By Miranda Marquit

According to the Institute for Higher Education Policy, even families that earn more than $100,000 per year can’t afford 59% of colleges in the U.S.

If you’re one of the many Americans who can’t afford college without help, you’re probably looking at grants, federal student loans, and private student loans as part of your education funding strategy. But how do grants differ from loans?

We’ll walk you through the key differences between grants and student loans so you can make the best decisions for your situation.

How do grants differ from loans?

Answering the question “How do grants differ from loans?” is fairly straightforward. Grants are free money, and they don’t have to be repaid. Student loans, on the other hand, are borrowed, so you must repay the money with interest.

Student loans vs. grants: Planning your college funding strategy

“Always apply for all the free money you can get,” said Olivia Valdes, an independent college consultant and founder of Zen Admissions. “Start with grants and scholarships. Once you’ve exhausted those options, students and their families should discuss the viability of taking out loans.”

For merit-based scholarships and grants, Valdes said, individual colleges often rely on your test scores and high school transcripts and the information you provide on your entrance application.

Frederick Pierce, president and CEO of student housing company Pierce Education Properties, pointed out that it’s possible to get help putting together a plan that works for you.

“Many students work with guidance counselors, financial planners, and the financial aid offices at universities to assemble a package of financial aid,” Pierce said. “Start with grants and scholarships, and then turn to loans to cover the difference in costs.”

Both Valdes and Pierce said there are other ways to pay for college besides relying on grants and loans. They recommended saving up when possible as well as working at least part time during college.

On top of that, Pierce suggested re-evaluating the school you attend.

“The average aggregate debt burden for those who graduate public universities with outstanding loans is less than $30,000,” Pierce said. “With the right approach, it’s possible to pay for college using multiple strategies and reducing your total education debt.”