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FINANCIAL AID

Understanding the Difference Between Need-Based and Merit-Based Financial Aid

Can virtuosic violin-playing abilities reduce the cost of college? The answer is...sometimes!

While the cost of college is high, not every student pays the “sticker price.” Financial aid comes in a few varieties, including gift aid, self-help aid, and loans. Gift aid—money that does not need to be paid back—can be awarded based on need or merit.

What is need-based financial aid?

Need-based financial aid is awarded based on the financial situation of prospective students and their families. Factors such as GPA, test scores, athletic ability, or violin virtuosity have no impact on a student’s access to this form of financial aid.

Federal Student Aid is the most common example of need-based financial aid. Through the Office of Federal Student Aid (FSA), individuals can gain access to monetary assistance by providing a detailed history of their and their family’s financial records and assets. Stay in the know about important dates and deadlines for the Free Application for Federal Student Aid (FAFSA®).

What is merit-based financial aid?

Merit-based financial aid is awarded based on a student’s demonstration of rare or remarkable skills or abilities. These can be academic, athletic, or artistic, for instance. Merit-based aid may be awarded by institutions, or it may be awarded by organizations.

For instance, Georgia State University offers out-of-state scholarships for students with GPAs of 3.6 or higher. A well-known source of organization-issued merit-based aid is the National Merit® Scholarship Program, for which the PSAT/NMSQT® is the qualifying exam.

What is the relationship between need- and merit-based financial aid?

While decisions about merit-based aid are typically made without regard to need (or, in some cases, with only partial consideration of need), decisions about need-based aid are typically made on the basis of a student’s full financial situation. Because of this, students who receive merit-based aid must disclose that information when (or after) applying for need-based aid, since merit-based aid awards can affect a student’s eligibility for need-based aid.

To learn more about financial aid for college, visit our Insights Center.


FAFSA® is a registered trademark of the U.S. Department of Education. National Merit® is a registered trademark of National Merit Scholarship Corporation, which is not affiliated with The Princeton Review. PSAT/NMSQT® is a registered trademark of the College Board and the National Merit Scholarship Corporation, which are not affiliated with, and do not endorse, this product. All product names, logos, and brands are property of their respective owners. The Princeton Review is not affiliated with Princeton University.