Merit-Based Scholarships vs Need-Based Scholarships – Educating point

Debashish Biswas

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Difference Between Merit Based Scholarship and Need Based Scholarship

Most of the talented students who are eager to study for the higher education but due to the financial crisis they are not able to pay the tuition fees. So, for that solution different organizations are providing scholarships to the studious and extraordinary students. This problem of most of the recipients are solved by the merit based and need based scholarships. Merit-based scholarships and need-based scholarships are two primary types of financial aid available to students seeking higher education.

Merit Based Scholarship Vs Need Based Scholarship

A study conducted by the World Bank found that recipients of merit-based scholarships in Kenya reported higher educational attainment and higher health and employment rates than their peers who received need-based scholarships.

The benefits of merit-based scholarships extend beyond the classroom, potentially leading to better long-term outcomes for recipients. Their eligibility criteria, application process, award amount, and renewal requirements differ.

What is a Merit-Based Scholarship?

Merit-based scholarships are awarded to the desired students mainly based on the students’ academic or extracurricular achievements. These scholarships are often granted to students who have excellent academics, athletics, arts, or leadership roles in their careers. The eligibility criteria for merit-based scholarships mainly come with a high GPA, strong standardized test scores, and significant participation in extracurricular activities.

The application process for merit-based scholarships differs based on the organization providing them. Some scholarships require a separate application, while others automatically consider students upon their admission to the institution. Some merit-based scholarships also require students to maintain a certain GPA or meet other performance criteria to renew the scholarship.

The award amount for merit-based scholarships that I have seen is typically from a few thousand dollars to full tuition, depending on the scholarship and the institution. However, the total amount of scholarships a student can receive may be, at most, the cost of tuition.

What is a Need-Based Scholarship?

On the other hand, need-based scholarships are awarded based on a student’s financial need. These scholarships aim to make education accessible to students who may not have the financial means to afford it. The eligibility for need-based scholarships is determined by the student’s financial situation, as assessed through forms like the Free Application for Federal Student Aid (FAFSA).

The application process for need-based scholarships often involves completing the FAFSA or similar forms that provide a comprehensive view of the student’s financial situation. A few institutes may also require some additional documents to verify financial needs.

The award amount for need-based scholarships varies and is determined by the student’s demonstrated financial need. These scholarships can cover various costs, including tuition, school supplies, and housing. Need-based scholarships are typically renewable yearly if the student demonstrates financial need.

Key Differences

1. Criteria for Awarding: Merit-based scholarships focus on a student’s achievements, talents, and abilities, while need-based scholarships are awarded based on the student’s financial situation.

2. Purpose: Merit-based scholarships aim to reward excellence and attract high-achieving students, whereas need-based scholarships seek to remove financial barriers to higher education.

3. Eligibility: For merit-based scholarships, eligibility is determined by accomplishments. For need-based scholarships, eligibility is based on financial need as assessed by FAFSA or similar applications.

What are the Advantages of Merit-Based Scholarships over Need-Based Scholarships?

Merit-based scholarships offer several advantages over need-based scholarships, primarily focusing on rewarding individual achievements and providing incentives for academic and extracurricular excellence. Here’s a detailed look at these advantages:

1. Encouragement of Excellence

Merit-based scholarships are awarded based on a student’s achievements, including academic performance, athletic prowess, artistic talent, or leadership skills.

According to the U.S. News & World Report, the average merit award for full-time undergraduates was $12,088 in the 2022-2023 academic year. The private colleges provide the most significant number of merit-based scholarship awards. 

In the 2022-2023 academic year, the research published by the National Association of College and University Business Officers (NACUBO) shows that 90.9% of first-time undergraduates received institutional grant aid from institutions, covering an average of 62.1% of published tuition and fees. In 2022, the NACUBO Tuition Discounting Study also published that an average institutional tuition discount rate of 56.2 per cent was reported by 341 private, nonprofit colleges and universities for first-time, full-time students.

Percentage of First Time Undergraduates

All this information encourages students to excel in their respective fields, fostering a culture of excellence and hard work. It motivates students to maintain high grades, develop their talents, and engage in extracurricular activities, knowing that their efforts can lead to financial rewards that support their education.

2. Recognition of Achievements

When you have been awarded the scholarship by doing your best to achieve it, they know the importance of hard work and dedication. And, by doing hard work, they receive merit-based scholarships that serve as a form of recognition for their hard work and different achievements. This recognition boosts students’ morale and enhances their resumes, making them more attractive to colleges and future employers. A case in point is the National Merit Scholarship Program, which awards students based on their PSAT/NMSQT scores, academic records, and extracurricular achievements. Recipients of this prestigious scholarship gain national recognition, which can be a significant advantage in competitive educational and job markets

3. Competitive Advantage

Merit-based scholarships can give students a competitive advantage when applying to colleges or for future opportunities and being a recipient of such a scholarship signal to colleges and employers that the student has demonstrated excellence in their academic or extracurricular activities. Colleges often view recipients of merit-based scholarships as high achievers, which can influence admissions decisions. Furthermore, listing these scholarships on resumes signals to potential employers that the candidate has a proven track record of excellence. This distinction can enhance their applications and resumes, setting them apart from other candidates. On the other hand, as need-based scholarship is based on financial need, the organization reduces the debt students accumulate during their college years.

4. Independence from Financial Need

As we know, need-based scholarships are awarded based on the financial situation of the student’s family, while merit-based scholarships are granted chiefly based on achievement. However, merit-based scholarships also have a negative impact as well. Merit-based scholarships are accessed mainly by higher-income students who are likely to continue their education regardless, potentially improving the achievement gap between lower- and higher-income students. It comes mostly by qualifying for the test and provides renewal according to performance. On the other hand, need-based scholarships, such as Ghana’s Need-based scholarships for secondary students, positively impact learning, fertility rates, and future earnings. It also indicates that need-based scholarships may be a more effective and equitable use of scholarship funds.

So, if high-achieving students received the merit scholarships and low-achieving students received the needed ones, we could easily understand that the merit scholarship recipients are selected through higher, hard-working performance.

5. Incentive for Improvement

Merit-based scholarships incentivize all students to improve their performance to receive financial aid for their education. And, in the merit-based scholarship, if you maintain the minimum GPA, you may be eligible for the renewal, depending on the scholarship organization. We also know that scholarships are available for various forms of achievement, encouraging students to strive for excellence in academics, sports, arts, or community service. This incentive can lead to overall improvements in school performance and student engagement.

 Meanwhile, when financial concerns are mitigated in need-based scholarships, students can focus on their studies and academic performance. According to the research published by SCISPACE, this scholarship program gives a great incentive in the form of performance, academic benchmarks, etc., which can encourage students to improve their academic performance.

6. Flexibility and Variety

A wide variety of merit-based scholarships are available, catering to different talents and achievements. This diversity means that students can find scholarships that match their unique skills and interests, from academic subjects to extracurricular activities like music, art, and athletics. The flexibility allows more students to benefit from scholarship opportunities, recognizing a broader range of achievements beyond academic performance.

How Do Colleges Determine Eligibility for Merit-Based and Need-Based Scholarships

CriteriaMerit-Based ScholarshipsNeed-Based Scholarships
Academic PerformanceHigh GPAs, class rank, rigor of coursework, test scores (SAT/ACT)Not directly considered
Financial NeedNot consideredDetermined by FAFSA and other financial documents
Extracurricular ActivitiesConsidered (clubs, sports, community service, etc.)Not directly considered
Test ScoresSAT, ACT, PSAT (for specific scholarships like National Merit)Not directly considered
Essays and RecommendationsOften requiredMay be required for scholarship applications
Artistic or Athletic TalentConsidered for scholarships in specific fieldsNot directly considered
Special InterestsScholarships for specific majors or underrepresented fieldsNot directly considered
Automatic ConsiderationSome schools automatically consider applicants based on their applicationSome schools may automatically consider based on financial need

On What Basis Should Scholarship be Awarded to Students?

Scholarships can be awarded based on various criteria, including academic merit, diversity, athletic skill, and financial need. It is a way of financial aid to encourage students to engage more to continue higher education in different fields. It is another way of pushing the economy for the country’s future.

Merit-based scholarships are awarded mainly based on a student’s merits, such as academics, test scores, and extracurricular activities. The student’s financial situation is independent of the selected qualified applicants for merit-based scholarship requirements. These scholarships help cover the cost of college and are offered by colleges, universities, companies, organizations, and foundations.

In the USA or other developed countries, there are some institutions which offer automatic scholarships based on SAT/ACT scores and GPA. For example, Alabama State University offers the Presidential Academic Scholarship, a full-ride scholarship, to students with a 3.76 GPA and 26 ACT or 1240 SAT scores.

In addition to academic merit, some scholarships are awarded based on diversity, inclusion, and athletic performance. On the other hand, need-based scholarships are awarded based on the student’s financial situation. If those recipients cannot qualify for the requirements of merit-based scholarships, they sometimes move for need-based scholarships. They require the results of a FAFSA and are often issued directly to the student.

Overall, scholarships are awarded based on criteria that reflect the values and goals of the awarding institution or organization. Merit-based scholarships, in particular, recognize and reward students for their academic and extracurricular achievements, regardless of their financial need.

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Hi, this is Debashish Biswas. I am a professional BTech Civil Engineer, but since 2020, I have been doing blogging, content writing, website development, SEO work, etc., as a full-time career choice. As I primarily work with computers, I have built my knowledge into it, such as coding, SEO Work, and other computer-related work. I recently joined one of the Schools as a Computer Vocational Teacher. My hobbies are reading books, magazines, and more. I am here to share my valuable knowledge in the education field. If you love my article, share it with your friends. You can also follow me on Twitter and Facebook. Thank You to all readers.

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