Merit Versus Need-Based Financial Student Aid

Written by: Reyna Gobel
Updated: 3/31/21

Deep Dive: Are need-blind schools the best financial option for your student?

If you’ve been listening to the news lately, you’ve heard Presidential Candidate Michael Bloomberg tout the need for need-blind schools, colleges that don’t consider financial need in admissions.

What does need-blind mean? Does it affect financial aid and is it better or worse than schools that aren’t need-blind but offer need-based and / or merit-based financial aid?

Here’s what you need to know:

What a need-blind college is

Need-blind is a term that generally refers to admissions that doesn’t consider whether a student can afford the school. For instance, let’s say there are two students that have the exact same GPA and test scores. One student’s parents can pay for the school completely, while the other would need financial aid or have to borrow 90 percent of the cost of attendance. A non need-blind school would admit the student who can afford the school outright out of the fear the other student might drop out because of affordability. A need-blind school would either admit both students or look for an academic, talent, or community service tie breaker. Another school that isn’t need-blind might just admit the student who has more money.

If need-blind admissions affects financial aid

Not necessarily. However, many need-blind schools find a way to fill the financial gap for students. For instance, Stanford University has a policy to meet the financial need of all undergraduate students without any use of student loans. Other schools such Harvard University and Bloomberg’s alma mater, John Hopkins University, have similar policies. However, it depends on your family’s economic situation. Families are expected to chip in a certain amount based on their ability to pay for college that involves a lot more than just looking at family income.

Thus, never assume your income is too high to qualify for financial aid. A number of factors can affect how income and assets are evaluated.

Check out the section of this guide on how full-need calculations differ to learn more about how your schools may review your family finances when awarding financial aid.

How meeting full need works

When a school says they’ll meet full need, they mean they’ll meet the calculated financial need minus the expected family contribution that is calculated either by FAFSA or the CSS Profile, a method hundreds of private schools use to figure out how much your family can afford to contribute to your education. Some schools say they’ll meet a percentage of need before you have to turn towards student loans.

For example, let’s say you used the CSS Profile and the school you chose calculated your expected family contribution at $15,000 per year. The full cost of attendance for everything from tuition to fees to room and board is $40,000. The remaining balance is $25,000. A school that meets full need without loans would give you $25,000 towards your education. A school that meets 90 percent of need would offer $22,500.

How full-need calculations can differ

Each CSS Profile school can use the same information differently to determine your EFC. For example, one school may consider home equity while another one may not. How divorced family’s income is considered differs among by schools as well. Schools may or not give credit for private school tuition for younger siblings as well in determining expected family contributions. The FAFSA has standard ways of calculating EFC, but often CSS schools have more money to give and allow more expenses to be deducted from income.

While you can never find out the exact amount of financial aid you’ll receive from online calculators, you can guestimate the EFC on the CSS Profile on the College Board’s Big Future website, says Robert Falcon, CEO of College Funding Solutions.

Then, you can conduct a college search based on a variety of factors or search for a particular school you are interested in on, a website that collects data on colleges from test score averages to finances, Falcon says. The resulting college data will include the average percent of need met at each school shown. With your EFC guestimate, you can subtract your EFC from the cost of attendance. Then, you take the resulted number and multiply it by the average percent of financial need met.

How to state financial need that isn’t represented by the EFC

One of the best secrets in financial aid is the special circumstances form. The form is available from financial aid offices and allows you to report things like medical expenses and income drops that weren’t reported on the FAFSA or CSS Profile forms. Make sure you can document your specific reason. Even an expected, future medical expense for yourself or a family member can be documented with a doctor’s note explaining the situation. Pay stubs or bank statements can likely back up income reductions. Hospital bills can back up existing or previous medical expenses.

Special circumstance forms are even more important in schools like need-blind schools that don’t offer merit-based aid. Your finances will essentially completely dictate your financial aid offer.

What happens with the amount your family is expected to pay

The remaining amount is expected to be paid by the family, either from their own money, employment not offered on the financial aid award letter itself, and / or student loans.

Whether you have already received a financial offer from universities or guestimating what might be awarded based on information or another online tool, look at this remaining out carefully to see if it’s affordable to you.

When evaluating affordability, review federal student loan limits and payments using the Repayment Estimator calculator, your savings in and out of a 529 college savings plan you’d like to contribute, and what you’d reasonably expect a student to bring in from work while attending college.

When merit-aid at a non need-blind school might be better

When you get into a school like Harvard, you won’t get merit aid, but you will get financial aid based on need. However, sometimes your family doesn’t necessarily qualify based on financial aid, but you still need financial help. For these students Falcon recommends choosing a different school that may be just one step down that offers merit aid based on academic achievement, talents, and / or community involvement.

Note: Private scholarships, scholarships awarded from the community for merit. Often, a student who gets into a school at the level of Johns Hopkins or Harvard could qualify for quite a few outside scholarships. Talk to your high school counselor for help finding quality scholarships. I personally was awarded a community service scholarship I was able to use at any school I chose to attend.

Double check how need is met for international students

Financial aid offices often have a different set of rules for international students than they do for domestic students. Thus, one of the first steps for students from outside of the United States is to contact school financial aid offices to find out policies for awarding scholarships and grants to international students. Financial need may or not be met. However, there may also be scholarships or grants for international students.

International students should also contact the international students office on campus and contacting the Education USA advising center, centers to learn about getting a US education in countries around the world.

When net price calculators might be helpful.

To estimate financial possibilities, Falcon doesn’t recommend net price calculators because they may be based on older numbers or could be limited in the type of data reported. For instance, the calculator should ask grades and test score questions in addition to income and place of residence. Grades and test scores can be factors in merit aid.

Depending on the school and whether they use the CSS profile, place of residence, number of siblings, private school costs, home equity values, etc. can impact whether or not you get need-based financial aid.

Thus, before using a net price calculator, call the school’s financial aid office to get details on what year the data is from and how other factors may affect financial aid awards. The best part about doing this could be finding out about additional ways to get scholarships you wouldn’t have thought about.

7 Key Takeaways When It Comes To Merit Versus Need-Based Financial Student Aid

  • Need-blind is a term that refers to admissions not considering whether or not you can afford the school.
  • Most need-blind schools offer financial aid based on the amount of money remaining in the cost of attendance after deducting the amount the family is expected to contribute based on income. Merit aid, such as academic scholarships, are generally not awarded.
  • Net price calculators aren’t always the best indicators of what students will pay for college.
  • Use BigFuture’s EFC calculator to estimate Expected Family Contribution.
  • Look up colleges you’re considering on to see the average percentage of need met.
  • To find need subtract the EFC from the total cost of attendance.
  • Some students whose family doesn’t qualify for financial aid based on need would be better off if the student applied to another school that offers merit aid.