Since old times, college has always been synonymous with expenses and with the rising inflation in every sector, education has not remained untouched. To make sure that college and higher education do not turn out of student’s reach and to bridge the gap, various forms of monetary assistance are available. These include grants, loans, scholarships and other forms of financial aid.
It is seen that many people are under the false impression that loans and financial aid are same and tend to use these terms interchangeably. But this is not the case and it is important to know the basic difference between them before opting for any of them.
A student loan is form of financial assistance provided to students (undergraduates, graduates or professionals) to pursue their education. They can be federal loans or private loans and are usually paid back at the end of the course term. A financial aid, on the other hand, is an umbrella term consisting of different forms of financial assistance like grants, scholarships, stipends, fellowships, internships and work-study programs. A student loan is also providing financial assistance and thus financial aid and loans are not synonymous, instead student loans are a part of financial aid.
The difference between financial aid and student loan are –
• Repayment terms – Financial aid in the form of grants and scholarships are not repaid while student loans need to be repaid and this repayment consists of principal and interest component.
• Criteria for Eligibility – To get a financial aid, it is important that the person fulfils the required criteria like income level below a certain amount, high grades, member of some native group etc. the eligibility criteria for student loans is the credit history of the person. Federal loan providers follow less stringent rules of credit compared to private lenders.
• Grantor – Financial aid is provided by individuals, organizations and government while student loans are provided by lenders like financial institutions, banks and government.
• Renewal – A financial aid can be renewed mostly if a person shows a proof that he is still studying. Student loans cannot be renewed.
• Application – A financial aid is provided for a specific application and the amount is also fixed. In case of loans, expenses apart from tuition and fees are also considered. The amount of loan is dependent on one’s needs and financial situation.