How is a Scholarship Different from an Education Loan?

Aspiring students often choose two key funding options when studying abroad: loans and scholarships. Generally, borrowers are on the hook to repay education loans for students with interest, while scholarship awards are money sponsored by acclaimed institutions — meaning you never have to pay them back. Even if scholarships don’t fully cover your costs, they can reduce the borrowing amount.

Here’s a detailed look at the differences between student loans and scholarships.

Understand Student Loans

A student loan is a type of financial aid designed as an education loan for students to help them pay for their education abroad. Public and private lenders typically offer student education loans, which can cover tuition, fees, books, and other expenses.

There are two types of education loans: Public and private. The government offers student loans with lower interest rates than private student loans. On the other hand, banks and other financial institutions offer student loans with higher interest rates and strict repayment terms. Students must provide documents to qualify. Once the loan is approved, the student will receive the funds and be responsible for repaying the loan at the mentioned time, including the interest that accrues after graduation.

How does it work?

It is important to consider the terms and conditions of any student loan products before applying, as a wrong student loan can have long-term financial consequences. Here’s a detailed description of how student loans work.

• The borrower applies for a student loan through a financial institution like a bank or government.
• The financial institution reviews the borrower’s credit history, income, and other financial information to determine their eligibility.
• If the borrower gets approval, they will receive the funds through a cheque or direct deposit.
• The borrower must repay the loan, including the interest, according to the loan agreement terms. The interest typically involves making monthly payments for some time.
• If the borrower cannot make their loan payments, they may be able to negotiate a new payment plan or seek other options, such as consolidation.

Understand Scholarships

Scholarships are financial awards to help students pay for their education. It is financial aid based on various criteria, such as academic merit, financial requirements, competency, or talent in a particular subject. Many scholarships are based on competitive exams, meaning students must meet certain requirements for the award. Some scholarships are also need-based, awarded to students who demonstrate financial need.

How does it work?

Scholarships for students are available through many sources. Therefore, it is a good idea to research and apply for as many scholarships as possible.

• Many sources include financial aid offices, online programs, and public or private organizations. Consider your requirements when searching for scholarships.
• Scholarships will have their own set of eligibility criteria. Ensure you understand the eligibility criteria before applying.
• You must have certain documents prepared when filling out the scholarship application, such as transcripts, letters of recommendation, and personal essays.
• Follow the instructions to provide all the required information and materials. Be sure to answer all questions and pay attention to deadlines.
• Submit your completed application. 
• Applicant must provide additional information or attend an interview if selected. Be sure to follow the instructions you receive and respond promptly.

Difference between Scholarships and Education Loans

Scholarships	Education Loans
A scholarship is a financial aid that a borrower must not repay.	An education loan for students is a type of financial aid that borrowers must repay.
Educational Institutions, public and private institutions, offer scholarships.	Financial institutions typically offer Education loans for students.
Scholarships for students are awarded based on merit, requirements, and other parameters. Therefore, they are not repaid.	Education loans for students are credited based on the borrower’s ability to repay the loan.
Since there is no requirement to repay, scholarships do not affect borrowers.	Education loans for students may harm the borrower in case of default.
Scholarships are available only if the student clears the competitive exams.	Education loans are available only if the student meets the requirements.

Final Thought:

Whether attending college for the first time or pursuing higher studies abroad, paying for tuition, stationery supplies, and other costs can be daunting. Fortunately, various forms of financial aid like scholarships and education loans are available to help make investing in higher studies financially feasible. However, EduLoans provides complete assistance in selecting the right financial aid so you can study without worries and your loved ones remain stress-free. Reach out to our counselors for more information.