March 27, 2017 By College Ave Student Loans

Gift Aid vs. Loans: What’s the Difference?

After receiving your first college award letter, you may still have questions about the different options that are available to you. Perhaps you weren’t offered any scholarships or financial aid but you were offered a federal loan – or maybe you were offered both. What’s the difference between gift aid and student loans? What needs to be paid back, and what’s yours to keep? We help to answer some of your questions.

What is gift aid?

Gift aid is money that is awarded to qualifying students that doesn’t have to be paid back. The amount will vary and may cover all of a student’s college expenses, or just a portion of them. Gift aid includes things like scholarships, grants, and housing or tuition waivers.

How does gift aid differ from student loans?

Generally speaking, student loans eventually need to be paid back (usually with interest added), but gift aid is money that you don’t have to pay back. It’s very important to make sure you understand which type of money you’re accepting; for more help decoding award letters, check out Understanding and Reviewing Financial Aid Letters. Also keep in mind that it’s possible to accept a partial loan offer, rather than just take the entire amount they’ve offered.

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

Not necessarily. Not all applicants will qualify for gift aid, but most applicants will be eligible for one or more types of federal loans. Even if your award letter includes offers for both gift aid and student loans, you don’t have to accept all or nothing. In other words, you can accept the gift aid but turn down any offers for federal loans if you don’t want to borrow money and have other ways to cover the cost.

When do I need to start paying back student loans?

It depends on the specific terms of your loan. Generally, federal student loan payments aren’t required until six months after graduation, or six months after a student drops below a half-time schedule (the six-month window is commonly known as the 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 to help you save. No matter what, it’s always a good idea to pay what you can when you can to begin tackling student loan debt sooner rather than later.

Will the amount I receive always be the same every semester?

Not necessarily. It depends on the school and your particular offer, so this is an important question to ask the school’s financial aid office, particularly when it comes to gift aid. The annual federal loan limits for Direct Subsidized and Unsubsidized loans also vary by year in school. For example, the typical undergraduate freshman who is still claimed as a dependent on their parents’ taxes usually can’t borrow more than $5,500 in federal loans to help pay for their first year in school. If that same student continues after freshman year though, s/he would typically be eligible to borrow up to $6,500 to help cover the second year. For more information on federal loan limits, visit

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

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 the living expenses are all costs to consider.

When gift aid and federal 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.