It’s generally understood that there are two types of financial aid: need-based aid and merit aid. Need-based aid is relatively straightforward. Your family submits financial documents (mostly income tax forms) so your Expected Family Contribution, how much you and your family might be expected to pay, can be determined. The difference between the price of a college and your EFC is considered need. Need-based aid, loans that have to be repaid and/or grants that don’t have to be repaid, is awarded to help you cover that need.

Merit aid, on the other hand, isn’t based on financial need. Merit aid—scholarships and grants—is what colleges offer to students trying to entice them to choose their school over other schools. It’s a tool universities use to make sure they get enough students to enroll and to get the student they really want.

(There is a lot of overlap between need-based and merit aid. If a college is really interested in a student, they may find a way to reduce their EFC and therefore get more need-based aid. Also, being able to meet full need and not gap a student on aid is definitely a way to entice students. But let’s ignore the overlap today and focus on pure merit aid.)

What’s less generally understood is that there is a wide variety of merit aid. To get an idea of the spectrum of merit aid, let’s look at two examples from my home in Houston.

When you look at the scholarship page on the University of Houston’s website, you get a lot of information. There are so many different scholarships, both funded by the university and outside sources, that they have a special navigation tool to help you search through all of them. Each scholarship has a name, a description, and instructions for how to apply. You can spend a lot of time looking through the scholarships and see exactly what you may be eligible for. It’s overwhelming at first, but it’s transparent.

For comparison, have a look at the Rice University merit scholarships page.

All admitted freshman applicants are automatically considered for merit-based scholarships so that no separate application forms or interviews are necessary. The Office of Admission notifies scholarship winners at the time of admission to the university.

That’s it. There aren’t individual scholarships you can apply for, nor are there descriptions or requirements. It’s the scholarship version of “don’t call us, we’ll call you.”

These are two extremes. On one end is U of H, which is basically a list of individual scholarships that require extra applications on your part. On the other end is Rice, where merit aid is not separately applied for, but is just part of your overall application. One is limited, but transparent. One is open-ended, but opaque.

Merit aid at most colleges is somewhere in between. There are named and defined scholarships for which you can apply, but there are also “merit aid” tuition discounts that just…appear. It helps to remember that while need-based aid is all about you and your particular circumstances, merit aid is all about the school and the funds they have to try to entice students to apply and enroll. Some schools have limited funds to hand out merit aid, and some schools have tons.

These two extreme examples remind us of several key ideas when it comes to merit aid:

Not all merit aid is the same. There’s the specified and limited kind like you see on the University of Houston website, and then there’s the mysterious kind you see on the Rice website. When I talk to students, they’re usually thinking of the UH kind. They’re talking about scholarships for which they can apply. When I talk to college admission professionals, they’re usually thinking of the Rice kind. They’re talking about the tuition discounts that are offered out of the blue by algorithmic calculations the college makes to decide how much to offer you to entice you to enroll. When you’re thinking about applying to a college, spend time on their financial aid sites to see where they fall in their approach. You don’t want to miss an opportunity to apply for a scholarship, nor do you want to assume that there’s no merit aid if there is. But you should know what the school offers.

Merit aid is often out of your control. It’s all about them enticing you for their enrollment needs, not necessarily you earning something through a competition. There are all sorts of reasons a university may want to entice you, and you often don’t know what it may be. Maybe the college is trying to improve the stats of their incoming class and therefore their ranking, so they want to lure students with higher test scores and higher GPAs. Maybe they’re trying to improve diversity, so they want to lure students from different parts of the country or with different experiences than those who typically applied in the past. Maybe they’re trying to fill up a new major they offer or revitalize a declining program, so they want to lure bright students with a particular course of study in mind. Maybe they want to lure wealthy students who can pay cash, so they flatter them by giving them a merit-based scholarship and a small discount to get them to come and pay most of the tuition. So think of merit aid as “acceptance plus.” You’ve been accepted to the college, plus they want to give you a discount in order to really lure you in. Some schools give very few applicants this kind of bonus, and some schools give most—or even all—their applicants some kind of bonus.

Generally speaking, expect more transparency from public institutions. It’s not surprising that University of Houston has the navigable list of specific scholarships. Public institutions, which are subsidized by tax dollars and overseen by public boards, tend to have more regulations in place for transparency. Private colleges are more likely to use the un-announced, un-applied-for type of merit aid. To be clear, I’m not saying that public universities are more or less likely to give you merit aid, just more likely to tell you upfront what it might be, and to make you apply for it separately.

Generally speaking, expect less merit aid the more selective an institution is. Remember that merit aid is meant to entice you to apply to their college, and to enroll if accepted. So it makes sense that the lower the acceptance rate of a college, the less merit aid you might expect. They already have enough applications; they don’t need to entice more. That’s how a private university with a low acceptance rate like Rice can be so nonchalant about merit aid. And it’s how the schools with the very lowest acceptance rates, like Harvard and Stanford, don’t give merit aid at all.

With each school you apply to, know what their merit aid landscape looks like and what you need to do. If you’re considering applying to a school, make sure you check out their website to learn more about their merit aid program. Is it more like the one at the University of Houston, or more like the one at Rice University? If you want to know even more details about aid, look up the Common Data Set for the college. Just do a web search for “[name of school] common data set”. Most colleges have this information available, and you can scroll through the spreadsheet to find all kinds of financial information. It takes some searching, but it’s there.

You can’t assume you will get merit aid. Whichever type of merit aid you’re thinking of, there’s no guarantee you’ll get any. If you meet certain qualifications to get automatic merit aid at a particular college (being a National Merit finalist, for example, or having really high standardized test scores), that doesn’t necessarily mean you’ll get that automatic aid from other schools. Each sets their own policies, and—as we’ve seen—not all of them even tell you what those policies are.

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2. Read these related posts:

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