Understanding Merit-Based vs. Need-Based Financial Aid: Tips for Eligibility

Tuition is not your only expense. You must also pay for school fees, transportation, housing, meal plans, textbooks, and supplies. Of course, you also have to set aside funds for emergencies and entertainment. Balancing personal and educational expenses can be overwhelming. This is especially true if you’re maintaining a job or supporting a family. This is where the importance of understanding financial aid enters, specifically merit-based and need-based financial aid. Don’t forget to compare tuition rates between multiple online colleges.

The main types of college financial aid are:

1. Need-Based Financial Aid: Offered to students with very limited financial resources.
2. Merit-Based Financial Aid: Offered to outstanding students.

Each financial assistance is designed to help college students finance their education. Unlike loans, these usually do not require repayment. However, the student must maintain certain requirements set by the awarding body to keep the financial aid.

Most affordable online colleges offer a mixture of both need-based and merit-based financial aid, which is ideal. Understanding financial aid can make a big difference in your college. They can help you focus more on your studies and prepare for your future.

What is Merit-Based Financial Aid?

Merit-based financial aid is offered in recognition of student achievements. This can be based on their grades, athletic abilities, community involvement, special talents, or extracurricular accomplishments. Also called merit scholarships or merit awards, merit-based financial aid is considered free money.

Here’s a short overview of the criteria of merit-based financial aid:

• Academic ExcelHere’s merit-based scholarships are often awarded based on high academic performance. This includes:
  • maintaining a high GPA
  • excelling on standardized tests
  • demonstrating a strong academic record in high school or college

• Leadership and Extracurricular Involvement

Some merit-based scholarships acknowledge students who exhibit exceptional leadership skills or significant involvement in extracurricular activities. This includes student government, community service, or special interest clubs.

• Athletic Skills

This merit-based financial aid is strictly given to students with exceptional athletic abilities. These opportunities are often only offered by colleges and universities with competitive sports programs.

• Artistic and Creative Talents

Scholarships are also offered to highly skilled students in areas like art, music, dance, or theater. You might need to audition, show a portfolio, or demonstrate your talent in other ways to apply.

• Special Achievements

Unique achievements or talents, such as winning national or international competitions, can also be a basis for merit-based awards. Check out our ranking of private colleges that give out the most merit-based financial aid.

Not all colleges offer merit-based financial aid, and those that do have different practices and amounts. Did you know that Ivy League universities don’t offer merit aid? We also have a ranking of colleges that give out the most merit based financial aid overall.

Merit-based aid is often renewable if you meet certain criteria the institution requires. If your school has limited merit-based opportunities, you should consider applying for private/external scholarships and awards. Here is a ranking of the best merit-based scholarships for out of state students.

Here are some of the most popular merit-based financial aid:

• The $2,000 Sallie Mae Scholarship is aimed at students pursuing higher education with high GPAs and meet other financial aid eligibility like age and citizenship status.
• The CIA Undergraduate Scholarship Program is designed for students who want to pursue careers related to national security and intelligence.
• Paul Flaherty Athletic Scholarship is awarded to student-athletes who excel in sports while maintaining strong academic performance. It recognizes dedication both on and off the field.
• PALCUS Portuguese American Scholarship is designed for students of Portuguese descent pursuing higher education. It supports those with academic excellence and community involvement.
• WJA Veteran Grant is intended to help those who have served or are connected to someone who has served in the military.
• Gen and Kelly Tenabe Scholarship Program supports students with ambitions and a strong track record of involvement in their communities.

Fast Fact: Out-of-state students often receive more merit aid than in-state students at public schools. According to the US News and World Report, the average merit aid for out-of-state students was $8,886 in 2022-2023, compared to $4,975 for in-state students. Public schools use merit aid to attract students from other states by offering more competitive college scholarships.

Related Articles:

• Federal Financial Aid for Online College: Tips for Your FAFSA Application
• Financial Aid for Adult Learners: Resources & Programs for Online Education
• Guide to Financial Aid for Online Students: Grants, Loans, & Work-Study Programs
• How to Compare Tuition Rates and Financial Aid Packages From Online Colleges
• Managing Hidden Online Learning Costs: Budgeting and Financial Aid Tips
• Online Colleges with Generous Financial Aid
• Success Stories of Financial Aid: How Online College Students Funded Their Education

What is Need-Based Financial Aid?

Next up: need-based financial aid.

Need-based financial aid is support given to students based on their financial situation. Unlike merit-based aid, awarded for academic or other achievements, need-based aid is designed to assist students who demonstrate financial need. It considers their income and family size.

The main types of need-based financial aid include:

1. Grants: Financial awards that don’t need to be repaid, often given based on need.
2. Scholarships: Can be need-based or merit-based, with some awarded for financial need.
3. Federal Subsidized Loans: Loans that do not accrue interest while the student is enrolled in school but must be repaid.
4. Work-Study: Provides part-time job opportunities to help fund education while gaining work experience.

To access need-based financial aid, start by completing the FAFSA. This form allows you to detail your household’s financial situation to determine your EFC or expected family contribution.

You’ll compete with more than 7 million college students with financial needs each year. Here are a few FAFSA tips to increase your chances of securing need-based financial aid:

1. Gather all the necessary documents before starting the FAFSA application. The best financial aid application strategy is to complete and submit your FAFSA as soon as possible, starting from Oct. 1. Early submission can improve your chances of receiving available funds.
2. Ensure all information on your FAFSA is correct, updated, and complete to avoid delays or issues with processing.
3. Be aware of both federal and state deadlines, as missing them can affect the amount and type of aid you’re eligible for.
4. Update your FAFSA for any financial changes to reflect the new information to adjust your aid package potentially.

Here are a few examples of need-based financial aid:

Federal Pell Grant

This grant helps low-income college students pay for school. The amount you get depends on how much money you need, your school costs, and whether you’re full-time or part-time.

Federal Supplemental Educational Opportunity Grant (FSEOG)

This grant gives extra money to students with very high financial needs. It adds to the Pell Grant and is given out by your school based on how much you need and how much money your school has available.

Key Differences Between Merit-Based and Need-Based Financial Aid

Here’s a quick table comparison to help you understand the difference between need- and merit-based grants and scholarship opportunities better:

Aspect	Merit-Based Financial Aid	Need-Based Financial Aid
Application Process	– Often requires submission of applications for specific scholarships or awards – May include essays, letters of recommendation, and standardized test scores – Application deadlines can vary depending on the award	– Requires completion of the FAFSA (Free Application for Federal Student Aid) or other financial aid forms – May involve providing detailed financial information and documentation such as tax returns and income statements – Deadlines are usually fixed and tied to the academic calendar
Types of Aid Offered	– Scholarships – Fellowships – Grants based on achievement – Institutional awards tied to academic or extracurricular success	– Grants (e.g., Pell Grants) – Federal Work-Study – Subsidized and Unsubsidized Loans – Institutional aid based on financial need
Award Amount	– Varies widely based on the institution or award criteria	– Typically determined by financial need and can vary each year based on changes in family financial status
Renewability	– Often a one-time award or based on maintaining certain performance levels	– Often renewable each year, provided financial circumstances remain similar

Merit-based aid gives students the freedom to choose schools based on their preferences and what best suits them. This freedom from financial constraints not only enhances their learning experience but also allows them to pursue their dreams and aspirations.

On the other hand, need-based aid tends to limit students’ college options. Students might have to choose schools with more favorable college tuition assistance, even if they are not their top choice, to ensure they can afford their education.

Tips for Meeting Merit-Based Financial Aid Requirements

You’ll be competing with hundreds of talented students. Consider these few tips to increase your chances of being chosen for merit-based education grants and scholarships:

1. Stay organized to maintain a high GPA. You should always aim for excellence in challenging courses.
2. Aim to score between 1200 and 1600 on the SAT or achieve a comparable score on the ACT.
3. Maintain membership in clubs, sports, or community service projects.
4. Build strong relationships with teachers, mentors, and community leaders who can provide meaningful letters of recommendation.
5. Craft a compelling essay that showcases your personal experiences, achievements, and aspirations.

When crafting scholarship essays, remember to:

1. Convey a positive message overall.
2. Avoid careless errors and grammatical blunders.
3. Always strive for depth, not breadth.
4. Never write an essay that reads like a newspaper editorial.
5. Be honest. Discuss qualities you have, not ones you wish you had.

Tips for Meeting Need-Based Financial Aid Requirements

The FAFSA is the first step to making your college journey more affordable. It should be filled out as soon as possible, electronically, and error-free. Before applying for the FAFSA, you should ensure you have all your documents ready. These include:

• Social Security Number
• Federal Income Tax Returns
• Bank Statements
• Investment Records
• Records of Untaxed Income

Use the IRS DRT for FAFSA to minimize errors and reduce the likelihood of being selected for verification. Avoid these common mistakes:

1. Leaving a field blank
2. Using a dot or comma in numeric fields
3. Listing an incorrect SSN or driver’s license number
4. Entering the wrong physical address
5. Entering incorrect federal income tax paid amount
6. Reporting Adjusted Gross Income (AGI) as the same as total earnings from employment
7. Filing income taxes incorrectly by claiming head of household status when it doesn’t apply
8. Forgetting to list the college
9. Forgetting to sign and date

Beyond the FAFSA, you must complete your CSS profile application. Like the FAFSA, this is also a detailed application for institutional financial aid and can be time-consuming. Here are a few easy steps for completing a CSS profile:

1. Make a College Board Account.
2. Gather Necessary Documentation. It requires tax documents from the same year as the FAFSA.
3. Select Colleges.
4. Submit the Application.
5. Constantly check your email and profile to see if there’s a need for correction.

Strategizing Your Financial Aid Application

Paying for college is not an easy feat. Colleges and universities often allow students to apply for as many scholarships and grants as possible to lower college costs. However, you should be mindful of the requirements for each financial aid to avoid wasting time on a financial aid you’re not qualified to begin with.

Here are a few tips on how to manage the process:

1. Create a calendar or spreadsheet dedicated to tracking application deadlines.
2. Set reminders well in advance of each due date.
3. Prioritize scholarships based on fit, value, and feasibility.
4. Break down the financial aid application process into smaller tasks to make it less overwhelming.
5. Use trusted scholarship search engines. Examples include:
   • Bold.org
   • Cappex
   • CareerOneStop
   • Chegg
   • Collegeboard
   • Fastweb
   • Google Scholar
   • Going Merry
   • Niche
   • Peterson’s
6. Regularly check the websites of scholarship providers.
7. Most importantly, don’t hesitate to seek help and feedback.

Know the Differences

• Merit-based and need-based financial aid aims to lower college costs.
• Merit-based financial aid focuses on students with exceptional talent or community involvement.
• Need-based financial aid is granted to students with limited financial resources.

Everyone in college has the opportunity to avail themselves of financial aid. Assess your strengths and situation and capitalize on them for maximum impact. Tailor your applications to highlight your unique qualities and needs.

If you excel academically, focus on merit-based scholarships. If you face financial difficulties, prioritize need-based aid.