Student grants vs loans in the US: what to accept first
Student grants vs loans in the US: how grants, scholarships, work-study and federal loans differ, what to accept first and how to read your aid offer.
Your college financial aid offer can look like one big number, but it is usually several kinds of aid with very different consequences. Some of it is free. Some of it you earn. Some of it you repay with interest. This guide explains the difference and the order to accept aid, using Federal Student Aid definitions.
The main types of aid
Grants
Federal Student Aid describes grants as financial aid that generally does not have to be repaid. Federal grants include the Pell Grant, the FSEOG and the TEACH Grant, which can convert to a loan if you do not meet its service obligation. States and schools also offer grants.
Scholarships
Scholarships are also gift aid you do not repay. They come from schools, employers, community groups, foundations and others, and are often merit-based or tied to specific criteria.
Work-study
Federal work-study provides part-time jobs for students with financial need. You earn the money by working, so it is not guaranteed until you work the hours.
Loans
Federal student loans must be repaid with interest. Federal Direct Loans include subsidized loans, where the government pays interest while you are in school at least half-time for eligible undergraduates, and unsubsidized loans, where interest accrues from disbursement. Private loans from banks and other lenders also exist, typically with fewer protections than federal loans.
The order to accept aid
A sensible order for most students:
- Grants and scholarships. Free money first.
- Work-study, if you can manage the hours alongside your studies.
- Federal subsidized loans, if you still need funds.
- Federal unsubsidized loans.
- Parent PLUS or private loans, only after careful thought.
You do not have to accept the full amount of loans offered. You can accept part of a loan or decline it.
How to read your aid offer
- Separate gift aid from self-help. Gift aid is grants and scholarships. Self-help is work-study and loans.
- Calculate your net price. Cost of attendance minus gift aid is what you or your family must cover with savings, earnings or loans.
- Check whether amounts are per year or per term.
- Check renewal conditions for scholarships and grants.
- Ask questions. Your financial aid office can explain anything unclear.
Why grants are not always permanent
Grants generally do not have to be repaid, but Federal Student Aid notes exceptions, such as withdrawing early from the program the grant was for. The TEACH Grant converts to a loan if you do not complete the service obligation. Read the conditions.
Getting more grant aid
- File the FAFSA early every year. See FAFSA step by step.
- Meet state deadlines. See state grants like Cal Grant and TAP.
- Apply for scholarships. See scholarships for US students.
- Appeal if circumstances change. If your family's finances have changed significantly, ask your financial aid office about a professional judgment review.
Borrowing wisely
If you need loans:
- Borrow only what you need for education costs.
- Prefer federal loans to private loans, because federal loans offer protections such as income-driven repayment options.
- Estimate your monthly payments and compare them to expected starting salaries in your field.
- Keep track of your total borrowing in your StudentAid.gov account.
Frequently asked questions
Can I decline a loan and keep my grants? Generally yes. Declining loans does not usually reduce grants. Ask your school to confirm.
Is work-study money guaranteed? No. You earn it by working.
Are scholarships ever repaid? Usually not, but some have conditions. Read the terms.
Should I take the maximum loan? Only if you need it. You can accept less.
What is the difference between subsidized and unsubsidized loans? For subsidized loans, available to eligible undergraduates with financial need, the government pays the interest while you are in school at least half-time. For unsubsidized loans, interest accrues from disbursement.
Before you apply: a quick checklist
- Use the official application site, never a paid third-party service. Applying for government student aid is free.
- Check the current year's deadlines on the official page and on your school's financial aid site.
- Gather your ID, tax information and, if required, a parent's or spouse's information before you start.
- Apply every year you need aid. Most programs require a new application for each school year.
- Read your award notice to see which parts are grants and which are loans.
- Keep your school's financial aid office in the loop. They can explain your package and point to bursaries or scholarships you may have missed.
- Watch for scams: no legitimate program charges a fee to get a grant or scholarship.
Questions to ask your financial aid office
Your school's financial aid staff see hundreds of situations like yours every year. Before you accept an offer or make a big decision, ask them:
- Which parts of my package are grants or scholarships, and which are loans or work-study?
- Are there school bursaries, scholarships or emergency funds I have not applied for yet?
- What happens to my aid if I drop a course or change my program?
- What do I need to do to keep this funding next year?
- Can my aid be reviewed if my family's income has changed?
Write down the answers and the name of the person you spoke with, so you can refer back to them later.
Keep exploring on GrantSift
Find student funding that fits you
Official aid pages are the source of truth, but scholarships, bursaries and grants are scattered across governments, schools and foundations. GrantSift brings student funding from official sources in the US and Canada into one place, with a short student check that matches programs to your province or state, level of study and field. Every listing links to the official page, and student aid that is a loan is labelled as a loan. Search scholarships and student grants or see plans and pricing.