The complete guide to college financial aid types
If this sounds like your family, you're not alone. The middle-class squeeze is real - but you're probably thinking about financial aid all wrong.
Most families focus only on need-based aid and miss out on thousands in merit scholarships. Or they assume merit aid is only for valedictorians and miss need-based opportunities.
Understanding both types of aid - and how to pursue them strategically - can save your family tens of thousands of dollars.
What it is:
Aid awarded based on the difference between college costs and what your family can afford to pay
Who qualifies:
Families with demonstrated financial need according to federal and institutional formulas
Examples:
What it is:
Aid awarded to attract talented students, regardless of financial need
Who qualifies:
Students with strong academic, athletic, artistic, or leadership achievements
Examples:
Key insight: You can receive both types of aid simultaneously. They're not mutually exclusive.
Cost of Attendance - Expected Family Contribution = Financial Need
College costs: $50,000
Your EFC: $25,000
Your financial need: $25,000
Reality check: Having "need" doesn't guarantee aid. Schools don't always meet full need.
Maximum: $7,395 per year (2024-25)
Who qualifies: Families with EFC under $6,000 typically
No repayment required
Varies by state: California Cal Grant up to $12,570; New York TAP up to $5,665
Residency required: Must attend college in-state usually
Often have strict deadlines
Varies by school: Can be $5,000 to $50,000+ per year
School's own money: Private colleges often have larger programs
Merit within need: Some schools give better aid to more attractive applicants
Part-time campus jobs for students with financial need
Typical earnings: $2,000-$4,000 per year
Benefits: Convenient location, flexible scheduling around classes
• Not what you'll actually pay (unfortunately)
• Minimum you're expected to contribute toward college costs
• Used by schools to determine aid eligibility
The middle-class reality: Families earning $80,000-$150,000 often get minimal need-based aid but struggle to pay full price.
Merit aid opportunities:
Based on GPA, test scores, class rank
Automatic at many schools (if you meet criteria)
Range: $5,000 to full tuition
Examples: National Merit Scholarships, university presidential scholarships
Music, art, theater, debate, journalism
Often require auditions or portfolios
Available at schools without strong athletics
Can be substantial ($10,000-$30,000+ annually)
Based on extracurricular leadership, community service
Often combined with academic requirements
Smaller amounts typically ($1,000-$10,000)
Good for well-rounded students
Specific to intended major (engineering, business, education)
Often available to continuing students too
May require separate applications
Range from $500 to $15,000+
Need-based aid:
Limited to minimal
Strategy focus:
Merit aid and cost-conscious choices
Best options:
Need-based aid:
Minimal at most schools, but possible at most generous schools
Strategy focus:
Target schools with both need-based and merit aid
Best options:
Need-based aid:
Significant aid possible, especially at generous schools
Strategy focus:
Balance need-based and merit opportunities
Best options:
Need-based aid:
Substantial aid available
Strategy focus:
Maximize need-based aid, supplement with merit
Best options:
Reality:
Some schools provide aid to families earning $200,000+
Strategy:
Apply anyway - you might be surprised, especially at well-endowed private schools
Reality:
Merit aid is available for B+ students at many schools
Strategy:
Target schools where your stats are above their average
Reality:
After aid, private schools can cost less than public schools
Strategy:
Compare net cost after aid, not sticker price
Reality:
Full athletic scholarships are rare; most are partial
Strategy:
Don't count on athletic aid unless you're being heavily recruited
Missing state aid deadlines (can lose thousands)
Not appealing aid offers when family circumstances change
Assuming you won't qualify without applying
Not updating FAFSA when tax information becomes available
Only applying to reach schools where merit aid is unlikely
Missing scholarship deadlines (often December 1st, not January 1st)
Not researching departmental scholarships
Applying too narrowly (limiting your options)
Focusing only on sticker price instead of net cost
Not comparing aid offers systematically
Assuming aid offers are final (negotiation is possible)
Not planning for aid renewal requirements
School A: $60,000 cost, $30,000 aid (mostly loans) = $30,000 net cost
School B: $45,000 cost, $20,000 merit aid (renewable) = $25,000 net cost
School B is better despite smaller aid amount
Most families can afford college if they understand and pursue both types of aid strategically. The key is building a balanced list that includes schools where you might get need-based aid AND schools where you're likely to get merit aid.
Remember: The goal isn't just to get aid - it's to find the right school at a price your family can afford. Understanding both need-based and merit aid gives you the tools to make that happen.
CollegeCompass provides personalized aid strategies, school recommendations based on your stats, and guidance on maximizing both need-based and merit aid opportunities.
Get expert guidance on building a college list that balances aid potential with academic fit and career goals.