To help with tuition, housing, school supplies, and other costs, the majority of college students receive some form of financial aid. The total amount of grants, tax credits, loans, and work-study incentives given to American students in 2020–21 was around $235 billion. The typical full-time student was paid close to $15,000.
The distinctions between need-based and merit-based financial aid are discussed here. Information on how students can apply for and receive both types of aid is also included in this booklet.
What Is Merit-Based Aid?
Merit-based aid goes to students based on their academic and/or extracurricular achievements rather than their financial need. Scholarships are the most common type of merit-based aid. Students may receive scholarships from nonprofit organizations, private businesses, and colleges and universities. When awarding merit-based aid, scholarship committees usually examine students’ grades, standardized test scores, and participation in extracurricular activities. Students may need to maintain a certain GPA throughout college to continue receiving these funds.
Some larger colleges may not provide merit-based aid to help down tuition expenses, while many smaller colleges do. Ivy League universities, for instance, provide a lot of institutional need-based aid but no merit-based aid.
kids might search for scholarships through community foundations, nonprofits, and the employers of their parents or guardians. Many of these groups give out prizes to kids who achieve excellence in a variety of professions. To locate possibilities tailored to their major or for students in particular states or regions, prospective students can also look through online scholarship boards.
The average merit-based reward in 2019–20 was $11,287, per U.S. News & World Report. In 2019–20, over 22% of all college students in the United States got this kind of assistance.
Need-Based Aid: What Is It?
The most prevalent kind of financial help given to college students in the United States is need-based aid. Federal work-study, state and federal grants, federal loans, and institutional grants and scholarships are all included in this category of assistance.
The most well-known need-based assistance program for students from low-income families is the Pell Grant. In 2020–21, almost 6.2 million students were awarded Pell Grants. For the 2021–2022 academic year, the maximum Pell Grant payout is $6,495.
A Federal Supplemental Educational Opportunity Grant, which gives students up to $4,000 annually to pay tuition and other costs, may also be available to students who exhibit a high degree of financial need.
Additionally, the majority of state governments offer need-based assistance through federal work-study programs, tuition exemptions, and grants. In addition to merit-based prizes, several private charities and companies provide need-based scholarships.
Complete the FAFSA to find out if you qualify for need-based financial help. To be eligible for federal help each academic year, make sure to do this each year you attend college.
What Are the Differences Between Need-Based and Merit-Based Aid?
Both merit-based and need-based aid are available to college students to help pay for tuition and other educational expenses like accommodation and school supplies.
While merit-based help is typically harder to obtain, need-based aid is still the most prevalent kind. Students must attain and maintain a particular standard of performance in their extracurricular and/or academic pursuits in order to be eligible for merit-based aid.
Not all universities and colleges provide both forms of financial aid. While students at larger public universities typically receive the majority of their financial help from need-based sources, smaller private schools frequently offer merit-based options.
Which Other Financial Aid Programs Are Available?
There are additional options for students to finance their postsecondary education besides need-based and merit-based aid.
Private loans, typically provided by banks or credit unions, can assist students in bridging financial gaps. The terms of private loans are typically less advantageous than those of federal loans, thus these should only be used as a last alternative.
Scholarships can also be awarded based on a student’s interest in a particular subject, among other criteria. Students of color and women are among the demographic categories that are the focus of other prizes.
The several kinds of financial aid programs and scholarships listed below are not determined by merit or need:
- Scholarships for Nontraditional Students and Adult Learners
- Student Scholarships for Disabled Students
- Opportunities for Students of Color to Receive Financial Aid
- LGBTQ+ Student Scholarships
- Scholarships for Families and Dependents of Military Personnel
NOTICE: All of the information, content, and resources on this website are presented for general informational purposes only and are not meant to be a substitute for professional financial advice. Before making any financial decisions, readers of this website should speak with a qualified counselor.
