Scholarships vs. Student Loans: Which One Should You Go For?

When it comes to financing your education, scholarships and student loans are two common options that students around the world often consider. Both of these options can certainly help you handle the financial burden of pursuing your higher education. However, it must be noted that they come with several distinct features and implications. So, here in this article, we are going to learn in detail about the financial aid of student loans, loan vs scholarship student debt, and other education grants. Let’s take a look at the types, pros, and cons of each and have a better understanding of loans and loan comparison.

What are Student Loans?

You must have heard of student loans, right? These student loans are financial aid packages that are specially designed to help students pay for their education expenses. They are totally different from scholarships as scholarships actually represent free money. However, student loans require borrowers to repay the borrowed funds, often with interest, after graduation or when they are no longer enrolled in school.

Types of Student Loans

When you apply for student loans, keep in mind that the student loans are usually of two types: Federal Loans and Private Loans

Federal Student Loans:

These are issued by the federal government of the state and it could be of following types:

Direct Subsidised Loans:

These loans are available to undergraduate students with financial need. The government pays the interest while the borrower is in school or during deferment periods.

Direct Unsubsidised Loans:

These loans are available to undergraduate and graduate students, irrespective of their financial need. Interest is charged from the moment the loan is disbursed, and borrowers are responsible for the interest payments.

Private Student Loans

Private loans are offered by banks and other financial institutions. They often require a good credit history and may have variable interest rates. Some online platforms also offer student loans with competitive rates and flexible repayment terms, thereby, making them increasingly popular among borrowers.

Pros and Cons of Student Loans


Student loans can provide access to education for those who may not have the financial means to pay for tuition fees upfront. Also, responsible repayment of student loans can help establish and improve your credit score.


Unsubsidised loans charge interest from the moment they are disbursed and this potentially leads to significant debt upon graduation. Moreover, student loans can lead to substantial debt, which can take years or even decades to repay, impacting your financial future. Also, loan payments can limit your financial flexibility after graduation, affecting your ability to save, invest, or make major life decisions.

What are Scholarships?

Now, let’s talk about scholarships! Well, scholarships are financial awards given to students based on various criteria, such as academic achievement, athletic prowess, community involvement, or specific talents. Unlike loans, scholarships do not need to be repaid, making them an attractive option for students looking forward to getting financial assistance for their education.

Types of Scholarships

Here are the following scholarship opportunities students can avail of:

Merit-Based Scholarships

One of the most popular scholarships, these scholarships are awarded based on academic achievement, standardised test scores, or other accomplishments. They reward students for their hard work and academic excellence.

Need-Based Scholarships

These scholarships are awarded to students with financial need. They aim to make education more accessible for those who do not have the means to pay for tuition and other expenses.

Athletic Scholarships

Athletic scholarships are usually given to students who excel in sports. These scholarships can cover part or all of the cost of attending college or university and are majorly offered by the institution’s athletic department.

Creative or Talent-Based Scholarships

These scholarships are awarded to students with exceptional skills or talents in areas such as art, music, dance, or writing.

Minority or Diversity Scholarships

Many organisations and institutions also offer scholarships to promote diversity and inclusion in higher education. These scholarships are often aimed at underprivileged groups.

International Scholarships

Some scholarships are available to international students pursuing higher education in a foreign country. These can be based on merit, need, or other criteria.