How is a Student Loan Different from a Scholarship?

Making a decision between two types of financial aid can be hard, until you don't know the differences. Learn the differences between Student loans and Scholarships to make a wise decision.

Updated by TCM Staff on 7th October 2020

The most important difference between Student Loans and College Scholarships is that student loans are basically a form of financial aid that you have to pay back after a period of time with a low-interest rate offered exclusively for students. But, scholarships are basically awards that make the student’s college fee and study-related expenses more affordable because they are directly calculated from your education cost. And these scholarships are not needed to be paid back.

In this article, we will be exploring the differences between Student Loans and Scholarships.

What is a Student Loan?

It is a type of loan credited to students in order to help them pay for their college/university fees and other studies related fee like tuition, books, and accommodation fee, the interest rate may be comparatively lower and you may get an extended repayment schedule depending on the type of the loan.

What is a Scholarship?

A scholarship is a form of financial aid awarded to students to pursue further education, this scholarship is awarded based on many criteria like talent, merit, leadership skills, and other unique attributes. The Scholarship provider uses this as marketing tactics or it reflects the values and social responsibility of the scholarship provider.

Student loans vs Scholarships

There are a few factors differences between student loans from a scholarship.

1. Receiving Money

Students receive financial assistance in the following forms : 

Student Loans

If you consider a student loan, the total amount is divided by semester or year basis and the loan providing companies pay up the amount to your college/university to cover your tuition fee and sometimes depending on the loan you are applying for, it may also include your books, school supplies, accommodation, and food expenses, or sometimes you may get the remaining money from which you will have to cover your living expenses.


Now taking scholarships into consideration, it is disbursed based on the scholarship provider. In most cases, the college provides scholarships, so they are directly paid form the finance department of the college. In the case of the third party as a scholarship provider, the money may directly be sent to the college or it may be given to you depending on the sponsorer and scholarship. 

2. Eligibility Criteria

On the basis of eligibility criteria, student loans and scholarships differ in the following ways:

For Student loans

As student loans are funded directly by the federal institution in order to get a federal student loan you will need to complete the FAFSA (Free Application for Federal Student Aid) and meet the eligibility and financial need requirements. For a private student loan, you will need to prove yourself how worthy are you to receive credit and assure the lenders that you can repay the loan. The loan lenders may also look at certain criteria like income and credit history in some cases.

For Scholarships

The eligibility criteria for each scholarship depends on the scholarship program and sponsorer. There are types of scholarships each scholarship has a different set of eligibility requirements.

To know more visit - Types of Scholarships

Pros and Cons of Student Loans and Scholarships

The pros and cons of student loans and scholarships are as follows:

Student loans



Repaying your loans and due on or before, helps you build your credit score by which you can get personal loans and credit cards with ease.

Though loans are fair and easy to get, it must be repaid with due interest within a period of time mostly after your education.

Student loans are easy to apply for and easy to get.and as a student you get loans with a very low-interest rate. 

As loan comes with an interest rate, the debt keeps accumulating until you repay your loans.

These student loans are credited based on the financial and need-based, and certainly not on academic achievements.

Your debt may get accumulated and when it becomes unmanageable it can create difficulties in the future and your ability to pay for other expenses.




They are completely free, so you don’t have to pay back the money that you have earned directly or indirectly.

Most of the scholarships are merit-based or related to attributes such as students’ backgrounds, community and etc.

You can apply for as many scholarships, and there is no limit restriction in the number of scholarships that you can win.

Choosing a scholarship and applying for it can be exhausting, it kills your try prioritizing the scholarships that you are going to apply for.

There are many types of scholarships, so you have a lot of chances to get one or more scholarships.

There are only very limited slots for each scholarship program, everyone can’t get into the program.

Winning a scholarship is an award for your talent and achievement, which helps you gain recognition, most essentially you have to proud of it.

In certain situations, the scholarship is awarded to people who may not be as deserving as others who were left out.

Can you get both Student loans and Scholarships?

You can apply for student loans even after winning a scholarship, but you may face the consequences because winning a scholarship can affect your loan eligibility sometimes.

When you have applied for a particular college/university or program, they will calculate your financial need. So at the end when you earn a scholarship(s) ultimately your cost gets reduced which results in making you eligible for less financial aid.

In rare cases, when a student’s scholarship did not meet his financial need, there are some scholarships called the first dollar scholarship where the recipient gets a specified amount that is awarded depending on the program guidelines. and sometimes the recipients are awarded the Last Dollar Scholarship which means they cover any remaining gap after all the aids are applied.


Things that you have to remember about Student Loans and Scholarships, student loans are just like any other loan, you will have to pay back eventually with the applied interest rate but for a student, it is easy to get a student loan whether federal or private academic excellence is not considered in most cases, but your creditworthiness is considered.

On the other hand, scholarships are prizes that awarded to you for your achievement or academic excellence or even the essays you submit. Prizes in the sense it is totally free you don’t have to pay back.

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