in order to receive the scholarship, including standards that are based on academic performance, talents, and academic or social merit.
When applying for a scholarship, it's important to note that the amount your student gets can vary widely. Many scholarships range between the cost of a single class to the tuition of an entire educational program. Private businesses, nonprofit organizations, schools and universities, and philanthropic foundations are just some of the organizations that help to fund scholarship programs.
A grant is a type of financial aid or gift that your state's government, the federal government, nonprofit organizations, and educational foundations award to college students. They are similar to scholarships in that students must meet specific eligibility requirements to qualify for a grant. Even though grants are free money, they are limited in funding, so if you're considering this as a financial aid option, it's crucial to apply sooner rather than later to increase your student's chances of receiving the grant.
Student loans are one of the most common types of financial aid students receive to pay for higher education. With a loan, students borrow money from banks or credit unions to pay for tuition and education-related resources. Since the bank or credit union issues the loan, students who meet the approval requirements are obligated to repay the loan and prove that they can do so. This may require you to co-sign the loan.
All of these financial aid options serve students in their higher education pursuits. However, there are several key differences between scholarships, grants, and loans that are important to consider when choosing between the three.
One distinctive difference between the three financial aid options is that scholarships are gifts that are strictly designed for education. There are many private and public scholarship programs that give students of all ages and abilities a chance to qualify for these funds. However, some programs can be very selective. Another key difference is that students who meet the eligibility requirements of various scholarship programs can apply and receive as many scholarships as they're able to. This isn't the case for grants and student loans.
Grants, like scholarships, are gifted funds that don't need to be paid back. However, there are limits to how many students receive this financial aid. Many of these grants are on a first-come, first-served basis. Another critical difference between a grant and other forms of financial aid is that you'll need to help your student fill out a FAFSA form to apply to different grant programs.
Student loans tend to differ the most from the other types of financial aid. Applying for a student loan can also be somewhat complicated, so it's important to understand what the application process entails. First, there are typically four kinds of student loans. Second, you need to consider what you and your family can afford to repay each month, including interest. With that being said, some state and federal student loans have fixed and lower interest rates and provide different repayment options. These can be excellent choices if you're specifically looking for a student loan.
Choosing which financial aid options are best for your unique circumstances can be challenging. Consider the advantages and disadvantages of each of your options, including the criteria your student has to meet to qualify for whichever financial selections you make. It's also possible to choose a combination of all three types of financial aid if one or two methods aren't enough to cover the necessary college expenses.
Before you decide which types of financial aid work best for you and your student, weigh the pros and cons of each option:
• Scholarships are awarded and don't need to be repaid.
• There's no cap on the number of scholarships a student can receive.
• There is a long-lasting financial supply for awarding scholarships.
• Students who are awarded scholarships have higher application success for future programs.
• Many scholarships are awarded based on unique merits, like academic background and GPA.
• Some scholarship programs can be very selective, making it hard for more students to apply.
There are many different programs available to college-bound students, so pursuing scholarships is an excellent choice if your child meets the necessary requirements.
• You don't have to repay a grant.
• Many grants are based on the needs of your student.
• You can usually file your FASFA once for each grant for which you apply.
• Grants have limited funding, so they run out quickly.
Grants remain a highly beneficial option for many college students. The most well-known grant program worth looking into is the Pell Grant, which can be a great way to boost your student's college fund.
• When your student repays his or her loan, it helps build his or her credit.
• Student loans are easy to apply and qualify for.
• They're based on your financial need rather than academic background and success.
• You have to repay the loan within a specific time frame.
• Student loan repayment includes interest.
• There is a risk of unmanageable student loan debt.
Student loans may be the easiest way to fund your child's education, though it's important to look for options with low-interest rates or loans that you don't have to pay off until after graduation.
All in all, these three forms of financial aid can give you a great starting point for helping your student achieve his or her academic goals. Speak with a financial or college admissions consultant to determine which option or options work best for you. Keep in mind that you can help your student apply for all three forms of financial aid to increase the resources you'll have to pay for their education.