Need-based aid vs. merit based aid – what’s the difference?

Word of the Week

Merit-based financial aid (n). Financial aid that is awarded based on student characteristics or abilities. Unlike need-based financial aid, merit-based aid is not tied to family income or other aspects of a family’s financial situation. Some types of financial aid, such as certain scholarships, may be awarded on both need-based and merit-based criteria.

As families begin the discussion about how to finance college for a student, it is important to be aware of two of the major categories of financial aid: need-based aid and merit-based aid. Need-based aid typically has income guidelines or cutoffs, often dependent on the number of people in a family. Merit-based aid is awarded based on other characteristics or abilities of a student—having a certain grade point average or standardized test score, writing an excellent essay, or demonstrating a talent such as singing or athletic ability. Depending on a family’s financial circumstances, they may finance college through need-based aid only, merit-based aid only, or a combination of the two. Families may access both types of awards from a range of sources: government (federal, state or city), colleges, or private funders (such as the highlighted scholarships on this blog!)

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Types of Need-Based Aid

Federal, State, and City Government Aid

The government, particularly the federal government, offers multiple types of need-based aid. Need-based aid includes grants (free money), loans, or work-study awards.

Federal Pell Grant: In the 2012-2013 academic year, eligible students could receive a maximum of $5,500 per year toward a two- or four-year college if enrolled full- or part-time. Pell is a grant, so students do not have to repay money awarded.

Federal Perkins Loan: Students with “exceptional financial need” can receive $5,500 per year as a subsidized loan (a total of $27,500 as an undergraduate). As a loan, students must eventually repay the borrowed amount plus interest.

Federal Subsidized Loans: A dependent student can receive up to $5,500 in her first year, $6,500 in her second year, and $7,500 in each of her third and fourth year (a total of $27,000 over four years). Independent students may borrow more. Similar to Perkins, student must eventually repay the borrowed amount plus interest.

Federal Work Study: Some colleges participate in this program that provides employment to undergraduate and graduate students to work part-time while in college. Usually, students are employed by the college.

DC Tuition Assistance Grant (DC TAG): The Office of the State Superintendent of Education (OSSE) provides DC TAG for Washington DC residents earning under $1 million per year. Students attending public colleges or universities can receive up to $10,000 annually towards the difference between in-state and out-of-state tuition. Students attending private Historically Black Colleges and Universities (HBCUs) and private colleges in the DC area can receive up to $2,500 per year for college expenses.

Non-Government Aid

Financial Aid from Colleges and Universities: Colleges may award grants or loans to students based on need. Every college has different financial aid policies, so check with the college’s financial aid office.

Outside Scholarships: Some organizations award scholarships based on need, however, many scholarship awarding organizations are also interested in other student characteristics such as student academic achievement (GPA, rigorous course work, recommendations) and extracurricular achievement (athletic, arts, community service, leadership).

AwardTypes of Merit-Based Aid

Financial Aid from Colleges and Universities: Many colleges offer merit-based aid awards as an incentive for students to attend the college. Always check the requirements for a scholarship: students may have to maintain a high grade point average to continue receiving the award. Some colleges only offer need-based aid. Make sure to ask the college’s admissions or financial aid office how they award financial aid to students.

Outside Scholarships: Many scholarships are merit-based, and often depend on the mission of the organization sponsoring the scholarship. For example, an organization that supports women’s athletics may sponsor a scholarship for female athletes entering college.

Smart College Planning Includes Applying for Need- and Merit-Based Aid

Many families will qualify for both need-based and merit-based aid, and every family should consider financing college with a combination of both types of awards.

• After January 1st, fill out the Free Application for Federal Student Aid (FAFSA). This federal aid form will inform a family if they may qualify for some of the need-based types of financial aid above. It is necessary to complete the FAFSA to apply for financial aid from a college and to apply for some scholarships.

Complete the CSS/Financial Aid PROFILE if required. Some colleges require an additional financial aid application, produced by the College Board, which asks for additional financial information.

Complete college-specific financial aid forms. Some colleges/universities may ask families to fill out institution-specific paperwork. Check with the college’s financial aid office.

Search for outside scholarships. All DCPS students have access to scholarship listings through the Individual Graduation Portfolio (IGP) and their Naviance account. Families should consult their school counselor for details about accessing either tool. Some search engines are,, and the C3N Network Scholarship Page. DCPS College Talk also features scholarships for DC area students on this blog and we share the Scholarship of the Day on Twitter. You can follow us @dcpscollegeprep.

Have more questions about need-based and merit-based financial aid? Leave us a comment here or email us at

About Chloe Woodward-Magrane

Chloe Woodward-Magrane is the Coordinator, College & Career Readiness at District of Columbia Public Schools. Previous to joining DCPS, she was a college admissions officer at Barnard College in New York City.

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