Grants and scholarships are the most sought-after type of financial aid by parents and students alike. The chief reason for this is that they don't have to be repaid. There is often confusion over the distinction between grants and scholarships; they are very similar to one another. Generally, the difference between the two is that grants don't usually have strings attached to them, while scholarships usually do.
For example, the HOPE Scholarship, a state scholarship funded by the Georgia lottery, is open to students who maintain at least a B average in school. Any student who is a Georgia resident and attends one of the state's public colleges or universities can take advantage of a full ride through school. HOPE Scholarships can be lost, however. It requires the student maintain a specific grade point average for each semester he or she receives state funding [source: GACollege411].
The federal Pell Grant, on the other hand, is tantamount to free money. It's a need-based grant open to American students who attend college in the United States. The Pell Grant is awarded on a sliding scale based on family income. Once approved, however, the funding doesn't depend on any type of performance or other factors. There's more good news: as a full-time student, you'll be eligible for 100 percent of the amount your family can take advantage of based on income. So if your family's expected contribution (from the Free Application for Federal Student Aid formula) is zero and you're a full time student, you can receive the maximum -- more than $4,000 each year -- for your college expenses [source: Ed.gov].
There's a universe of grants and scholarships available, with full-time students generally being eligible to take advantage of 100 percent of their amount. Both types fall into need or merit-based categories, and are offered by government agencies, private businesses and nonprofit organizations. Colleges and universities offer need and merit-based grants and scholarships for incoming students. This kind of financial aid is called institutional aid and colleges and universities have financial aid offices to help determine how much the school can offer you.
Once you've exhausted the scholarship and grant dollars you can collect based on your merits and need, you might find you still need more money to pay for your education. It's time now to turn to loans.