- Generally, the recipients of grants are free to decide how exactly to spend the grant money, and are not obligated to do anything in return for receiving the grant. This kind of grant award is called "unrestricted." By default, a grant is unrestricted. Only by explicitly limiting the recipient's discretion in the terms of the grant award can a grant become restricted. Unrestricted grants are useful in funding the general expenses of a person or organization.
- Unrestricted grants are easiest to understand in terms of their restricted counterparts. Restricted grants, as the name suggests, come with some kind of strings attached. Restricted grants are useful in funding specific projects and ensuring long-term goals because the restrictive terms place a stronger degree of control on how the grant is used.
- Most commonly, the restriction on a "restricted" grant comes in the form of how the money can be spent. The grant recipient may not even get the chance to possess the grant money personally. Instead, the grant sponsor may disburse it directly to some other organization. Even when the recipient is awarded the money personally, the grant sponsor may require proof that the money was spent on authorized expenses. In other cases, the restriction on a grant provides for conditions under which the grant must be repaid if the recipient fails to meet a set of stated goals within a certain period of time. A few grants are restricted in that they require the recipient to do something extra in return for the grant.
- Scholarships are a form of grant, and in the world of academic scholarships most are unrestricted. They are disbursed as cash or credit, and the student may spend the money freely. The assumption is that most students who qualify for grants are responsible individuals and will spend the money in furtherance of their college education. In contrast, a restricted grant places limitations or obligations upon the qualifying student. Some grants have to be repaid if the student drops out of college later on. Some grants are not disbursed to the student, but rather directly to the student's college, leaving the student no opportunity to spend the money in other ways. Some grants require that a student, upon graduation, work for a specified number of years in a given occupation before being able to continue their career freely.
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