You may be wondering what the difference is between these two kinds of financial aid.
Need-based aid is granted strictly based on your and your family's financial need. It has nothing to do with your grades or your extracurriculars or your test scores.
If you apply for need-based financial aid, a college might cover your entire college costs (a "full ride"), or some part of your costs.
Need-based aid can include money paid directly from the school (effectively a discount on your tuition), but also a variety of loan packages or work-study opportunities (part-time jobs that allow you to put the money you earn towards your school expenses).
You have to apply for need-based aid and to do that you'll submit a financial aid application where you and your family have to disclose a bunch of financial information. It's a hassle but can make the difference between college or no college for a lot of people, so it's worth it.
At a minimum, if you are a US citizen or permanent resident, you should expect to fill out the FAFSA (Free Application for Federal Student Aid) to be eligible for federal need-based aid. File the FAFSA as soon as possible; it opens up on October 1. Most colleges give out need-based aid on a first-come, first-served basis until they have used up their need-based financial aid budget. For now, the browser version of the FAFSA is much easier to use than the mobile app version.
After filling out the FAFSA, you’ll get an Estimated Family Contribution, or EFC. The EFC is the amount your family is expected to pay toward college. The difference between the cost of tuition and your EFC is what the college considers your financial need. You can get a forecast by using FAFSA4caster to estimate what need-based federal financial aid you might be eligible for.
Individual U.S. states also have their own financial aid applications, so make sure to check out the options your state offers (example: MASSGrant in Massachusetts).
Some colleges will also require the CSS Profile application in addition to the FAFSA.
There's a BIG DIFFERENCE between money a colleges gives you outright (which you DO NOT have to pay back) and loans (which you DO have to pay back). So when you receive your financial aid award package, read the details carefully.
Merit-based aid or merit-based scholarships have nothing to do with your financial need. Instead, colleges give out those funds to applicants they want to recruit to their school. It's a way for them to attract what they consider top talent or people with special characteristics.
At some colleges, all applicants are considered for merit-based aid. At others, you have to apply separately for merit-based scholarships, and there might be additional application requirements like extra essays, portfolio submissions, or extra recommendations. You do not have to pay back merit-based aid/scholarships.
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