The Key Differences Between Grants and Scholarships for College Financial Aid

Navigating financial aid options can be downright confusing for students and families figuring out how to pay for college. Two common terms you’ll encounter are “grants” and “scholarships.” Both provide money for college that doesn’t need to be repaid, which sounds great. But they are far from identical. Understanding the distinctions between grants vs scholarships is critical when mapping out your financial aid strategy.

What Are Grants Exactly?

Let’s start by defining what grants are. Grants are a type of financial aid primarily from the federal government, state governments, and colleges/universities that is awarded based on financial need rather than academic merit or talents. They aim to help lower-income students and families pay for college when their Expected Family Contribution is not enough to cover the full cost of attendance.

The largest federal grant program is the Federal Pell Grant, awarded solely based on financial need. For 2022-23, the maximum Pell Grant award is $6,895. Eligibility is determined by you submitting the Free Application for Federal Student Aid (FAFSA) which calculates your Expected Family Contribution (EFC).

If your EFC falls below a threshold set annually by Congress (currently $6,206), you’ll qualify for a Pell Grant. The lower your family’s EFC, the higher your Pell Grant award will be, up to the max amount. Over 7 million students received Pell Grants totaling $28.7 billion in 2020-21.

In addition to Pell Grants, the federal government offers other need-based grants like:

  • Federal Supplemental Educational Opportunity Grants (FSEOGs) – Between $100 and $4,000 per year
  • Teacher Education Assistance for College and Higher Education (TEACH) Grants – Up to $4,000 per year for future teachers
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States also offer their own need-based grant programs for residents, such as the Cal Grant in California and the Excelsior Scholarship in New York. Award amounts vary but help cover public college/university tuition or other expenses. Colleges and universities themselves also commonly provide institutional need-based grants to enrolled students with financial need, funded from their endowments and budgets.

Grants from all sources do not need to be repaid, giving lower-income students essential financial assistance for college when family earnings alone are inadequate. Students can receive multiple grants from several providers concurrently to reduce unmet need.

What Are Scholarships Then?

Now that we’ve explained grants, what exactly are scholarships? Scholarships are another type of financial aid that does not require repayment. But a key difference from grants is that scholarships are awarded based on criteria like:

  • Academic merit – GPA, SAT/ACT scores, class rank, academic honors
  • Athletic, artistic, or extracurricular talents – Sports, music, forensics, theater, dance, journalism, leadership roles
  • Field of study or career interests – Healthcare, engineering, business, teaching, technology, research
  • Affiliation – Employers, professional associations, labor unions, religious organizations, military/veteran status
  • Demographics – Gender, race/ethnicity, religion, family ancestry, sexual orientation

Scholarships recognize students for exceptional achievements, abilities, affiliations, or backgrounds. There are thousands of scholarship programs offered by:

  • Colleges and universities – Academic merit, extracurriculars, alumni legacy
  • Corporations and employers
  • Professional and trade associations
  • Nonprofits supporting specific causes – Diversity, community service, health research
  • Churches, mosques, synagogues, temples
  • Veterans groups like the American Legion
  • Union groups like the AFL-CIO
  • Identity-based organizations – National organizations like UNCF and Hispanic Scholarship Fund, or local groups

Scholarships vary widely in award amounts from several hundred dollars to covering full tuition and more. Some are one-time awards while others are renewable annually.

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Competitive applications are usually required where students are evaluated based on achievements, skills, essay quality, interview performance, etc. The most prestigious academic scholarships like the Rhodes Scholarship or Marshall Scholarship require exceptional applicants.

Unlike grants focused exclusively on financial need, scholarships recognize applicants meeting certain criteria regardless of need, although some do consider socioeconomic background as an additional factor.

Students from all income levels can potentially earn scholarships through hard work developing their talents and applying strategically. The more scholarships you apply for, the better your chances at winning free financial aid.

Comparing Key Characteristics of Grants vs Scholarships

Now that we’ve defined grants and scholarships separately, how exactly do they differ? Here is a comparison of some of the most important distinguishing characteristics:

Eligibility Criteria Grants: Based on financial need – household size, income, assets, etc. You must demonstrate need by completing the FAFSA.

Scholarships: Based on merits like academic success, sports, arts, leadership roles, field of study, demographics, affiliations, etc. Financial need may also be considered but not required.

Awarding Organizations Grants: Federal and state governments along with colleges/universities

Scholarships: Wide range including colleges, employers, associations, nonprofits, community groups, religious organizations, etc.

Application Process and Timing Grants: Complete FAFSA to assess need for federal/state grants. Institutional grants awarded once accepted and enrolled. Less competitiveness if eligible.

Scholarships: Extensive applications often required assessing qualifications before enrollment. Highly competitive.

Award Amounts Grants: Award amounts based on government formulas and student need within program limits. Typically $500 to $6,500 range.

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Scholarships: Vary widely from minimal to covering full tuition and more depending on specific program.

Renewal Policy Grants: Renewed annually by filing FAFSA again demonstrating continued financial need.

Scholarships: May require reapplying and/or maintaining certain criteria like GPA each year.

Payments Grants: Paid directly to college/university chosen by student and applied to tuition and fees.

Scholarships: Also paid to school for tuition and fees. Any remainder refunded to student for other costs.

Taxability Grants: Not taxed for degree-seeking students using funds for qualified educational expenses.

Scholarships: Generally not taxed when used fully for tuition, fees, books, supplies, and equipment.

Ideal Strategies for Leveraging Grants and Scholarships

Hopefully I know you now have a clearer picture of how college grants and scholarships differ. Making use of both can be invaluable for keeping your debt down. Here are some tips for effectively obtaining grants and scholarships:

  • Submit the FAFSA annually by state deadlines to access grants
  • Thoroughly research potential scholarship options early
  • Start applying for relevant scholarships in 11th and 12th grade
  • Target scholarships that fit your qualifications and strengths
  • Craft polished, thoughtful applications and essays
  • Request strong recommendation letters from teachers, counselors etc.
  • Prepare thoroughly for interviews and communicate effectively
  • Maintain grades, activities, affiliations tied to renewable scholarships
  • Contact college financial aid office about grant options upon acceptance
  • Notify colleges if you receive outside scholarships to adjust aid package
  • Use all grant and scholarship funds strictly for educational expenses

The more time and effort you devote to the process, the higher your chances of securing these critical no-debt resources. Reduce reliance on loans and build an affordable pathway to your degree!


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