Grants vs. Scholarships: Differences Explained

Written by: The College Finance Team
Updated: 11/18/21

Grants and scholarships are college funding options to help offset the cost of attendance for college students. Although similar, this article will walk you through the main differences between grants and scholarships. Grants are normally offered to students with the most financial need, for instance, while scholarships are typically based on academic achievement. Keep reading to learn the key differences between these financial aid options for college students. 

What Is a Grant?

A grant is a type of federal aid for students to fund their education without having to repay the amount awarded. Grants can come from the federal government or state governments, private or nonprofit organizations, and universities, colleges, or career schools. There are four types of grants the U.S. Department of Education offers to eligible candidates, including:

To see if you qualify for a grant, you’ll need to submit a Free Application for Federal Student Aid (FAFSA). The FAFSA must be completed every year to be considered for financial aid, and the deadline can vary. 

Additional requirements to maintain grant eligibility will depend on the type of grant you’ve received. Also, bear in mind that each year has a federal deadline, as well as state and college priority deadlines. Since the application deadlines vary from college to college, it’s wise to check with the colleges you are interested in to ensure they receive the processed FAFSA data on time. 

Do Grants Have to Be Paid Back?

Unlike student loans, grants don’t usually need to be repaid and are free money for students demonstrating financial need. Although you won’t need to repay your grant in most cases, you may sometimes be required to pay back a portion of your grant. If you withdraw from a program that you were awarded a grant for, change enrollment status, receive additional funding that changes your financial status, or don’t meet the required obligations of your TEACH grant, then you’ll need to repay your federal grant. Your school will inform you if you must repay some of your grant and will give you 45 days to pay the required portion or join a satisfactory repayment option.

A satisfactory repayment arrangement allows students who have defaulted on a federal student loan to regain federal student aid. This arrangement can be used for students who defaulted on a loan and can be used only one time. To regain eligibility, students must repay six consecutive, on-time, and full payments on their defaulted loan. 

What Is a Scholarship?

A scholarship is a type of financial aid that provides partial or full funding to students. Scholarships are a fantastic way for college students to pay for their education without repaying the amount they were awarded. Often, scholarships are in niche subjects, tailored to students with different backgrounds, experiences, and interests. Scholarships are available all over the U.S., providing students with a variety of funding options from public and private organizations. 

Many organizations offer scholarships to students, including: 

  • State governments: Some federal agencies provide scholarships to students with similar interests or that align with the organization’s mission. For example, the National Oceanic and Atmospheric Administration (NOAA) offers scholarships to students with a passion for climate science.
  • Universities or colleges: Many institutions offer scholarship funding to attract new students. Often, scholarship funding is provided by wealthy donors so the school can attract applicants with similar interests or passions.
  • Nonprofit organizations: Charitable organizations will often provide certain communities with scholarship opportunities. Often, these scholarships will depend on the student’s background, heritage, and experiences. First-generation college students, families who have faced financial hardships, and minorities are often eligible for these types of scholarships. 
  • Corporations: Organizations like McDonald’s, Starbucks, and Coca-Cola sponsor college scholarships. They may fund employees or donate toward specific community education. 
  • Sports organizations: More than 180,000 students receive athletic scholarships. Often, these scholarships cover room and board, tuition, and other school fees. 

In addition to these scholarship options, scholarships can be based on additional criteria. Sometimes, students can be awarded scholarships based on contests (e.g., writing or journalism) and even random chance

Key Differences Between Grants and Scholarships

Both grants and scholarships don’t usually need to be repaid. Although they both provide students with financial assistance, the eligibility criteria are different. Grants, for example, are usually based on financial need, whereas scholarships can be based on merit.

Source of Funding

Funding for grants and scholarships can vary greatly. Grants can come from the federal government, state governments, colleges, and nonprofit organizations. Unlike scholarships, grant eligibility is typically based on financial need. 

Scholarship funding, on the other hand, comes from a multitude of institutions and organizations. Scholarship funding can come directly from schools, donors, state governments, government agencies, corporations, or nonprofit organizations. They’re awarded to students of certain backgrounds, talents (sports, music, etc.), and academic merit. 

How Recipients Are Determined

Grant recipients are typically chosen based on financial need. By completing the FAFSA, students disclose their income and financial information. 

Scholarships, on the other hand, are usually merit-based and require test scores. Students must typically prove academic or athletic ability to qualify for a scholarship. Additionally, scholarship awardees must continue to maintain certain requirements to continue receiving funding. 

Restrictions on Those Receiving Funds

Specific requirements between grants and scholarships also vary greatly. To remain eligible to receive grants, requirements will vary from grant program to program. For example, the Federal Pell Grant Program is usually for undergraduate students and requires those receiving funding to maintain undergraduate enrollment in a nonforeign country and complete the FAFSA form annually. Meanwhile, maintaining eligibility for the Federal Supplemental Educational Opportunity Grant Program (FSEOG) will depend on your FAFSA and other factors your college considers. 

Many scholarships have maintenance requirements that are similar to grant requirements. Some may request that students maintain a minimum GPA to renew their scholarships. However, exact requirements will vary based on which scholarship(s) you received. 

What’s Better, a Grant or a Scholarship?

Both grants and scholarships are good financial aid options for students. Students who receive grants or scholarships won’t typically have to pay back the funds they receive if they maintain the eligibility requirements throughout their course of study. When it comes time to apply for funding, though, it’s wise to apply for grants first. Then, apply for scholarships. Applying for both a grant and scholarships can help you maximize your education funding so you can focus on earning your degree. 

To receive a grant or a scholarship, you will typically need to apply online. To receive grant money, you will need to complete the FAFSA. In some cases, you may also be required to prove financial need when applying for scholarships, as well. Usually, each organization will have a unique application process.

Discover More About Grants and Scholarships at

Although both grants and scholarships provide students with funding, the eligibility requirements are not always the same. In most cases, grants are for students who demonstrate clear financial need, while scholarships are typically merit-based. Unlike student loans, they are both gift aid, meaning that recipients don’t need to repay the amount they are given. 

Unsure about which grants or scholarships you are eligible for? has a variety of grant and scholarship guides to help you plan for funding your education. Our guides will walk you through applying for grants and scholarships so you can maximize your free money for education. 

Once you’ve applied for federal and state grants and scholarships, you may need to look into federal and private student loans. Visit our website to learn more about the different types of financial aid to get the most out of your college investment. Compare federal and private student loans, learn how to repay your student loans, and manage your college funding.