When applying for financial aid for college, there are two main types of aid to consider - need-based aid and merit aid. However, there is often confusion about the key differences between these types of aid. Many families mistakenly believe that merit aid will provide more financial assistance than need-based aid, but this is not necessarily true. The amount of need-based aid is determined by the family's financial circumstances, while merit aid is awarded based on academic, athletic, or other achievements regardless of financial need. Understanding the distinction is important to maximizing financial aid eligibility. The key difference is in how eligibility for each type is determined.

Need-based aid is awarded based on a student's financial need. To determine need, the student must complete the Free Application for Federal Student Aid (FAFSA). This application collects information about the family's income, assets, household size, and number of children in college. The college's financial aid office uses this information to calculate the student's expected family contribution (EFC) - the amount the family is expected to pay toward college costs. Students with a lower EFC are considered to have more financial need. Types of need-based aid include federal grants like the Pell Grant, state grants, institutional grants from colleges, work-study programs, and federal student loans. The amount of need-based aid awarded is intended to help fill the gap between the EFC and the college's cost of attendance. Qualifying for need-based aid depends entirely on the family's financial circumstances.

Merit aid is awarded based on a student's academic, athletic, artistic, or other abilities and achievements, regardless of their financial circumstances. Common types of merit aid include academic scholarships, arts scholarships, athletic scholarships, ROTC scholarships, and more. These are usually awarded by colleges, private companies, nonprofits, religious groups, professional associations, and community groups. Qualifying for merit aid depends on the student's skills and accomplishments. For academic merit aid, criteria may include GPA, class rank, SAT/ACT scores, rigorous curriculum, leadership activities, and extracurricular involvement. More competitive colleges offer more generous merit scholarships, aimed at attracting top-achieving students.



The bottom line is that need-based aid helps students who otherwise couldn't afford college, while merit aid rewards students for their abilities and hard work. Many students receive both types of aid in their financial aid packages. Completing the FAFSA is the most important step for gaining access to need-based financial aid opportunities. Building a strong academic and extracurricular profile helps qualify students for merit aid. Considering both types maximizes a student's options for making college affordable.