Edmit logo

What’s the Difference Between Merit-Based and Need-Based Financial Aid?

Featured Stories

Filter By Categories

If you are applying for college financial aid, then you may be wondering what the differences are between merit-based and need-based financial aid. The primary difference between these two types of financial aid is that merit-based scholarships, unlike need-based financial aid, are awarded to students based on academic or other merit rather than demonstrated financial need. Happily for many students, your parents’ salaries typically have no bearing on your eligibility for merit-based aid. In addition, while need-based financial aid can take many forms, such as grants, scholarships, work-study positions, and loans, merit-based financial aid is typically only awarded in the form of grants and scholarships.


Eligibility Criteria

Need-based financial aid is awarded strictly based on a student’s financial profile, which takes into account the student’s family assets and income, with no consideration of the student’s academic merit. (Colleges, of course, will consider academic merit when deciding whether or not a student should be admitted.)  Merit scholarships are typically, though not always, need-blind, meaning that a student’s financial profile is not considered when determining his or her candidacy to receive a merit award. Instead of evaluating financial need, merit scholarship sponsors can consider any combination of merit-based factors. Some sponsors of merit scholarships only evaluate academic performance, in the form of grade-point averages, SAT or ACT scores, or class rank. Other sponsors may consider your academic performance in addition other criteria such as teacher recommendations, your region or state of residence, high school of attendance, community involvement, level of dedication to a specific field of study, gender, race, or ethnic background. Especially if the scholarship sponsor is a religious or cultural organization, or an organization dedicated to a certain field of study such as math or art, scholarship applicants must be significantly involved in the activities of that group to potentially receive any student assistance.


Sources of Funding

Need-based financial aid and merit scholarships also differ in how they are funded. Much need-based financial aid is issued by the government, while merit-based aid is awarded by colleges or by private sponsors. Almost all financial aid provided by federal and state governments, with few exceptions, is need-based financial aid. Many different private sponsors award merit scholarships, ranging from religious groups, community groups, cultural organizations, national foundations such as the Bill & Melinda Gates Foundation and the Coca Cola Scholars Foundation, and private individuals, such wealthy alumni who endow scholarship programs via their alma maters.


Application Process

Students who wish to apply for need-based financial aid must complete the Free Application for Federal Student Aid (FAFSA), and perhaps the College Board’s CSS Profile for private colleges that require it. The U.S. Department of Education utilizes the Federal Need Analysis Methodology to determine a student’s Expected Family Contribution (EFC), while the College Board employs its own Institutional Methodology to calculate a student’s EFC. (The difference between a school’s cost of attendance and a student’s EFC, minus any other need-based financial aid that the student receives, equals the amount of total need-based aid that the student may obtain from the federal government.)  Applying for need-based financial aid is relatively straightforward, typically only requiring completion of the FAFSA, while applying for merit-based aid can be a time-consuming and lengthy process. Some colleges automatically consider students for merit scholarships, or require submittal of only a very simple application; applying for other private scholarships, on the other hand, can be quite onerous. Private scholarship sponsors may require candidates to write essays, sit for interviews, and perhaps more. Many otherwise qualified students are loathe to spend significant amounts of time applying for scholarships with paltry monetary awards, and instead choose to prioritize those merit awards for which the application process is the simplest.


Merit scholarships are frequently, though not always, awarded on a one-time basis, while need-based financial aid is available to students for every year that they attend college. Students are required to complete a FAFSA for every year that they wish to receive federal student assistance.

 

Need more info?  Learn more about merit scholarships from the experts at Edmit.

Sign up for updates

Popular Tags

Financial Aid and Scholarships* paying for college financial aid Cost of College* grants and scholarships FAFSA Student Loans* Saving for College* federal student loans college tuition cost of attendance 529 plan college financial planning financial aid award expected family contribution private student loans taxes room and board college savings plan on-campus housing college applications application fees merit-based financial aid private universities public universities student loan assistance college expenses federal financial aid merit scholarships Salary and Career* budgeting for college edmit hidden gems tuition discount financial need parent PLUS loan southern colleges CSS profile college costs edmit team education expenses living expenses western colleges financial aid appeal income midwestern colleges off-campus housing affordable college college majors loan forgiveness northeast colleges application fee waivers degree programs edmit scholarship institutional aid loan repayment new england colleges choosing a major net price prepaid tuition plans work-study SAT career choosing a college in-state tuition international students need-based financial aid need-blind colleges private scholarships qualified higher education expenses repayment plans tuition guarantee 401k ACT UGMA UTMA budget college ranking systems discretionary income education savings accounts fees free tuition full ride scholarship grants great lakes region colleges health insurance options investment ivy league schools meal plans mid-east region colleges need-aware colleges plains region colleges rocky mountain schools southeastern colleges southwestern colleges student loan debt tuition payment plans 568 presidents group Inversant MEFA applying to college asset protection allowance best price campus life college advisor college deposit college search college spending concurrent enrollment cost by region cost by state crowdfunding educational expenses esports fee waivers financial literacy fraternities and sororities full tuition gap year home equity loan income share agreements internships liberal arts degree line of credit medical expenses military benefits out-of-state students out-of-state tuition percent need met private college consultant retirement savings saving school-based scholarships small business standardized testing state aid state schools student bank accounts student organizations title IV schools travel expenses tuition decreases tuition increases tuition reciprocity undocumented students