How do scholarships and loans for college really work?

As I'm planning for college, I'm trying to understand how scholarships and loans work. Should I be focusing more on scholarships to cover costs, or are loans inevitable? What are some strategies for minimizing the amount of loans I need?

Scholarships and loans are both important parts of college financing, but they function quite differently.

Scholarships are essentially free money awarded to you because you fit certain criteria or have accomplished something exceptional. These can be merit-based, need-based, or a combination of both. Merit-based scholarships are often given for academic or extracurricular achievements, while need-based scholarships are determined by your family's financial situation.

Seeking scholarships should be a priority to minimize future debt. Start by exploring scholarship opportunities offered directly by the schools you're applying to, as institutional scholarships are often the largest. Deadlines can be as early as November or December, so don’t wait until you get an admissions decision to start this process.

Also, look for local scholarships in your community. Many companies and local organizations sponsor scholarships for local students. These scholarships tend to have a smaller applicant pool, so you'll have less competition.

At the national level, there are also many scholarships you're likely eligible for. The trick is to find them, and Appily has a tool where you can find scholarships based on your profile.

Now, as for loans, they do play a role in many students' financial plans. Unlike scholarships, loans need to be paid back, often with interest. Federal student loans often offer the most favorable terms with low interest rates, and repayment doesn't start until 6 months after you graduate. To get these loans, you have to submit the FAFSA.

Private loans are also available through banks and other financial institutions. These may have higher or variable interest rates, and they don't always have the beneficial repayment options of federal loans. It's best to consider private loans as a last resort after exploring grants, scholarships, and federal loans.

Lastly, always make sure to run the net price calculator on each college's website to understand the potential aid package you might receive, and thus how much you might need in loans.

In summary, try to maximize scholarships and grants, use federal loans sparingly if needed, and turn to private loans only as a last resort.