Quick answer: Scholarships and grants are free money. You do not pay them back. Grants are usually based on financial need. Scholarships are often based on grades, talent or who you are. Loans must be paid back with interest. Use scholarships and grants first, loans last.
Side by side
| Scholarships | Grants | Loans | |
|---|---|---|---|
| Pay back? | No | No, unless you withdraw early (or a TEACH Grant turns into a loan) | Yes, with interest |
| Usually based on | Grades, talent, major, background, sometimes need | Financial need | Federal: filing the FAFSA and attending at least half-time. Private: your credit. |
| Who gives it | Schools, companies, nonprofits, community groups | Federal government, states, schools | Federal government, banks, online lenders |
| How to apply | A separate application for each one | Mostly the FAFSA | FAFSA for federal loans; lender’s form for private |
| Example | A $1,000 award from a local business | Pell Grant (up to $7,395 in 2026–27) | Federal Direct Loan (6.52% for undergrads in 2026–27) |
Scholarships
A scholarship is a gift for school. You usually apply with an essay, grades or a form. Some have rules, like keeping a certain GPA or studying a certain major. Read How to Find Scholarships.
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Grants
A grant is also a gift. Most grants are based on need. The FAFSA decides your need using your Student Aid Index (SAI). The biggest federal grant is the Pell Grant. See Types of Financial Aid.
Loans
A loan is borrowed money. You pay it back with interest, usually after you leave school. Federal loans come first. Most have fixed rates and income-based repayment. Private loans come last. See Student Loans in 2026.
How they work together
- Your school adds grants, scholarships, work-study and loans into one aid offer.
- If you win an outside scholarship, tell your school. It may lower another part of your aid, often loans first. Ask how your school does it.
- From 2026–27, if non-federal grants and scholarships cover your full cost of attendance, you cannot also get a Pell Grant.
Sources
- Federal Student Aid: 2026–27 Pell Grant amounts
- Federal Student Aid: 2026–27 loan interest rates
- Federal Student Aid: One Big Beautiful Bill Act updates
Last checked: November 6, 2026.
