What are Need-Based Scholarships and Why Are They Important?

As the cost of a college education continues to rise, scholarships and grants are more important than ever before. However, navigating the complex landscape of federal grants and loans, institutional scholarships, work-study, and more presents a significant challenge for students, especially those facing serious resource challenges. Scholarship-granting organizations also face challenges in deciding how best to administrate their funds for maximum impact. Differentiating between need-based and merit-based scholarships is an important starting point for both groups. 

What Are Need-Based Scholarships?

As the name suggests, need-based scholarships are awarded based on a student’s ability to pay for college. While need-based aid is typically associated with federal grants like the Pell Grant, many universities, foundations, nonprofits, and businesses also offer need-based scholarships. While the Free Application for Student Financial Aid (FAFSA) is used to determine eligibility for federal aid, many colleges and organizations use the College Board’s CSS Profile application in addition to the FAFSA when assessing need. 

Some need-based scholarships require that recipients have a GPA above a certain threshold or belong to a particular category, such as art students, science majors, or underrepresented minorities. However, unlike merit-based scholarships, need-based scholarships also have financial criteria and generally are not open to students with families over a certain income level.

What Are Merit-Based Scholarships?

Unlike need-based scholarships, merit-based scholarships do not consider a student’s financial situation. Instead, they are awarded to a student based on a particular achievement, often in academics, sports, or extracurriculars. Many schools award scholarships to student-athletes or students who graduate high school with a certain GPA. Additionally, schools and organizations offer merit scholarships for students who show high potential in specific academic areas or have demonstrated exceptional commitment to activities like the arts or volunteerism.

Since these scholarships are awarded based on performance, they often require a student to maintain a high GPA or remain an active member of their sport or activity to continue receiving funding. 

What Are the Benefits of Need-Based Scholarships vs. Merit-Based Scholarships?

Need-based scholarships carry several significant benefits compared to merit-based scholarships. They:

1. Are more likely to impact a student’s ability to attend college

Since merit-based scholarships do not consider a student’s financial situation, they are often awarded to students whose families could pay for a college education themselves. Need-based scholarships are more likely to be the difference between attending college and being unable to afford it. 

2. Are more likely to be awarded equitably

Students who grow up in poverty may lack opportunities presented to their wealthier peers, which can impact their eligibility for merit-based scholarships. For example, a student whose parents cannot afford private sports coaching and travel to away games may be less likely to receive an athletic scholarship. Similarly, students who attend under-resourced schools or have unstable home environments may not perform as well academically because they lack essential support. Need-based aid, therefore, is more likely to promote equity. 

3. Are more responsive to a student’s circumstances

Changing life circumstances can have a major impact on a students’ performance both academically and in their extracurriculars. Since continued funding from merit-based scholarships often depends on outcomes, they can become a significant source of stress for students facing unexpected challenges.

Examples of Need-Based Scholarships

In addition to federal and state grants, many colleges and universities offer their own need-based scholarships, typically listed on their financial aid websites. However, a number of groups and organizations also offer scholarships. These include:

1. Isaac Yunhu Lee Memorial Arts Scholarship - $10,000 scholarship open to low-income students planning to attend or currently attending art school.
2. Horatio Alger National Scholarship - $25,000 scholarship open to students whose families have an adjusted gross income of $55,000 a year or less.
3. The Gates Scholarship - Full funding after financial aid for low-income minority students with an outstanding academic record and strong leadership skills
4. Greenhouse Scholars Fund - Provides need-based funding to students from Colorado, Georgia, Illinois, New York, or North Carolina with family incomes under $70,000 a year who have GPAs of 3.5 and above.
5. Charleston Family Trust Scholarship - $3,000 scholarship open to Black students with unmet financial need who demonstrate an interest in serving their community. 

Numerous additional need-based scholarships are available to students based on their hometown, state, or affiliations. 

Tips for Starting a Need-Based Scholarship

Organizations looking to fund a need-based scholarship should be careful to design their eligibility and applications for equity and sustainability. Key considerations include:

1. Is the scholarship a one-time or ongoing award? 

Organizations should first consider whether they plan to disburse funds on a one-time basis (for example, to students affected by a disaster), or whether the scholarship will be awarded each year. If the latter, funders must ensure enough money is endowed to ensure the award’s longevity. 

2. What eligibility requirements will be used?

Scholarship funders should consider how they will assess financial need (often, using the FAFSA is a good start). In addition, they should decide whether additional criteria, such as minority status, GPA, or a history of community service will be considered and whether the scholarship will be limited to students from a specific geographical area.

3. What will the application process be? 

In addition to high school transcripts and FAFSA information, many scholarships require that students write an application essay or provide information about extracurricular activities. Organizations should consider making the process as simple as is reasonably possible to keep the barrier to entry low.