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FAQ

What is the difference between grants and student loans in financial aid?

Answered on November 8, 2026

The difference comes down to repayment. A grant is money you do not have to pay back. A loan is money you borrow, and you pay it back with interest. 1

Grants usually go to students with financial need. The biggest federal grant is the Pell Grant, for undergraduate students from low-income households. Most grants stay yours as long as you stay enrolled and finish the term. A few have strings attached. A TEACH Grant turns into a loan if you do not complete the required teaching service. 1

Federal student loans come in a few types. Direct Subsidized Loans go to undergraduates with financial need, and the government pays the interest while you are in school at least half-time. Direct Unsubsidized Loans are open to most students, and interest starts building from the day the money is disbursed. Direct PLUS Loans go to graduate students and parents of dependent undergraduates. You sign a Master Promissory Note for any federal loan, which is a legal promise to repay the full amount plus interest. 1 2

Most aid offers mix both types. Federal Student Aid suggests accepting aid in this order: money you do not repay first, earned money like work-study second, and borrowed money last. That order keeps your debt as low as possible. 2

Before you accept a loan, check the amount against what you actually need. You can turn down part of a loan, or all of it. Grants and scholarships cover the same costs without adding debt, which is why they are worth chasing first. Our guide to student loans for single mothers walks through the federal loan types in more detail. 2

Sources & notes

Data and figures on this page come from the sources and notes below:

Footnotes

  1. Financial Aid Dictionary: Top Terms Related to Grants, Work-Study, and Student Loans , studentaid.gov. ↩ ↩2 ↩3

  2. Accepting Financial Aid , studentaid.gov. ↩ ↩2 ↩3

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