Merit-Based Aid vs. Need-Based Aid

Melissa Cox CFP® CFLSA

Merit-Based Aid Versus Need-Based Aid: Is There A Difference?


Welcome back to Cox Collegiate Planners!


This blog is where we talk about anything and everything having to do with higher education! From innovative and forward-thinking strategies to cut college costs to creating plans to save money and borrow reasonably - this is your one-stop shop to learn how to prep for college the right way. 

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As a College Planner and CERTIFIED FINANCIAL PLANNER™, I have a unique perspective on college finance. Financial aid, scholarships, and or just plain old college financing and savings don't happen independently. All too often, people are plagued by their previous self's procrastination. After all, college is one of those things that feels as if it'll never arrive… until it does. When it does, you don't want to be caught off guard. Taking a proactive and planned approach to college and tuition is the only way of ensuring you don't find yourself with an overwhelming bill with no way to pay at the end of the semester!

Types of Aid - Merit and Need


2 Types of Financial Aid
Melissa Cox CFP explains the types of Financial aid

We all know there are scholarship and aid programs for college and university students. Still, it can feel like you need a college-level class to understand what each one is and how to apply for them. Just to name a few -there are subsidized loans, unsubsidized, expected family contributions, scholarships, and more!


Today, however, we're going to be really focusing on two types of aid, what they are, and how they're similar and dissimilar. The first type of aid we're going to discuss is called Merit-Based Aid, and the second is Need-Based Aid. Understanding what these types of aid are and how they can work for you (or your loved one) is a monumental first step towards getting to know the behemoth that is college financial aid. 

What is Merit-Based Aid?

Merit Based Financial Aid
Melissa Cox CFP explains Merit-Based Financial Aid


To way way way over simplify it - Merit-Based aid, or Merit-Based Scholarships, are given to students based on things like their academic performance, engaging in extracurricular activities, or performing well on standardized tests like the SAT or ACT. Merit-Based aid is often awarded to students who have achieved more than one of these benchmarks. It's also important to note that while Merit-Based Aid is often rewarded by the college or university you're attending/applying to, it can also be awarded by outside sources. External sources that you may be awarded Merit-Based Aid from are organizations like community organizations, fraternal groups, ethnic groups/clubs, band organizations, or athletic organizations. 


While Merit-Based Aid and Scholarships can seem very similar to Academic scholarships, they're not exactly the same. Academic Scholarships are awarded almost entirely based on a student's school performance. In contrast, merit-based scholarships are awarded based on varying criteria like those mentioned above (academic performance, standardized tests, extracurricular activities, leadership experience, etc.). Merit-Based aid can be challenging to get. However, if you do get it, it can cover a large portion of tuition and college expenses. 


What to remember: Merit-Based Aid and Scholarships are granted to applicants based on their performance in various pursuits. Financial need plays no role in the awarding of Merit-Based Aid. 

What is Need-Based Aid?

Need Based Financial Aid
Melissa Cox CFP talks about Need Based Financial Aid


Now, to way way way over simplify Need-Based Aid. While Merit-Based Aid is awarded to scholars based on their performance in and outside the classroom, Need-Based Aid is awarded to students based on family and individual income, family size, estimated family contribution (or EFC), and cost of attendance. Unlike Merit-Based Aid, Need-Based aid is completely untied to academic performance. This means that Need-Based Aid may be equally awarded to two different students even if one outperforms the other academically, extracurricularly, and in standardized exams. 


Need-based financial aid may come in the form of scholarships, grants, student employment, or student loans. They also may originate from your college, state government, outside organizations, or the federal government. Schools providing Need-Based Financial aid often require the applicant to submit a completed FAFSA, application, and various other documentation to prove or demonstrate their need for aid. 


Another difference between the two types of aid is that some forms of Need-Based Aid, like federal student loans, require repayment. In contrast, the vast majority of Merit-Based Aid and Scholarships do not. It should be reasonably straightforward what you will or won't have to repay; however, my suggestion would be to meet with a college planner if there's any confusion. Someone like myself can help you truly understand what you're applying to, how it will be awarded, as well as when/how/if you will need to repay that money. 


What to remember: Need-Based Aid is awarded based on individual or family need. These are meant to help bridge the gap between how much you can afford and how much college costs. 

What's the FAFSA?

Melissa cox CFP talks about the FAFSA Form


The FAFSA, or the Free Application for Federal Student Aid, is an application filled out by prospective/current college students. This form helps the federal government and schools understand your financial situation and award financial aid. Examples of federal financial aid are Pell Grants, Federal Supplemental Educational Opportunity Grants, Federal Direct Subsidized/Unsubsidized Loans, and Federal Work-Study Programs. The FAFSA is required by almost every college and university. It's free to fill out, and you can do it online! 


You may also need to fill out a CSS profile depending on your school. This is a less common requirement, but there's a filing fee if you have to fill it out. Once again, if there's anything about the FAFSA or CSS that you find confusing, I'd highly recommend meeting with a financial planner, college planner, or someone who's both (wink, wink). College planners are very accustomed to forms that determine aid. We know all the loopholes, fee waivers, and shortcuts that'll help you make the most of your application!

Let Cox Collegiate Planners Help You Create a Plan to Work Towards College Together

Create a College Funding Plan
Melissa Cox CFP can help your family create a college funding plan


It's essential to begin thinking about college as early as possible. Being proactive and getting ahead of the crowd can work in your favor when applying for Merit-Based or Need-Based aid. The worst thing you or your loved one can be when it comes to college planning is a passive participant. If you let applying for scholarships, aid, or college sneak up on you, you'll be frantically applying, and it's likely you'll miss something!


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If you're in financial need or your child is gifted academically or otherwise, please feel free to reach out. Together, we can find solutions to help you or your child get into school and be as responsible as possible with their tuition, finances, scholarships, and loans. As with many things in life, one of the hardest parts of college planning is deciding to take the first step. Reach out and give me a call or send mean email to schedule an appointment. Together, we'll develop a smart, strategic, and forward-thinking plan to achieve financial success in higher education. 


Schedule a call with Melissa Cox CFP®
Schedule a call with Melissa Cox CFP®

Until next time… this is Cox Collegiate Planners!


Melissa Anne Cox, College Funding and Student Loan Advisor, is also a CERTIFIED FINANCIAL PLANNER™ and financial coach in Dallas, Texas.

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