Which type of financial aid is considered free money? Grants and scholarships. Both grants and scholarships are gift aid — free money that does not have to be repaid, unlike loans. The difference is who gives them and how you qualify: grants are usually need-based and come from governments and colleges, while scholarships are usually merit-, talent-, or criteria-based and come from colleges, foundations, companies and community groups.
Key Details
- Both are free money: Grants and scholarships are gift aid that never has to be repaid.
- Grants: Usually need-based, from federal and state governments and colleges.
- Flagship grant: The Federal Pell Grant, awarded via the FAFSA.
- Scholarships: Usually merit-, talent-, or criteria-based, from colleges, foundations, companies and community groups; many also consider need.
- Stacking: You can receive a grant and a scholarship at the same time.
- Not free money: Work-study is earned, and loans must be repaid with interest.
Key Differences: Grants vs Scholarships
| Grants | Scholarships | |
|---|---|---|
| Source | Federal and state governments and colleges | Colleges, foundations, companies and community groups |
| Basis | Usually need-based | Usually merit-, talent-, or criteria-based; many also consider need |
| How you apply | Via the FAFSA | Separate applications |
| Typical amounts | Amounts vary | Amounts vary widely |
Grants: Need-Based Free Money
Grants are usually need-based and come from federal and state governments and colleges. The flagship grant is the Federal Pell Grant, which is awarded via the FAFSA. Grants are gift aid, so they do not have to be repaid.
Scholarships: Merit-Based Free Money
Scholarships are usually merit-, talent-, or criteria-based and come from colleges, foundations, companies and community groups. Many scholarships also consider need. Scholarships are gift aid too, so they do not have to be repaid.
Benefits of Free Money
- Grants and scholarships never have to be repaid — unlike loans, which must be repaid with interest.
- You can receive a grant and a scholarship at the same time and stack them.
- Grants cover financial need through the FAFSA, while scholarships reward merit, talent or other criteria.
Myths About Grants and Scholarships
- Myth: You have to choose one. You can receive both a grant and a scholarship at once and stack them.
- Myth: Work-study is free money. Work-study is not free money — it is earned.
- Myth: All financial aid works the same. Loans must be repaid with interest; grants and scholarships do not have to be repaid.
How to Get Grants and Scholarships
- File the FAFSA to be considered for grants, including the Federal Pell Grant.
- Apply for scholarships through separate applications to colleges, foundations, companies and community groups.
- Stack both — receive grants and scholarships at the same time to cover more of your costs with free money.
Official Link
Official website: https://studentaid.gov
Related Guides
Read our guides to student loan wage garnishment delayed until 2027 and Going Merry scholarships.
Frequently Asked Questions
Which type of financial aid is considered free money?
Grants and scholarships. Both are gift aid that does not have to be repaid, unlike loans.
What is the difference between a grant and a scholarship?
Grants are usually need-based and come from federal and state governments and colleges, while scholarships are usually merit-, talent-, or criteria-based and come from colleges, foundations, companies and community groups. Grants are awarded via the FAFSA, while scholarships use separate applications.
Do you have to pay back a grant?
No. A grant is free money — gift aid that does not have to be repaid, unlike a loan, which must be repaid with interest.
Can you get a grant and a scholarship at the same time?
Yes. You can receive both at once and stack them.
Is work-study free money?
No. Work-study is not free money — it is earned.