If you are applying to college, then you may have heard something about merit scholarships. But what are they, exactly? 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 usually have no bearing on your eligibility for merit-based financial aid.
For many merit scholarships, “merit” refers simply to academic performance, such as your grade-point average, SAT or ACT scores, or class rank. For other scholarships, eligibility or “merit” may be determined in part by your region or state of residence, high school of attendance, community involvement, teacher recommendations, level of dedication to a specific field of study, gender, race, or ethnic background. Merit can mean many different things to many different scholarship sponsors. Merit-based aid is often (but not always) need-blind, meaning that candidates’ financial needs are not considered as part of the recipient selection process.
Merit scholarships are awarded by a variety of organizations and for different reasons. Colleges award merit scholarships as a method of attracting the most qualified students to attend their schools, while religious, cultural, and community groups award merit scholarships as a way of supporting talented young people within their organizations. Merit scholarships are not awarded by the federal government, but may be provided by state or local governments, in addition to state-funded schools. Public colleges and universities typically award fewer merit scholarships than private institutions, which are often generously endowed with scholarship programs funded by wealthy alumni.
With the understanding that merit can have many different meanings to many different scholarship sponsors, you can begin by considering all the ways that you have merit. Make a list of relevant religious groups, community or cultural organizations, serious hobbies or academic pursuits, and any other affiliations. Research the specific eligibility criteria for merit scholarships offered by your target schools. Before you begin the arduous process of actually applying for merit scholarships, refine your focus to only pursue merit scholarships for which you are best qualified.
The application process for every merit scholarship is different. Some schools that award merit-based aid allow your college application to double as your merit scholarship application, while other schools require submittal of only a simple application to apply for merit scholarships. The process of applying for non-school-based merit scholarships, on the other hand, is typically much more varied and onerous. In addition to a general application, private scholarship sponsors may require candidates to submit written essays, obtain letters of recommendation, or sit for interviews. Applying for private merit scholarships, if approached indiscriminately, can almost feel like a full-time job!
You can (and should) apply for merit scholarships sponsored by your school, since those awards tend to be the largest and require the least amount of work to obtain. You can learn about private merit scholarships that are available by utilizing the many online scholarship databases. In addition, you may be able to learn of other lesser-known scholarship or grant programs by talking with your school guidance counselor and the leaders of any organizations in which you participate. Above all, do not hesitate to broaden your search beyond what you can initially find online. The competition for smaller, locally-sponsored scholarships tends to be more limited, making these types of scholarships generally easier to obtain.
While you certainly can apply for as many merit scholarships as you like, it is strongly recommended - as noted above - to prioritize the merit awards for which you are most qualified. Otherwise you may expend a significant amount of time and energy on the scholarship application process but ultimately reap very little financial reward.
How Do Merit Scholarships Differ From Need-Based Financial Aid?
While merit scholarship criteria sometimes includes financial need, need-based financial aid is awarded strictly based on financial need as determined by the FAFSA, without regard for merit. 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 by way of grants and scholarships. As such, need-based financial aid often must be earned in the form of work-study wages or repaid in the form of student loan installments. Merit scholarships need not be repaid but often carry ongoing eligibility requirements such as a minimum GPA. Merit scholarships and need-based financial aid also differ in how they are funded and how much funding is typically available, and by the rigor and complexity of the application process. Learn more about the differences between merit-based and need-based financial aid.
Does Receiving a Merit Scholarship Affect My Financial Aid?
The unfortunate answer is (usually) yes: winning a merit scholarship does impact your financial aid. Due to the practice of scholarship displacement, receiving a merit scholarship almost always results in your school reducing or rescinding other forms of financial aid. (Schools are prohibited by federal law from “over-awarding” financial aid in excess of financial need by more than $300.) If you were hoping to utilize private merit scholarships to meet your Expected Family Contribution, then unfortunately the practice of scholarship displacement will effectively prevent you from doing so. On a more positive note, most schools (about eighty percent) will reduce or rescind the least attractive forms of financial aid, such as unsubsidized student loans, first. Receiving a merit scholarship may not help you to meet your Expected Family Contribution, but it can significantly improve your financial aid package such that you graduate with little or no student debt. Which is undoubtedly a very good thing! Learn more about strategies for reducing or avoiding merit scholarship displacement.
Some merit scholarships are designated for specific purposes, such as tuition or room and board, while others can be used to pay for any expense. If your merit scholarship is sponsored by your college, then the school will automatically withhold an amount equal to the cost of tuition. Any remainder may be paid out to you in the form of a check or direct bank deposit. Private sponsors of merit scholarships typically pay scholarship monies to the winners directly, permitting recipients to spend their merit awards however they choose. Notably, if scholarship awards are not utilized to pay for qualifying education expenses as defined by the IRS, then the award money may be subject to taxation - more on this below.
There is no upper limit on the number of merit scholarships that you may receive, although there is a financial limit. That monetary limit is equal to your financial need, as determined by the FAFSA, or your school’s cost of attendance, whichever is less.
In terms of absolute dollar amounts, the vast majority of merit scholarships are provided by colleges directly. As a result, you may be able to obtain an attractive amount of merit-based aid from just a single merit scholarship awarded by your university. There are no legal limitations on how many private merit scholarships you may receive, but as any high school junior or senior can confirm, there certainly are practical limitations on how much time you can devote to completing scholarship applications. The monetary awards offered by many private scholarship sponsors are somewhat paltry; as a result, many well-qualified candidates choose to forgo applying for private merit awards in favor of obtaining fewer, larger merit scholarships from their colleges directly.
Rather than trying to win every merit award under the sun - which would be impossible anyway! - students should instead prioritize applying to schools that offer merit-based aid to the most students.
Merit scholarships are usually, although not always, tax-exempt. To avoid paying taxes on a merit award, a student must be enrolled in a degree program at an eligible educational institution. In addition, merit scholarship monies must be spent on qualifying education expenses as defined by the IRS. Learn more about the tax implications of receiving a merit scholarship.