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Scholarship is a term students should understand. Bankrate explains.

What is a scholarship?

A scholarship is a gift of money or financial aid to help students pay college costs. Students are not required to repay scholarships.

Deeper definition

Students commonly use the term “scholarship” to mean free money used to help defray college tuition and other costs.

A student may be awarded a scholarship for one of many reasons: for maintaining a high grade point average, or for being from a particular state or of a specific ethnic background. Scholarships can be awarded by both colleges and outside organizations.

Many scholarships are rewarded via a contest or on the basis of achievement. Depending on the organization that is sponsoring the scholarship, applicants may be required to write an essay, fill out a questionnaire or submit content. After the application process ends, a winner is selected and the funds are disbursed.

Scholarships are often used interchangeably with “grants” because neither form of financial aid requires that you repay the money. But there is an important distinction between the two: Grants are need-based, whereas scholarships are mostly merit-based.

Scholarship examples

The largest source of grant-giving is the federal government. State governments can also fund grants and scholarships for their residents who are attending in-state colleges. Colleges can fund grants as well, but may have stricter qualifications to receive this financial aid.

Scholarships come in all shapes and sizes:

  • Academic scholarships: Also referred to as merit scholarships, academic scholarships are prestigious, awarded to students with excellent academic performance and extracurricular involvement.
  • Athletic scholarships: These scholarships are awarded to student athletes who excel in their sport of choice, such as football, baseball, golf and volleyball.
  • Average academic performance scholarships: These scholarships are awarded to students who excel in school, but not to the degree of an academic scholarship. They take other components of the student’s life into consideration, such as volunteer activities.
  • Creative scholarships: These scholarships require an audition of some sort and are geared toward students with artistic talent. Art, music, and dance scholarships are among the most prominent examples of creative scholarships.

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