Understanding Need and Merit Aid
If you’ve started researching colleges, you’re likely in disbelief over the cost. The sticker price for college can be shocking.
Thankfully, few people pay the full list price for their undergrad education thanks to aid.
Financial aid comes in two general forms: need-based aid and merit aid.
Need-based aid
Need-based aid is given to students based on the financial need of their family.
Most schools calculate this based on the Student Aid Index, a number calculated by filling out the Free Application for Federal Student Aid (FAFSA).
Other schools require applicants to fill out the College Scholarship Service Profile, or CSS Profile.
With this information in hand, schools may offer a combination of funding sources to cover the difference between what they think you can pay and the total cost of attending the school. These sources can include:
Grants
Scholarships
Loans that must be repaid
Work-study and employment
It’s important to note that this isn’t always free money. Some colleges will provide a plan that covers the gap between what you “can” pay and the total cost, but some of the gap is covered by loans or money from a job.
Schools that label themselves as "meets demonstrated need" institutions promise to provide a financial aid package that covers the difference between what you can pay and what the school charges. However, it's important to note that this package is based on what they believe you can pay. Unfortunately, these expected household contributions may not align with what you can actually afford.
Some colleges go a step further, promising to meet a student’s financial needs without requiring loans.
For example, Washington University in St. Louis instituted a no-loan policy starting in fall 2024. This means it replaces need-based loans with scholarships and grants that don’t need to be repaid.
Dartmouth College has a similar policy, promising to cover the gap with scholarships, grants, and student employment (work-study).
At the other end of the spectrum are “need aware” schools. These take your ability to pay into consideration during the admissions process. These schools may deny an applicant because of their perceived inability to pay.
Merit Aid
Merit aid is given to students regardless of their financial need.
In most cases, merit aid is given based on a student’s record, such as their high school GPA, extracurriculars, awards, and test scores.
Most schools use nebulous criteria to distribute merit aid. Factors like essays, attributes, or intended fields of study can give some students a leg up. Other schools give guaranteed merit aid based on statistics.
For example, The University of Kansas distributes guaranteed merit based on the student’s high school GPA at the end of their junior year.
Some schools, such as Dartmouth, Harvard University, and Pomona College are stingy with merit aid or give none at all. Others give merit aid to nearly all students who attend. They do this as a recruiting tool; it allows them to list a high price that makes the school seem prestigious but makes applicants feel important because they received a scholarship. For students, merit aid is a reward for their good track record. For schools, it incentivizes promising applicants to select their institution.
CollegeIQ provides two metrics to help you understand how much merit aid you might receive from an institution:
Merit Price™ - The Merit Price is the average price that students who are not eligible for need-based aid pay to attend the school. This number is calculated by taking the average merit award given to students who enrolled in the most recent year for which we have data, and subtracts it from the total cost of attendance. A merit score is only applied to schools where at least 40% of the latest incoming class received a merit scholarship.
Merit Meter™ - Merit Meter shows how generous a school is with merit aid. This is calculated based on the average award given to those without need as a percentage of the total cost of attendance. It’s important to note that the amount a school offers in merit is not as important as what you will pay to attend. A less expensive school that offers less merit aid might still be a better value than a more expensive school that offers more aid.
Figuring your Net Price
The net price refers to the amount you pay after scholarships and grants are deducted.
For most schools on CollegeIQ, we display the net price paid for full-time, first-year students who received scholarship aid by income: $0-$30,000, $30,001-$48,000, $48,001-$75,000, $75,001-$110,000, and $110,001.
The best way to determine how much someone in your financial situation might pay is to use the school’s Net Price Calculator available on their website.
CollegeIQ recommends using a combination of the data we provide and the school’s net price calculator to get an estimate. The next step for schools you’re serious about is to talk to their financial aid office.