As you and your child approach the final year of the college application process, the prospect of paying for college may keep you up at night.
In my role as an independent educational consultant, I’ve had many conversations with students and families regarding their worries about financing college. As a parent of a college freshman, I’ve also gone through this myself.
Recognizing the confusion surrounding financial aid, financial need, and merit money, I want to clarify these terms to empower you to make well-informed decisions about your family’s financial plan for college.
First, what exactly is financial aid?
Financial aid is any form of funding that helps you pay for your child’s college. This aid can include grants, loans, work-study programs, and scholarships.
The government, colleges themselves, states, and private organizations all have different forms of aid.
The primary goal of financial aid is to make college accessible to students from all financial backgrounds, ensuring that financial constraints don’t hinder their pursuit of higher education.
How Do Students Qualify for Financial Aid?
There are generally two types of financial aid: need-based aid and merit-based.
Need-based aid is determined by a family’s financial situation and is based on the information that is submitted on the FAFSA (the Free Application for Federal Student Aid) and, when required, the CSS Profile.
Merit-based financial aid, also known as merit scholarships or merit money, is a form of financial assistance awarded to students based on their academic achievements, athletic excellence, artistic talents, leadership skills, or other exceptional qualities.
Unlike financial aid, merit money is not determined by financial need.
Merit money is a way for colleges and universities to attract and retain top-tier students who bring recognition and prestige to their institutions.
For top students with many college options, free cash can be the deciding aspect in their selection process.
Types of Need-Based Financial Aid:
Grants: Grants are gift funds that do not need to be repaid. They are often awarded based on academic achievement, financial need, or specific demographics.
Subsidized Loans: Subsidized loans are need-based loans that accrue interest only during the repayment period. The government pays the interest while you’re child is in school at least half-time.
Unsubsidized Loans: Unsubsidized loans are not need-based and accrue interest from the time they are disbursed, regardless of whether your child is in school.
Federal Work-Study: Work-study programs provide part-time employment opportunities on campus or off-campus to help students earn money for their educational expenses.
Types of Merit-Based Financial Aid:
Academic Scholarships: These scholarships are awarded based on academic excellence, such as high GPA, standardized test scores, or class rank.
Athletic Scholarships: Athletic scholarships are awarded to talented athletes who contribute to their college’s sports programs.
Artistic Scholarships: These scholarships are awarded to students who demonstrate exceptional talent in visual arts, music, dance, theater, or other creative fields.
Leadership Scholarships: Leadership scholarships recognize students who exhibit outstanding leadership potential and community engagement.
Miscellaneous Scholarships: Many colleges have their own subcategories for merit money that could relate to what county a student is from or their religious affiliation. Check with each institution to understand what they offer.
When applying for need-based financial aid, you’ll need to file the Free Application for Federal Student Aid (FAFSA) and/or other institutional forms like the CSS Profile.
For merit money, funds can be granted via the FAFSA and through institution-specific applications.
Timing and Deadlines
Timing can be critical because some financial aid like grants and scholarships are first-come, first-served.
So I advise you to be proactive by gathering all the different application deadlines and submitting your FAFSA and any additional financial aid documents as early as possible.
Merit money is often determined during the admissions process via the Common App, or, it can be determined by a separate scholarship application.
Applying early may increase your child’s chances of being awarded merit-based scholarships but check with the awarding school or organization to understand criteria and timelines.
Making College Accessible
There’s no doubt that financial aid plays a significant role in making college affordable and accessible to students from diverse financial backgrounds.
Now that you understand the different types of financial aid, be sure to keep on top of deadlines and keep exploring the different options available to your child.
Encourage your teen to apply for both need-based and merit-based aid, casting a wider net for potential funding.
If you have any questions, seek help from your child’s guidance counselor, reach out to prospective colleges, or book a free discovery call with us.