Gift Aid vs. Student Loans

First, congratulations on getting your first college award letter. Whether you’ve read the letter once or a few times for it to sink in, you may still have questions about the different options available to you. Perhaps there was no mention of any financial aid or scholarships but you were offered a federal loan – or maybe you were offered all of the above.

We get it, award letters can be confusing. It’s natural to wonder: What’s the difference between gift aid and student loans? Or, what needs to be paid back, and what’s yours to keep?

We’re here to help to answer some of your questions.

What is gift aid?

Gift aid is money that’s offered to qualifying students that doesn’t have to be paid back. Think of it as free money. This catch-all term usually refers to grants and scholarships. Gift aid isn’t exclusive to the federal government either – it can be given out by state governments, schools and colleges, non-profits, and private organizations.

As for how much you’ll get, that varies.

The amount may cover all your college expenses or just a portion of them.  For example, you may receive housing or tuition waivers or up to a certain amount per semester towards your tuition.

That’s why it pays (literally) to do some research to find out what you may qualify for.

How does gift aid differ from student loans?

Loans eventually need to be paid back (usually with interest added) either while in school or after you graduate. Gift aid, on the other hand, is money you don’t have to pay back.

Understanding the type of funding you receive is crucial since you’ll need to know if you’re going to be charged eventually — you’ll typically receive a financial aid offer letter after applying for the FAFSA and receiving your acceptance letter from the college.

The offer letter will show you how much it’ll cost to attend the school and any gift aid and loans offered. Keep in mind that it’s possible to accept a partial loan offer, rather than just take the entire amount offered.

For more help decoding financial aid award letters, check out our guide “Understanding and Reviewing Financial Aid Letters.”

Will I always receive offers for both gift aid and student loans?

Not necessarily.

While most applicants will be eligible for one or more types of federal loans, not all applicants will qualify for gift aid. That’s because there are specific qualification requirements — grants are typically need-based while scholarships are merit-based.

Even if your award letter includes offers for both gift aid and student loans, you don’t have to accept everything offered. In other words, you can accept the gift aid but turn down any offers for federal loans if you don’t want to borrow any money. The financial aid office at your school can guide you through how to accept an offer if you need some guidance.

When do I need to start paying back student loans?

It depends on the specific terms of your loan.

Generally, you’re not required to pay back federal student loans six months after graduation. That, or six months after a student drops below a half-time schedule — the six-month window is commonly known as the student loan grace period.

Most private lenders offer similar grace periods, and some, like College Ave Student Loans, offer choices about whether or not to make payments during school, which can lower the cost of your student loan.

No matter what, it’s always a good idea to pay what you can as soon as you can to begin tackling your student loan debt sooner rather than later.

Strategies for lowering your student loan costs.

Will the amount of gift aid I receive always be the same every semester?

Not necessarily.

The amount of gift aid you receive depends on the school. You’ll want to ask your school’s financial aid office if your offer will vary year to year, particularly when it comes to gift aid.

A few factors that can affect the amount you receive include:

  1. A change in enrollment status
  2. Not meeting certain requirements for your particular grant
  3. Your need for student aid went down

Plus, the annual federal loan limits for Direct Subsidized and Unsubsidized loans also vary year by year. For example, the typical undergraduate freshman who is still claimed as a dependent on their parents’ taxes can borrow up to$5,500 in federal loans to help pay for their first year in school. If that same student continues after freshman year, they would typically be eligible to borrow up to $6,500 to help cover the second year.

Make sure to visit for up-to-date information on federal loan limits.

What can I do if I don’t receive enough money?

Apply For A Student Loan

Even with financial aid and federal loans, students may not receive enough money to cover their college expenses. There is a lot more to budget for than just tuition – textbooks and other required course materials, transportation costs, and living expenses are all costs to consider.

When gift aid and student loans aren’t enough, it’s important to explore your other options when it comes to taking care of those college expenses. One option is to take out a private loan through College Ave Student Loans, where we offer a personalized loan that matches your individual needs. Explore our different student loans today to learn more, and to get started on the application process.


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