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Merit-Based vs. Need-Based Aid: Everything You Need to Know

Going to college can be expensive, which can often be a sizable obstacle to continuing your education. Fortunately, there’s financial aid out there to make going to school feasible. 

Two of the main types of aid are merit-based and need-based. Merit-based means earning aid for your achievements and skills while any need-based aid depends on your financial circumstances. Keep reading to learn more about the different types of aid!

Merit-based aid is…

Merit-based aid is awarded to students for their achievements and skills. It isn’t determined by your financial status, which means it could completely cover your cost of attendance or fill any leftover gaps after receiving need-based aid. 

Some merit aid is outlined in your acceptance letter while others might be received from outside sources such as scholarship websites, foundations, nonprofits, and more. There are multiple types, so let’s look at a few.

Academic scholarships

Academic scholarships are aid that you receive for having good grades! Keeping your GPA high or at least on the rise is a good sign to colleges, and they like to reward your efforts. Schools want students who are a good fit for their school which often means excelling academically, your grades throughout high school are a main indicator here.  Not only will your grades qualify you for academic scholarships from your college, but they are often a key factor in your eligibility for the outside scholarships that we mentioned earlier. 

It is important to keep in mind that academic scholarships can be highly competitive, especially full-tuition ones. So, get involved in activities and clubs in and outside of school to set yourself apart. 

Related: Extracurriculars and why they matter

Athletic scholarships

While you might think athletic scholarships should be in a classification of their own, they are actually considered merit-based aid! These scholarships are a direct result of your hard work in and outside of the classroom. 

In addition, your skills as an athlete can bring in revenue for your institution. It can also be beneficial for you as well with new NIL regulations, student-athletes can get paid on top of their athletic scholarships. Pursuing athletics in college can be a lengthy process,  so make sure you connect with your coaches and school counselor early in your high school career. This way you can make sure you’re on track with your athletics and your academics!

See also: How to get recruited for college sports

Scholarships by talent/skill

In addition to academic and athletic scholarships, merit-based aid also includes scholarships by skill. These awards are given to students that shine within their clubs, hobbies, and more. Even if you cultivate a special talent on your own time, you can still apply for this type of funding.

Usually, scholarships like this will require a submission of an essay, resume or portfolio to get a look at who you are and how this skill or talent fits into your life. 

Need-based aid is…

Need-based aid means exactly what it sounds like. It’s aid that’s distributed according to your level of financial need. But how is this need determined?

Well, “need” is quantified through the FAFSA, which takes all your financial information and calculates your student aid index (SAI) expected family contribution (EFC). The SAI is an eligibility index number that a college uses to determine how much aid the student would receive. It’s important to note that the SAI is not an amount of money that you are expected to pay for college, it is the result of multiple factors entered on your FAFSA.  

So, let’s talk about the different types of need-based aid:

Related: Filling out the FAFSA with divorced parents


You might already be familiar with the Pell Grant, but you’ll be happy to hear that there are other grants available as well. There are also private grants, which are offered by organizations not affiliated with any government agencies. You can also find grants offered exclusively in your state. Grants, like scholarships, are money that does not need to be paid back.


This type of aid might not be the most ideal, but loans can allow you to pay tuition and other expenses quickly. Your college will likely offer you an unsubsidized and subsidized loan amount with your aid package. Then, you have the choice to either accept or decline loans, which will automatically be credited to your account upon acceptance. 

However, loans need to be paid back. Not immediately, of course, but loans enter their repayment period when you officially graduate or stop your schooling. Fortunately, you may be able to qualify for deferment to give you some time to start paying your loans back.

Need-based scholarships

Just as the name indicates, these types of scholarships require you to provide proof of demonstrated financial need. This can be done by submitting the FAFSA or CSS Profile to your scholarship provider. You’ll likely need to also provide proof of acceptance or enrollment into an accredited institution

Alternative forms of aid

While merit- and need-based aid are the two main forms of aid, there are other forms as well. There is more money than you might think dedicated to financing your education, it’s just about where you look! For instance, there’s location-based aid as well as tuition reimbursement.

Check out below for a brief explanation of each! 

Location-based aid

This form of aid includes grants and scholarships offered exclusively within your state. In fact, each state has a budget to allocate to financial assistance for their residents.

Fortunately, opportunities like this have a limited number of people that can apply. This means that there’s likely a higher chance for you to get a percentage of the funds for continuing your education! Try to apply as soon as possible to ensure the best results. 

Tuition assistance

Tuition reimbursement is when a company pays their employees a designated amount each semester or year for school. Oftentimes, companies will pay the school directly before or after your school term. Depending on your job, receiving tuition assistance might depend on how related your major is to your current job and/or your ending GPA in your courses. 

Employee benefits

Many companies and organizations offer their employees a variety of benefits. Some even provide student loan repayment and scholarships! You can even ask about these opportunities as soon as you start working!

Even if your employer doesn’t offer a repayment plan for all employees, it’s still possible to negotiate for it to be part of your contract! However, this will require you to ask if there’s availability in the budget and to stress the value of your contribution and student loan repayment. 

Companies may also pay for their employees to continue their education! Whether it’s a bachelor’s or master’s degree, if it’s related to your field then it can be an asset to employers. Be sure to note that some might require you to stay a period of time after you complete your courses or you might have to pay back your school expenses. 

Federal programs

In the U.S., there are different federal programs that can offer assistance with paying for higher education. For example, students that were in foster care can qualify for Educational and Training Vouchers up until they are 26 years old. These vouchers can be a big help since they provide up to $5,000 each academic year.
There are also programs for military families, and more! So, be on the lookout for these extra opportunities to make college more affordable and attainable.

Key Takeaways

Key Takeaways

  • Merit-based aid is provided to you based on your achievements and interests 
  • There are several different types of merit-based aid such as academic and athletic scholarships along with scholarships by skill
  • Need-based aid is dependent on your financial circumstances 
  • Need-based aid includes grants, loans, and scholarships 
  • There are also alternative forms of financial aid that aren’t solely under the umbrella of need-based or merit-based. These alternatives include location-based aid, tuition assistance, employee benefits, and federal programs. 
  • You should explore all forms of financial aid available to you to maximize the funding you stand to receive for your education
Key Takeaways

Frequently asked questions merit-based vs. need-based aid:

Does my financial aid automatically transfer over each year?

Yes and no. Some scholarships and aid require you to reapply each year while others automatically transfer over. Be sure to stay on top of the eligibility requirements for your different forms of funding because failing to meet them can result in losing or reducing your aid.

Does FAFSA qualify me for merit-based aid?

No! Merit-based aid isn’t determined by the FAFSA or CSS Profile. In fact, if your merit aid covers your cost of attendance, then you don’t have to fill out the FAFSA each year.

What's the best GPA for a merit scholarship?

If your school grades on a 4.0 scale, you should ideally have above a 3.0 GPA to qualify for a merit scholarship. It’s best to get as close to a 4.0 as possible to possibly get a full-ride. However, academic scholarships aren’t completely dependent on grades since colleges take your level of involvement in activities into consideration as well.