College Students

Pros and Cons of Student Loans, Grants and Scholarships (and a List of The 10 Best)

EPF Last Update: June 3, 2020

Imagine that you are a grad school owner.

You offer only one class with 10 attendees. Now, let’s say that 7 of those students cannot pay your class right now so they asked your brother (a banker) for a student loan. By the end of the course, they will pay him back.

What happens if 5 of those 7 did not repay your brother on time?

This is exactly what’s happening to lenders and educational institutions in the US. Approximately 77% of grad students apply for a student loan and from those, only 30% pays-off their debt before leaving school.

Although student loan might be an option so you can get to a renowned institution, there are other financial opportunities for you.

We from ElitePersonalFinance compiled the pros and cons of student loans, school/college grants and scholarships for you. By the end of the post, you will get a list of the 10 best scholarships and student loans available.

What is a Student Loan?

A student loan is a category of loan offered to students so they are able to pay for educational-related expenses. These expenses range from books, college tuition, living expenses to supplies.

The main criteria for a student loan is paying back the amount borrowed with interests. In comparison, you must see a student loan the same way as a mortgage or car loan.

There is also a variety of types of student loans divided between federal and private.

Federal Student Loans (FAFSA): Stafford Loans (or Direct subsidized federal loans), unsubsidized loans, PLUS Loans, Parent PLUS Loans.

Private student loans: In school for parents and students, refinanced loans for graduates and Consolidation loans.

Pros of student loans:

  • They help cover educational expenses.
  • They increase your opportunity for better colleges.
  • Students might use the amount to cover other financial expenses besides education.
  • If paid on time, they help to build credit.

Cons of student loans:

  • They must be repaid.
  • Savings and income from part-time job may not be enough to cover it.
  • You start your financial live with debt.
  • You may have to sacrifice other life goals.
  • Defaulting will damage your credit really bad.

List of 10 Best Student Loans

What is a Scholarship?

Scholarship is a financial support for students so they are able to further their education. It is offered by different institutions, schools, non-profits, community organizations, and businesses.

Their approval is usually merit-based but there are other eligibility factors. These factors might range from grade point average, specific academic programs, degree level, age, nationality, etc.

Some scholarships cover any education-related cost. While others include tuition or limited aspects depending on the program.

Students must also be aware of the application period. The sooner they apply for the program, the higher the chances of getting the scholarship. Each organization provides a limited amount of funds per year.

Pros of scholarships:

  • You do not have to pay them back.
  • They make your resume stand out.

Cons of scholarships:

  • Very selective programs with high competition.
  • You have to maintain some requirements during each semester.
  • It might be less flexible on how to spend compared to loans.

List of 10 Best Scholarships

What is a School or College Grant?

School or college grants are financial aid provided for the students in a financial-need situation.

Grants are also an option for those who are willing to start a specific project abroad and need financing for it. It might come from non-profit organizations, private companies, the Federal and State Government.

Differently from Scholarships, school grants are often need-based and their requirements range from family income, dependency status, full-time or part-time status, students with disabilities, etc.

The most common types of school grants are the Pell Grants, TEACH Grants, the Federal Supplemental Educational Opportunity Grants (FSEOG), and Iraq and Afghanistan Service Grants. You might also find State grants and private school grants depending on each educational institution.

Pros of school grants:

  • They do not have to be repaid.
  • You might get more than one.

Cons of school grants:

  • Restricted: Financial-need based only.
  • Highly competitive.

Recommended Articles

Debt

5 Tips After The Federal Government Shutdown

EPF January 22, 2019

The Government shutdown has affected about 800,000 federal employees and thousands of contractors. Some are due to work without the direct pay, some given temporary leave (not paid for), and others have not yet received payment since the shutdown began....

Debt

The Financial Impact of The Government Shutdown

EPF January 16, 2019

A financial impact is growing drastically due to a disaster that is beyond control on government institutions. This follows significant effects already flowing through the economy thus causing financial problems for millions of people who rely on the government as...

AS SEEN ON