Two of the most coveted forms of college financial aid are scholarships and grants. These are an integral part of many financial aid packages and do not have to be repaid. Sometimes, the words 'scholarship' and 'grant' are used interchangeably. However, scholarships are usually based upon academic, sports, performing arts, or other achievement criteria. They are generally offered to a smaller percentage of students through a competitive selection process. Scholarships may originate from the student's chosen college, private organizations, or philanthropic individuals; and they may consist of any amount of monetary aid. Full scholarships, which are primarily awarded only to incoming freshmen or first-year graduate students, may cover all tuition and fees for up to four years of full-time studies at an accredited college or university. Yet, even with a full scholarship, students may require additional financial aid to cover books, materials and other expenses.

Grants may be awarded to a broader student population and usually involve financial need as part of the eligibility criteria. Most grants, including Federal Pell Grants and Federal Supplemental Educational Opportunity Grants, provide a fixed amount of monetary aid, instead of taking care of all college costs. Private grants, from corporations and schools, may be more generous. However, grants are routinely supplemented with other forms of financial aid to form a complete financial aid package that covers college expenses. Also, students may need to reapply for some grants annually in order to insure that the eligibility criteria continue to be satisfied. On the other side of the coin, and depending upon the type of grant, students may receive higher amounts of grant award in successive years if their incomes decrease, or if eligibility criteria change in their favor.

Both scholarships and grants are generally paid directly to the higher education institution designated by the student. If the award includes a stipend for books, housing, food or other expenses, the student may receive a check after tuition and fees have been paid. Scholarship or grant monies may be discontinued the following term or year if the student's academic performance falls below an acceptable standard, or if the student's income level no longer meets eligibility criteria. Both scholarships and grants are valuable forms of assistance that are often included as important components of the financial aid package.