Key takeaways
- Studying abroad is expensive and requires financial support. The common funding sources are student loans and scholarships, each with distinct advantages.
- Student loans are typically provided by banks or other institutions and require repayment with interest after you complete the course.
- Scholarships are awarded based on your academic performance, unique talent, or financial need. However, scholarships are highly competitive.
- A choice between scholarships and loans must be made after considering factors such as academic merit, financial need, and repayment capacity.
- A balanced approach where you combine scholarship and a loan is advised to ensure financial stability and academic success.
Studying abroad can be quite expensive, and it’s important to have sufficient financial support during this crucial stage. The two primary sources of funding that typically come to mind for international students are scholarships and student loans. Both these options have their own set of advantages and disadvantages.
The source of funds you select can impact your finances in many ways. Hence, it’s essential to know how a student loan is different from a scholarship so that you can make the right choice.
Let’s help you discover student loans and scholarships for studying abroad. Talk to our experts!
In this article, we’ll take you through the differences between student loans and scholarships and their impact on your finances. Keep reading!
Table of Contents
- What is a student loan?
- What is a scholarship?
- Key differences between student loans and scholarships
- Pros and cons of student loans
- Pros and cons of scholarships
- When to choose a loan and when to opt for a scholarship
- Popular scholarships and student loans for Indian students
- Final thoughts
- Frequently asked questions
What is a student loan?
A student loan is a financial aid provided to students to support their education. International students can use student loans to finance the heavy expenses they might incur during studies abroad. The loan usually covers the tuition fees, books, and various other miscellaneous expenses.
You can access student loans through both private and public lenders. The different types of education loans include secured loans, unsecured loans, government loans, and private loans.
The loans provided by the government come with lower interest rates compared to those provided by private lenders. If you choose loans from private institutions, you may have to pay higher rates of interest along with strict repayment terms.
Once a student loan is approved, you will have to start repaying it along with the interest after you complete the course.
How does it work?
Understanding the process of securing a student loan will help you apply without any hassles. Here is an overview of the student loan application and disbursement process.
- Meet the eligibility criteria
- Submit the application form
- Receive the loan amount
Meet the eligibility criteria
When you apply for a student loan, the financial institution will first review your profile to determine your eligibility. Your credit history, income, and other personal details will be scrutinised.
Apart from the financial eligibility, the institution will also check your academic performance, course of study, and the credibility of the educational institution you are applying to. The loan application will be processed further only if you meet the eligibility requirements specified by the institution.
Submit the application form
If you meet the eligibility criteria, you’ll have to fill out the application form and submit the required documents. Next, the application form is reviewed, and if it meets the eligibility requirements, your loan will be approved.
Note: While applying for a student loan, ensure that you read the terms and conditions carefully. A wrong student loan can cause serious long-term financial consequences.
Receive the loan amount
Once the loan is approved, the amount will be provided to you based on the agreement. It may be disbursed directly to the education institution, deposited into your account, or paid as a cheque.
Most education loans have a moratorium period during which you do not have to start repaying them. The repayment period usually begins after you complete the course.
Repayment is usually done in monthly instalments, and the tenure varies based on the agreement and loan amount. You will have to pay interest on the amount.
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What is a scholarship?
Scholarships are awarded to help students meet their educational expenses. International students can use the support of scholarships and easily finance their overseas education.
The scholarships are provided to students on the basis of several criteria, including academic qualifications, unique talents, and financial need.
Many scholarships are provided based on competitive exams, while some scholarships are need-based and offered based on your financial need. The coverage varies depending on whether the scholarship is fully or partially funded. However, most scholarships typically cover your tuition fee, cost of living, and other related expenses.
How does it work?
Before you proceed with applying for scholarships, an understanding of the overall process is required to improve your chances of securing a scholarship. Here’s how you can apply for an international scholarship.
- Research and identify the scholarships
- Meet the eligibility criteria
- Collect the documents
- Submit the application form
- Wait for the decision
Research and identify the scholarships
The first step towards securing a scholarship is to research and identify the right scholarships. There are many sources you can use to find scholarships, which include websites and scholarship databases.
Meet the eligibility criteria
To apply for a scholarship, you must meet certain eligibility criteria. A common criterion is your academic performance, which is decided based on your academic scores, GPA, and standardised test scores. For scholarships which are need-based, you will have to prove your financial situation and explain why you need the scholarship.
Many scholarship committees also look into your extracurricular records, talents, and future potential. You can use your involvement in sports, arts, and other activities to prove your talents.
Collect the documents
You may be required to collect several documents as part of applying for the scholarships. The documents include Recommendation Letters, Statement of Purpose, academic transcripts, CV, and English language proficiency test scores, such as IELTS/TOEFL.
Submit the application form
You can fill out and submit the application form. Ensure that the details are correct, and also upload the correct documents along with the application form. It’s advised to submit the application well in advance and avoid last-minute stress or other possible delays.
Wait for the decision
Wait for the decision of the scholarship provider. You may be required to attend an interview if you are shortlisted.
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Key differences between student loans and scholarships
Here are the key differences between student loans and scholarships to help you decide on the best financial aid for your higher education.
| Feature | Student loans | Scholarships |
| Repayment | Must be repaid with interest | No repayment required |
| Provider | Offered by banks, financial institutions | Offered by educational institutions, the government, or private organisations |
| Eligibility | Based on credit history, income, course of study, and other criteria | Based on merit, financial need, talent, or other criteria |
| Application process | Requires financial documents and credit checks | Requires transcripts, essays, and recommendation letters. Competitive in nature. |
| Funds coverage | Can cover full tuition, living expenses, travel, and other expenses | May cover full or partial tuition, living expenses, travel, or specific costs |
| Financial burden | It’s a long-term debt with interest payments | No financial burden |
| Availability | Widely available if eligibility is met | Limited availability. Highly competitive in nature. |
| Impact on academic profile | Neutral | Positive recognition on securing a scholarship. Enhances your resume. |
| Speed of Funding | Relatively quick | It may take longer due to competition and the selection process. |
| Risk | Risk of default and debt stress | No financial risk |
Pros and cons of student loans
Here’s an overview of the pros and cons of taking student loans for studying abroad.
| Pros | Cons |
| Provides access to quality education without any upfront payment. It allows you to meet the financial requirements of attending top institutions. | Creates a debt after your studies, which must be repaid with interest, leading to a financial burden. |
| The repayment options are flexible and include moratorium periods after graduation and several easy repayment plans. | Loans are costly since the interest accrues over time and increases the total repayment amount. |
| Enhances credit history if payments are made on time. | The pressure of repayment affects your ability to save or invest. |
| Potential tax benefits on interest paid. | Any default can lead to penalties, damage the credit score, and create financial stress. |
| Reduces immediate financial pressure, allowing you to focus on studies. | Some loans have variable interest rates that may increase over time, raising monthly payments. |
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Pros and cons of scholarships
Here are the pros and cons of using scholarships to fund your overseas education.
| Pros | Cons |
| Covers expenses such as tuition, books, travel, and living expenses, making foreign education affordable. Full or partial coverage is provided based on the nature of the scholarship. | The application process is time-consuming and requires recommendation letters, academic transcripts, and various test scores. |
| Increases your self-esteem and recognition as scholarships are typically awarded based on academic merit, leadership, or other talents. | Scholarships are highly competitive. As a result, many deserving candidates may not receive awards. |
| Securing scholarships reflects your academic excellence and gives you a competitive edge in college admissions. | The restrictive eligibility criteria limit who can apply and qualify for certain scholarships. |
| You can reduce student loans and avoid a heavy financial burden. | There is a risk of failing in scholarships, which can cause emotional stress if your application is unsuccessful. |
When to choose a loan and when to opt for a scholarship
You must assess your requirements and financial capabilities while making a choice between a loan and a scholarship. Here are the key factors you must consider.
Academic achievements
If you have excellent academic achievements and outstanding extracurricular records, scholarships may be a good choice. Many scholarships are awarded based on your academic potential.
Financial needs
You should estimate the overall educational expenses. Scholarships may not cover the expenses fully. In such situations, you may also need the support of education loans.
Repayment requirement
Scholarships do not create a debt burden. However, student loans have to be repaid once the moratorium period ends. Consider this factor and your repayment potential while selecting the source of funds.
The best option is to take scholarships based on your eligibility so that you can reduce the future repayment burden. Take a student loan for any additional amount that is not covered by the scholarships.
Popular scholarships and student loans for Indian students
Here are the popular scholarships and student loans you can apply to finance your studies.
Scholarships
- Fulbright-Nehru Scholarship
- Chevening Scholarship
- DAAD Scholarship
- Australia Awards
- National Overseas Scholarships
- ICCR Scholarships
Student loans
- SBI Student Loan
- HDFC Credila Education Loan
- Axis Bank Education Loan
- Avanse Education Loan
- InCred Education Loan
- Eduvanz Education Loan
Final thoughts
Scholarships and student loans are two popular choices available for international students to finance their higher education overseas. Scholarships are usually competitive and awarded based on merit, talent, or financial need. Student loans are provided based on the credit history and repayment capacity.
The two options have their own set of advantages and disadvantages. Understanding the pros and cons of both options will help you make the right choice for financing your higher education overseas.
Let us help you secure student loans and scholarships. Start your study-abroad journey right away!
Frequently asked questions
Can a student receive both a loan and a scholarship simultaneously?
Yes, you can receive both a scholarship and a loan simultaneously. However, the total financial aid should not be more than the cost of attendance at your educational institution.
Can student loans affect my credit score?
Yes, student loans can significantly affect your credit score. Timely repayments can build a positive credit history, while missed payments can lower your credit score.
What happens if I cannot repay my student loan on time?
If you do not repay your student loan on time, it can damage your credit score. You may also have to face late fee penalties or legal notices.
What resources can help students find scholarships and student loans?
There are several resources you can use to find scholarships and student loans. Some of the useful resources include International Student, International Scholarships, International Education Financial Aid, NAFSA, and International Student Loan.
