Grants are the type of financial aid that is considered “free money” because they generally do not need to be repaid.

Quick Scoop

  • Grants are awarded based on financial need (like the Federal Pell Grant and other federal or state grants) and usually do not require repayment, unless your enrollment or eligibility status changes (for example, withdrawing early).
  • Scholarships are also free money in practice, since they do not need to be repaid either, but many quiz-style questions and basic financial literacy courses specifically label grants as the “free money” answer.
  • Loans must be repaid with interest, and work-study is earned through a job, so neither is considered “free money.”

For a typical multiple‑choice question that asks, “Which type of financial aid is considered free money?” the expected correct answer is: Grants.

Information gathered from public forums or data available on the internet and portrayed here.