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Categorized | Financial Aid

Need-Based vs. Merit-Based Awards

helpareaderseriesI recently received a question from a reader inquiring about the difference between need-based and merit-based awards.

First, let me say that I am excited to have our first question asked and answered on our website (and so soon). This is exactly what is here for. Now onto the answer..

Need-based awards and financial aid that are given to a student from a university or college are a result of the EFC (estimated financial contribution) figure that is created by your FAFSA results. The higher your EFC, the less need-based aid you are eligible for. The lower your EFC, the more need-based aid you qualify for. In theory, if your EFC changes from year to year, it is quite possible that the need-based aid portion of your financial aid package could also fluctuate. Fortunately, most institutions don’t recalculate your financial aid package for minor changes in your EFC.

Merit-based aid and awards are given to a student based upon their academic and extracurricular success leading up to college. Factors playing into this are GPA, SAT and ACT scores, club activities, and community service. The good news is that all merit-based aid is not impacted by your FAFSA results (EFC). For example, if your student is receiving $10,000 in merit-based aid and you win the lottery (lucky you!), you don’t have to worry about that part of the financial aid package going away. However, any need-based aid will probably disappear immediately (imagine a “poof” sound as you read that last statement.. like it disappears up in smoke). That is as good as sound effects get for web reading. 😉

The one thing that you want to keep in mind about merit-based aid is the requirements that the student must maintain to continue receiving those funds. Typically there is a GPA threshold that the student must uphold in order to continue to receive merit-based aid. Also, depending on the merit-based scholarship, some students may be required to participate in certain activities. For example, if the merit-based aid is related to musical ability, the student may be required to participate in a certain number of recitals or music oriented programs each year.

The most important thing to remember when your receive your financial aid package is that you want to quickly decipher which aid is need-based and which aid is merit-based and what are the requirements to maintain those funds for the duration of your student’s educational experience. Your financial aid office will be able to give you the specifics on each scholarship and award. All you have to do is ask…

I hope this information is helpful and that it appropriately answers our reader’s question. If you have a question that you would like to have answered on, please do not hesitate to drop me a line. I am always glad to help.

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2 Responses to “Need-Based vs. Merit-Based Awards”

  1. Michael mendez says:

    My neighbors son is not qualifying for any aid. He’s going to school to be a pharmacist. His dad already funded 4 years of college in a state college, $20,000 a year. The student is now transferring to another college for Pharmacy which the cost is $50,000 a year. Here’s my question, The dad is filing the FAFSA every year and still get’s no money…..Why isn’t he getting any aid to help pay for college???


  1. […] When students are looking for every dollar available to help cover college costs, the amount of merit aid that they are eligible for can play a big role. Merit aid and awards are given to students based upon their academic and extracurricular successes leading up to college. Key factors playing into this are GPA, SAT and ACT scores, club activities, and community service. Since most merit aid is provided directly from a college or university, there can be a number of other factors that help decide which students are recipients of the available funds (remember… don’t confuse Merit-Based aid with Need-Based aid). […]