Comparing Merit vs. Need-Based Scholarships: Which is Right for You?

Understanding Scholarship Options

Here, we’ll discuss merit-based scholarships vs. need-based scholarships. By understanding these types of scholarships, you can make informed decisions.

Why consider scholarships in the first place? You can pay your tuition and fees, room and board, and books in full. Doing so means you’re paying for college costs out of your pocket.

This isn’t a big deal if money isn’t an issue. But if you want to spend as little of your money as possible, scholarships are the way to go.

Let’s consider the average cost of attendance at $38,270/student/year (EDI, 2024). Then, consider the average household income of $114,395/year (2024). Average college costs are almost one-third (33.45%) of average household income.

No wonder college students and their parents get loans to finance their education. But that’s a trap that you want to avoid. Nowadays, the average student loan balance is $41,520/student (EDI, 2024).

The average time for repayment ranges from 7 to 10 years. But it can be as long as 20 years depending on the loan amount, interest, and amortization.

But by taking advantage of all types of scholarships for college, you can avoid the debt trap. We’re talking about:

• Merit-based scholarships, which are based on an individual’s achievements
• Need-based scholarships, which require proof of unmet financial need

Are you interested in knowing more differences between merit vs. need-based financial aid? Read on and expand your understanding. 

What Are Merit-based Scholarships?

These are financial aid awards to college students based on specific achievements. The types of achievements and their weight vary depending on the scholarship program. The most common types of achievements are the following:

• Academic excellence
• Athletic skills
• Artistic talents (e.g., performing arts, music, and creative writing)
• Leadership and service (i.e., campus and community involvement)
• Entrepreneurial projects
• STEM achievements
• Social impact projects (e.g., public policy and environmental sustainability)
• Research and innovation in specific disciplines (e.g., healthcare)

The ability to overcome adversity is also a criterion in many merit-based scholarships. 

The eligibility requirements vary, too, based on the type of merit used. But common eligibility requirements include:

• Official transcripts to determine academic performance and progression. Information about the GPA and types of advanced courses taken (e.g., AP, IB, or honors) are taken from them. There’s usually a minimum GPA for merit-based scholarships.
• Resume to determine your work history, if any, and other useful information.
• Personal statement or scholarship essays with prompts so you can make your case, so to speak.
• Portfolio of works that highlight your specific achievements or auditions
• Project proposals, if necessary, for which the scholarship program will provide funding if approved.

Here are well-known merit scholarships to consider.

• Coca-Cola Scholars Program
• Gates Scholarship
• National Merit Scholarship Program
• Davidson Fellows Scholarship
• Elks Most Valuable Student Scholarship

Who qualifies for merit scholarships? If you fall into one or more of these categories, give them a try.

• High-achieving high school students in their senior year or current college students. Show your strong academic record and high GPA. 
• Students with leadership and service experience, such as in student and community organizations.  
• Artists and athletes with exceptional skills in their specific interests.
• Innovators and problem-solvers whose out-of-the-box solutions made a positive impact. 

With merit scholarships, you must prove your worth. Start early on getting good grades, volunteering, and developing your talents.

What Are Need-based Scholarships?

These are financial aid awarded to students based on their demonstrated financial need. Academic achievement and extracurriculars may still be considered but are secondary.

Need-based scholarships increase access to a college education for students from low-income backgrounds. The scholarship money can cover tuition and fees, room and board, and books and supplies. In some programs, it’s also applicable for living expenses.

Note that every scholarship program has its specific disbursement policies. In most programs, the scholarship money goes directly to the student’s account. No money passes through your hands or bank account.

In some programs, you may receive the scholarship money through your bank account. You then have discretionary spending power. Be sure to use it as intended so you can maximize it.

These disbursement aspects are also true for merit-based scholarships. Need-based and merit-based scholarships also don’t have to be repaid. Both are considered free money for their recipients.

Need-based scholarships have these typical eligibility requirements.

• Proof of household income, such as tax returns and pay stubs. There’s usually a threshold income stated, such as $95,000/year and below. 
• Submission of FAFSA with complete and accurate information. Your Student Aid Index (SAI) information will be sourced from your FAFSA.
• Pell Grant eligibility, again through FAFSA.

Check if you’re also eligible for state and institutional aid. Communicate with your college’s financial aid officer. 

More supporting documents may be required to prove your financial need, including:

• Bank statements
• Proof of disability benefits
• Proof of unemployment
• A letter of special circumstances (e.g., high medical expenses)

Check out these well-known need-based scholarships.

• Jack Kent Cooke Foundation Scholarship
• Pell Grant
• Dell Scholars Program
• Horatio Alger National Scholarship
• QuestBridge National College Match

Who qualifies for need-based scholarships? If you’re a student who falls into one or more of these categories, go ahead.

• You’re from a low-income family with a family income that falls within the income threshold.
• You and/or your family are facing financial difficulties. These may be due to medical expenses, job loss, and other economic reasons.
• You’re a high-achieving student with insufficient financial resources
• You come from traditionally disadvantaged populations. Check out first-gen student scholarships or programs for minority groups (e.g., UNCF).  

Need-based scholarships are as competitive as merit-based scholarships. You must also adopt a proactive approach so you can get ahead.

Then, there’s the matter of how to apply for scholarships and succeed. In both merit-based and need-based scholarships, you must pay attention to detail. You should also follow instructions, double-check documents, and submit them before the deadline.

Key Differences Between Merit and Need-based Scholarships

Here’s a side-by-side comparison of merit-based and need-based scholarships for easy reference.

Feature	Merit-based Scholarships	Need-based Scholarships
Initial eligibility criteria	Merit scholarship eligibility criteria include: * Academic performance * Athletic or artistic ability * Leadership and service * Research and innovation * Independent projects with positive impact	Need-based financial aid eligibility criteria include: * Low-income family background * Unmet financial need due to financial difficulties * Traditionally disadvantaged populations
Primary selection factors	* Cumulative GPA * SAT/ACT scores * Extracurricular involvement * Special skills or talents	* Household income * Student Aid Index (SAI) * Pell Grant eligibility
Secondary selection factors	Financial need	* Academic performance * Leadership and service * Extracurricular activities
Application documents required	* Application form Official transcripts * Personal statement and/or scholarship essays * Letters of recommendation * Portfolio of work or audition	* FAFSA CSS Profile, if applicable Supporting financial statements (e.g., tax returns and pay stubs) * Application form Other supporting documents, as necessary
Award amounts and coverage	Varies. But it can cover partial or full tuition and indirect expenses. Full-ride scholarships are available.	Varies. But it can cover partial or full tuition and indirect expenses.
Renewal eligibility criteria	* Maintain satisfactory grades * Continued participation in leadership and service activities * Completion of proposed projects	* Maintain satisfactory academic progress * Proof of continued financial need
Who can apply?	These are scholarships for high-achieving students, talented artists and athletes, and student leaders.	These are for students: * From low-income backgrounds * With extreme financial hardship * From traditionally disadvantaged populations

As you can see, financial need affects both types of scholarships. In merit-based scholarships, financial need can be a secondary factor. Furthermore, students getting merit-based scholarships may be eligible for extra need-based scholarships. The trick is in making a compelling case for your unmet financial need.

Which Type of Scholarship Is Right for You?

The best scholarships for college students are the ones that fit their needs. As such, there’s no one-size-fits-all scholarship package. You must consider your interests, needs, and goals in making your choice.

For example, financial aid for low-income students isn’t for you if you’re not a low-income student. Your FAFSA and family’s financial statements won’t likely meet eligibility criteria.

When comparing academic scholarships vs. financial need scholarships, here’s what to do.

• Identify your personal achievements. Do you have strong grades and SAT/ACT scores? Does your leadership and service experience make you stand out? Do you have exceptional athletic skills or artistic talents? If you do, then merit-based scholarships are your best choice. You have a fighting chance of winning one or more of them.
• Determine your financial need. Do you come from a low-income family or a traditionally disadvantaged population? Does your family have inadequate financial resources? If yes, then consider need-based scholarships first. You can make a compelling case, too, by demonstrating your passion to succeed.
• Consider the colleges you’re planning to enroll in. Do they offer automatic merit-based scholarships to high-achieving students? Does your preferred college offer a wide range of need-based scholarships? Do they have transparent financial aid policies and practices?

Be sure to consider how scholarships affect financial aid, too. Scholarships may decrease need-based grants, work-study, and subsidized loans.

These can also be considered as financial assets. In turn, you may not be eligible for federal aid because of increased income. You may also be directed to refund excess money.

But it’s important to know that you can qualify for both types of scholarships. The trick is to adopt an effective funding strategy to maximize both scholarships.

Here’s how you can do it:

• Start with your FAFSA.
• Explore your merit-based scholarship opportunities. Look for one-time and renewable scholarships, too.
• Apply to as many merit-based and need-based scholarships as you can.
• Review and compare your financial aid offers.
• Work with your financial aid officer to maximize your financial aid package.

In the end, getting both types of scholarships means getting the best of both worlds. Less out-of-pocket costs, less student debt.

How to Apply for Scholarships: Step-by-Step Guide

Here are scholarship application tips to boost your success at getting free money.

• Research and explore your scholarship opportunities. Start early, use scholarship engines, and ask local organizations.
• Read about eligibility and criteria, application process, and deadlines.
• Gather the required application documents. Double-check their completeness and accuracy. Edit and proofread as many times as necessary. Ask for constructive feedback from your peers, family members, and teachers.
• Tailor your application documents to every scholarship program. Pay special attention to your resume, personal statement, and letters of recommendation.
• Meet the deadlines. Late submissions aren’t usually considered.

You can’t win them all, but you can win scholarships to meet most of your college costs.

Frequently Asked Questions (FAQs)

Q: Can I apply for both merit- and need-based scholarships?

Yes, you can. When you do, you’ll have more free money to cover your college costs.

Q: Do need-based scholarships consider academic performance?

It depends on the eligibility requirements. Need-based scholarships consider demonstrated financial need as the primary factor. But academic merit, such as a satisfactory GPA, may be considered, too.

Q: How do scholarships affect other financial aid?

Scholarships may decrease the amount of work-study and loans you can avail of. This way, your total financial aid doesn’t exceed your total cost of attendance.

Policies between colleges vary. So, check first with your school’s financial aid office.

Q: Are there scholarships specifically for minority or first-generation students?

Yes. Check out the Hispanic Scholarship Fund and Gates Millennium Scholars Program. Consider the Loran Scholars Foundation and Mandela Rhodes Scholarship, too.

Conclusion: Making the Right Choice

Merit-based and need-based scholarships will reduce your out-of-pocket costs. However, these are distinct types of scholarships in their eligibility requirements and criteria. Knowing their similarities and differences will result in your informed decision between them.

But why choose between these two types of scholarships when you can earn both? You can combine both types to cover most of your college costs.

So, explore all your scholarship opportunities and take full advantage of them. You’ll enjoy more financial flexibility during your studies and after graduation.