What’s the Difference Between Merit-Based and Need-Based Financial Aid?
Are you ready to find your fit?
Learners often need help understanding financial aid applications. This guide explains the difference between merit-based and need-based financial aid. Students may qualify for one or both aid types.
Merit-based scholarship programs award funds based on academic achievement. Need-based scholarships assist learners who demonstrate financial need.
Financial aid is an umbrella term encompassing many types of funding. Grants, loans, and scholarships are three of the most common types of aid. This guide covers examples of merit-based aid and need-based aid.
Merit-Based Financial Aid
Learners with good grades and extracurricular involvement often qualify for more scholarships. Many colleges offer institutional awards. Students can also receive merit-based financial aid from private companies and organizations. The following section answers common questions about merit-based financial aid.
Each school and academic department sets unique requirements for merit-based aid programs. Students should contact prospective schools for details. If a different school offers a student more merit-based aid than their top-choice school, they can negotiate for more aid. Colleges may offer more aid to entice talented learners to attend.
Not every school offers merit-based aid. The amount of available aid varies by school. Contact a school's financial aid department for specific information. When speaking with the financial aid department, students should clearly state their financial needs. Some schools also consider financial need when awarding merit-based scholarships. Learners may also qualify for departmental scholarships.
Application requirements for merit-based aid vary by program. Most institutional scholarship applications need official high school transcripts. Schools may consider applicants' high school GPA and graduation ranking. Merit-based scholarships from companies and organizations may consider applicants' community involvement. Applications often require a short essay and recommendation letters. Merit-based aid for an activity such as choir may require an audition.
Need-Based Financial Aid
The difference between merit-based and need-based financial aid is that need-based aid programs consider applicants' financial situation. Some types of need-based aid ask applicants to submit their guardian's tax returns. Independent students submit their tax returns. This section answers three common questions about need-based financial aid.
When determining a student's eligibility for need-based aid, the Federal Student Aid office considers the applicant's cost of attendance (COA). The Federal Student Aid office also calculates each student's expected family contribution (EFC) based on tax information.
If the learner's COA exceeds their EFC, the student may be eligible for federal need-based aid. Institutions may use their own assessment procedure to determine need-based aid eligibility. However, many schools use students' FAFSA results to award this type of aid.
Many schools offer need-based aid. But not every school provides this type of assistance. The amount of available need-based aid varies each year. Available aid amounts may depend on donations or government funding. For example, a cut in federal spending could impact a public institution's ability to offer need-based aid. Students should check with their prospective school's financial aid office for information about need-based aid availability.
Learners submit the FAFSA to apply for government-funded aid, such as subsidized loans and grants. The federal government distributes need-based aid based on information that applicants provide on their FAFSA. Colleges and universities often use the FAFSA to determine eligibility for institutional aid. Private companies and nonprofits may also run need-based aid programs.
Do Merit Awards Affect My Financial Aid?
Some schools displace grants and scholarships with students' private scholarships. This reduces the amount of institutional funding learners receive. Before applying for private scholarships, students should understand the terms. Learners should contact their school's financial aid department to ensure they do not participate in scholarship displacement.
But receiving merit-based scholarships does not generally impact a student's need-based aid eligibility. Applying for both need-based and merit-based awards typically results in a more attractive financial aid package. The federal government also allows students to apply aid to living expenses.
Students can receive both merit-based aid and need-based aid. For example, learners can receive a Federal Pell Grant and a basketball scholarship. Applying for various scholarships and grants can help students reduce student loan debt.
What Colleges Award Merit-Based Aid to the Most Students?
The amount of available merit-based aid varies by school. Generally, private colleges award more merit-based scholarships than public schools. But private colleges tend to cost more than public universities. College Transitions regularly updates a table outlining the average merit-based aid that many schools provide. The table also lists the percentage of first-year students who received aid for the 2019-20 school year.
Tips for Maximizing Merit-Based Aid
Students can maximize their financial aid to minimize debt despite the differences between merit-based and need-based financial aid. Learners can also leverage their qualifications to receive more merit-based aid. Along with earning a strong GPA and pursuing extracurricular activities, learners can follow the strategies below to receive the most aid possible.
Tessa Cooper is a freelance writer and editor who regularly contributes to international and regional publications focused on education and lifestyle topics. She earned a bachelor’s in public relations from Missouri State University and is passionate about helping learners avoid high student loan debt while pursuing their dream major. Tessa loves writing about travel and food topics and is always planning her next meal or vacation.
See articles by Tessa
Do this for you
Explore your possibilities- find schools with programs you’re interested in and clear a path for your future.