Before we guide you how to search for a scholarship, it’s important to understand the basic components of financial aid. Financial aid is a broad term encompassing all the different ways to pay for higher education. Financial aid typically falls into three broad categories: scholarships and grants, federal student loans, and private student loans.

Scholarships and grants

Scholarships and grants are the best form of ?nancial aid because in all but a few cases, you never have to repay the money you receive. Scholarships tend to be awarded based on demonstrated ?nancial need or applicant’s merits, while grants tend to be awarded based on field of study or focus (with the exception of federal grants, which are need-based, such as the Pell Grant). For this guide’s purposes, the terms will be used interchangeably.

Federal student loans

Federal student loans are student loans that are backed by the U.S. Government. They typically have ?xed interest rates and must be repaid over a period of ten years. Federal student loans also offer borrower protections such as deferments and forbearances that allow borrowers to temporarily suspend their payments, as well as loan forgiveness or loan cancellation. Federal student loans may be issued by the government or by a private company such as the Student Loan Network.

Private student loans

Private student loans are loans that are backed and issued by private companies. They typically have variable interest rates and usually have less
favorable terms than federal student loans. Private student loans are often used to “?ll the gap” between federal ?nancial aid and any remaining expenses.

Generally speaking, apply for scholarships and grants first, then federal student loans, and finally private student loans as needed. Unless it’s to earn frequent flyer miles or other rewards and you have the cash on hand to immediately pay off the debt, avoid using credit cards and other forms of high-interest loans to pay for higher education expenses.