Many people assume that all financial aid is based on financial need, but this is not the case, there are two kinds of aid, need-based aid and merit-based aid. Need-based college aid is awarded based on the student and/or family’s financial need. Merit-based college aid refers to the college money that is available based on a student’s academic merits and special skills, as well as from the organizations they belong to.
- Understanding how aid is awarded and what type of financial aid is available will help students/families to determine how to pay for postsecondary costs.
- Need-Based Aid
- The Department of Education and the colleges and universities you’re applying to determine your need by subtracting your expected family contribution (EFC) form the cost of attendance (COA) at each college or university.
- Because all federal aid is need-based, you must submit the Free Application for Federal Student Aid (FAFSA) form to be eligible for federal aid, as well as need-based aid from states and institutions. Some schools also require an additional form, either the CSS Financial Aid PROFILE form or a specific form created by the school.
- Some need-based aid consists of education grants you don’t need to repay, while others are college loans that need to be repaid with interest. Federal loans are the largest form of financial aid, and they will likely be a large part of your college award letters.
- Common examples of need-based financial aid:
- Federal education grants
- State grants
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants (FSEOG)
- Federal Work-Study Programs
- Federal Loans, such as the Perkins Loan and Subsidized Stafford Loan
- Merit-Based Aid
- Some money for college is awarded without regard for financial need. This type of college aid is usually awarded for a student’s academic achievements in high school, as well as for special talents and unique traits, such as musical or athletic skills. Awards and scholarships like this are usually awarded by states, colleges and universities, private groups or individuals. It’s generally intended to supplement need-based aid or help you cover your expected family contribution if you don’t have that money on hand.
- Common examples of merit-based financial aid:
- College scholarships
- Tuition waivers
- Scholarships are the most common type of merit-based aid (though some do have a need-based component), which may come from the school or from outside sources.
- Need-Based vs Merit-Based Financial Aid (Campus Explorer article)
- Need-Based Aid vs. Merit-Based Aid (Princeton Review article)
- What’s the Difference Between Need-Based and Merit-Based Aid? (College Raptor article)
- 8 Rules for Maximizing Merit Aid (U.S. News article)
- How to Win a Merit Scholarship
- Understanding the 2 Types of College Financial Aid
- What’s The Difference Between Merit And Need Based Financial Aid? (Road2College)
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