College funding can be confusing. Learn the difference between merit aid and need-based aid, how FAFSA and institutional aid fit into the picture, and why the right funding strategy depends on your family and the colleges you're considering.

If you're trying to figure out how your family will pay for college, you've probably encountered terms like merit aid, need-based aid, FAFSA, CSS Profile, and institutional aid.

But what do they actually mean—and which types of funding should your family be pursuing?

This is an important question because college funding is not one-size-fits-all.

The Two Major Types of College Funding

There are two broad categories of funding families should understand: merit aid and need-based aid.

Merit Aid

Merit aid is generally awarded based on a student's qualifications according to the criteria established by a particular college or university.

Academic achievement is one common basis for merit scholarships, but merit-based awards can also recognize talents such as:

• Sports
• Music
• Theater
• Other special talents or accomplishments

Importantly, every college establishes its own criteria for merit aid. What qualifies a student for a scholarship at one school may not do the same at another.

Need-Based Aid

Need-based aid is determined based on a family's financial circumstances - what a family can be reasonably expected to afford - and can come from several different sources.

These include:

Federal and state financial aid: Students generally need to complete the FAFSA to be considered for federal aid, and states may also use FAFSA information when determining eligibility for state programs.

Institutional aid: Colleges and universities can provide their own financial aid, particularly private colleges and universities. Depending on the institution, to be considered, families may complete the CSS Profile or another financial aid form in addition to FAFSA.

Why College Funding Gets Complicated

This is where many families get confused.

There isn't simply one application, one type of scholarship, or one formula that determines how a family will pay for college.

The funding strategy can also differ depending on the types of colleges a student is considering.

For example, families applying primarily to public colleges may be looking at a combination of merit scholarships and federal and state financial aid.

Families applying to private colleges may have access to federal and state aid as well as institutional aid, potentially including merit scholarships.

And this doesn't even address outside scholarships.

What About Families With Higher Incomes?

One common misconception is that families earning a relatively high income should automatically assume that financial aid is off the table.

That's not necessarily the case.

Eligibility and the amount and type of aid available depend on a number of factors, including the college, the student's circumstances, the family's financial situation, and the type of aid being considered.

That's why it is important to understand the funding landscape rather than making assumptions based on income alone.

There Is No One-Size-Fits-All Funding Strategy

This is one of the most important things I want families to understand.

Your college admission strategy and your college funding strategy need to work together.

The right approach depends on the student, the family, the colleges being considered, and the types of funding for which the student may be competitive or eligible.

This is one of the principles behind CFF College Fully Funded®.

We use a structured framework to help students build a strong college application and develop a funding strategy that takes their individual circumstances into account.

Watch: How College Funding Actually Works

I recently discussed this topic during my Friday Live, where I break down the college funding landscape and explain the differences between merit aid, need-based aid, federal and state aid, institutional aid, and more.

Watch the video:

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If you have questions about college funding or college admissions, leave them in the video's comments section. Your question may become the topic of a future Live!

Join Me Live

I now go LIVE on Fridays at 4:00 PM ET to answer questions and provide guidance about college admissions and funding.

If you'd like specialized guidance throughout the college application and funding process, learn more about CFF College Fully Funded® and our upcoming cohort:

To college fully funded,

Dr. Faith Okpotor Founder and CFF Head Coach National Center for Higher Education Access Award-winning academic and tenured professor

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