Adult Learner

Merit-Based vs. Need-Based Financial Aid

As you consider your options for paying for school, you are likely looking for financial aid opportunities. In fact, most students will use some sort of financial aid to cover the expenses of their schooling. Financial aid includes loans, grants, tax credits, scholarships, and work-study programs, all of which can make a big dent in your college expenses. As you explore your options, there are two basic categories of financial aid: merit-based and need-based. Understanding these and how they apply to you will help you make the right choice in which types of aid to apply for based on your unique situation.

How Does Merit-Based Financial Aid Work?

Merit-based financial aid is awarded to students based on some sort of merit, whether that is academic success or extracurricular achievements and activities. For these, financial need does not play a role, so students with higher incomes can often qualify.

Many merit-based awards are scholarships from nonprofits and private businesses that want to invest in the best and the brightest. Sometimes, students can get merit-based scholarships from their school, especially if the school is looking for sports players or academically strong students.

Merit-based scholarships often have a committee that will look at each applicant’s qualifications to determine who should receive the reward. If given a merit-based scholarship or grant, you will likely need to maintain a minimum GPA in your courses as a requirement to continue receiving your scholarship.

Applying for merit-based aid starts at the college level. Many schools will automatically award merit-based scholarships if students score a certain range on their SAT or ACT test. Others require an application, including private scholarship and grant opportunities. These applications often include an essay or letters of recommendation from others who can attest to the student’s character and work ethic.

Can Students Renew Merit-Based College Aid?

Most types of merit-based aid are renewable, provided the student continues to fulfill the requirements of the scholarship. However, not all programs are renewable. Financial aid offices will answer questions about your aid, including whether it needs to be renewed or not or if it is a one-time grant.

How Does Need-Based Financial Aid Work?

Need-based aid is designed for students with financial need. Most state and federal aid is considered need-based. The Pell Grant is a common source of need-based aid from the federal government, providing funds based on the student's family income. As with all "grants," Pell Grant money does not have to be repaid. The maximum amount of Pell Grant money available to students in the 2024-2025 school year is $7,395, and this amount can be adjusted each school year.

State governments offer need-based aid programs as well. In addition to grants and work-study programs, some states offer tuition waivers for those who stay in-state for their education.

While the most common types of need-based aid come from the government, there are need-based programs available through nonprofits and businesses who want to help lower income individuals within their communities.

Can Students Renew Need-Based College Aid?

For most need-based programs, if the financial need persists, the student can get the grant or scholarship again for the next school year. However, for any government aid, this requires filling out the FAFSA every year to verify your income. Private need-based programs will also want to verify your income before renewing their financial aid.

Merit-Based vs Need-Based Financial Aid – Which Is Better?

There is no difference between how you use merit vs need-based aid. Both types of financial aid are applied to lower your college costs. The primary difference is how you qualify for one over the other.

If you are not considered low-income, then you will need to pursue merit-based financial aid, as you will have fewer need-based financial aid options. Focusing on having a well-rounded set of extracurricular activities and community service will help you qualify for this type of aid. In addition, work to keep your grades high, as many of these programs require at least a 3.0 GPA. High ACT or SAT scores will also be a factor when being considered for aid.

If you are low-income or middle-class, you may be able to qualify for need-based aid. This type of aid is a bit easier, as it has fewer requirements directly on the student. Income level, as shown on your FAFSA, is the starting point for consideration of need-based aid.

Of the two, merit-based aid is more difficult to qualify for. These funds are usually limited, and there are many applicants. Plus, requirements to earn the scholarships or grants can be quite involved. 

Look for Combination Options

If you are a student who qualifies for need-based financial aid, and you have the right qualifications for merit-based financial aid options, consider looking for programs that have both requirements. Many private organizations that offer scholarships want to provide their money to students in need but also want to give it to worthy students. Thus, their financial aid may have a combination of qualifications that include both merit and income guidelines.

How to Get Started with Financial Aid

Navigating the realm of financial aid can be overwhelming, especially when considering the differences between merit-based and need-based aid. Here's a guide to help you get started.

Understanding Merit-Based Financial Aid

Familiarize yourself with the criteria for merit-based aid, which often includes academic achievements, extracurricular activities, leadership roles, community service, and special talents or skills. Research scholarships offered by colleges, universities, private organizations, and businesses that align with your achievements and interests. Check with your prospective schools to see if you qualify for any institutional merit-based scholarships and grants. Prepare application materials, including transcripts, letters of recommendation, resumes, and essays, tailored to highlight your accomplishments and strengths.

Navigating Need-Based Financial Aid

Start by completing the free application for Federal Student Aid (FAFSA) to determine your eligibility for federal student aid programs, including grants, loans, and work-study opportunities. Gather financial documents such as tax returns, W-2 forms, bank statements, and investment records needed to complete the FAFSA accurately. Explore need-based aid programs offered by your state government and prospective colleges or universities, and submit any additional forms required for institutional aid. Research private scholarships and grants based on financial need offered by nonprofit organizations, foundations, and community groups.

Other Types of Financial Aid

While need-based and merit-based are the two most common types of financial aid, there are also aid programs tailored to a student's unique interests. For instance, a student who is interested in pursuing a degree in education may be able to find grant and scholarship options for future teachers. The Teacher Education Assistance for College and Higher Education (TEACH) grant is one of these, offering up to $4,000 of federal government aid in return for agreeing to teach in specific high-needs areas after graduation. You can find financial aid for specific health conditions, mental health concerns, STEM interests, artistic ability, and even being left-handed. Keeping your eyes open for these types of financial aid can help you find more money to pay for your educational expenses.

In addition, working professionals can often get tuition assistance through their employers. This is particularly helpful for UMass Global students, as we offer an employer-aligned curriculum that brings value to the employers of our students. Talk to your employer about any tuition assistance they may offer and see how that applies to your desired program of study. If your employer partners with UMass Global, we offer additional tuition discounts to bring down the initial cost of the degree.

Get Financial Aid Help from UMass Global

If you are considering attending UMass Global, our One-Stop Specialists can help you learn more about your financial aid options. While the process often starts with the FAFSA, there are other options available as well. Our team will help you find the financial aid opportunities that will give you the needed income to fund your education. Speak to our financial aid department today to see if you qualify for merit-based, need-based, and other types of financial aid.

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