Student Loans vs Financial Aid

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Author: Joseph Reinke, CFA

When you go to college, you have to make a decision: student loans vs financial aid.  They are often times referred to as the same thing but they are not.

Most students go first to student loans.  Most likely because they are easier to get.  As of the Q2 2022, there was $1.75 trillion in student loan debt in the United States. The average per person is hovering around $30,000 and most are getting too much debt for the degree they are receiving.

Student loans and financial aid are both ways you could fund your education. But which do you want to do?

Below, I go over the differences between student loans and financial aid so you can make an informed decision.

First Things First

The first thing you’ll need to do is fill out the free application for Federal student aid (FAFSA).

This is how you’ll qualify for federal loans as well as grants and other forms of financial aid available on a Federal and state level.

What’s The Difference Between Student Loans And Financial Aid?

The biggest difference between student loans and financial aid is that student loans are required to be paid back with interest.

Financial aid such as grants or scholarships do not need to be paid back.

Your priority when it comes to financial aid should be grants and scholarships.  However, they are often times harder to get.

Student Loans

You actually have several options when it comes to student loans.

There are federal as well as private options that you can pick between.

Federal loans are generally preferred because they usually have lower interest rates.  They give you more flexibility with repayment options than private options. For example, access to income driven repayment plans.

Private loans should really be used as a last resort. You have no repayment flexibility and they usually have higher interest rates.  In fact, if you are going to graduate school, you most likely will never need private loans.

If you need more money to cover cost of living after taking out federal loans, then private options can help make up that gap.

FitBUX is here to help, so if you need any more information, create a free FitBUX profile and schedule a call.  Our expert Coaches are happy to help.

Financial Aid

As mentioned above, most financial aid options such as scholarships or grants don’t need to be repaid once you receive it.

There are various ways to receive them such as through your school or certain websites such as Scholarship Points or College Scholarship Service

Once you fill out your FAFSA, you’re automatically subjected to grants.  These grants are usually ‘merit-based’ or ‘needs-based’ such as being in a low income household.

There are also grants that are given by state. The Department of Education gives a great guide that lists grants per state.

What’s Next

The are small but important difference when comparing student loans vs financial aid.

If you haven’t already, fill out the FAFSA and apply for as many scholarships that are available to you. Anything you don’t have to take out in student loans will help you out once you’re graduated and ready to take on life.

As mentioned earlier, we’re here to help. If you have any more questions, feel free to create a FitBUX Profile and schedule a call with us so we can go over any questions you may have along with how to use our one-of-a-kind financial planning technology so you can gain financial independence.

By David Hughes and Joseph Reinke, CFA

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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