Advertiser Disclosure

Need-Based Scholarships & Grants

Home > Students & Debt > Scholarships & Grants for College Students > Need-Based Scholarships & Grants

Need-based scholarships and grants are exactly what their title indicates: money for students with a financial need.

More than 85% of college students receive some form of financial aid so there is no question that there is a lot of need at colleges and universities.

The question is: How do colleges determine who has a need? And is there enough money available to satisfy that need?

The answer to the first question is the same at most schools. Determining need is a simple math equation: Cost of Attendance minus the Expected Family Contribution equals the Student Need. In acronym formula, that would be: COA – EFC = SN.

The answer to the second question is no, there is never enough money. Federal grant money peaked in 2010-11, but has since declined by 34%. The 2010-11 funding was attributed to poor economic times that created higher need. As the economy and family budgets recovered, fewer students are qualifying for need-based grants like the Pell Grant. Meanwhile state and institutional grants have continued to increase, picking up the slack.

The $125.9 billion in federal, state, institutional, private and employer grants handed out for the 2015-16 school year, was the most ever. That’s a $1.9 billion increase over one year and an $42.4 billion increase since 2008-09.

Need-based grants – most coming from the federal government — accounted for $47.1 billion in 2013-2014, a $2.4 billion increase over one year and $30 billion more than was handed out eight years earlier.

There was $28.1 billion in Pell Grants distributed in 2016, and all of it is awarded on a need basis. Eligibility for Pell Grants is based only on the income and assets of a student’s family. Test scores, academic standing or unique talents (academic, athletic, music, etc.) are not a factor in need-based awards.

Need-based considerations are a factor in merit-based awards, or scholarships. The terms grant and scholarship are used interchangeably, but there is a difference. Grants typically are need-based. Scholarships typically are merit-based with a needs element sometimes included.

Both grants and scholarship are free money. Unlike loans, you won’t have to pay them back, with a few exceptions. You will need to repay a grant if you withdraw from the program the grant was given for or if you fail to meet the requirements of a service obligation like the TEACH Grant. Your aid can be reduced if you switch your enrollment status from a full-time to a part-time student or if you receive outside scholarships or grants, which would reduce your need for federal student aid.

Determining Student Financial Needs

The process for determining needs-based grants begins with students filling out the Free Application for Federal Student Aid (FAFSA) form. FAFSA asks questions about family income and assets. FAFSA then uses a formula to determine the EFC (Expected Family Contribution) and sends that information to whatever colleges the student is interested in attending.

Colleges are in charge of determining the COA (cost of attendance). Things like tuition, fees, housing, books, meals, supplies, transportation and miscellaneous materials go into the COA, which varies from school to school. College Board estimates the average cost of an in-state public university (tuition, fees, room and board) to be $24,610 for 2016-17.

A college’s financial aid office then does the math – COA minus EFC — and comes up with the amount a student needs. Students with the most need, get the most grant money.

It is important to get the FAFSA filled out as early in the calendar year as possible. Grants in some states are determined on a first-come, first-served basis. It pays to file early, even if you have to estimate the answer to some questions. Your answers can be updated later.

Pell Grants Top Need-Based Award

The Pell Grant is, by far, the most popular need-based grant with 7.6 million students receiving a total of $28.2 billion in 2016. Pell Grants are 100% need-based. The maximum award for 2016-2017 was $5,815. It will go up to $5,920 in 2017-2018.

The parent’s income is a good starting point to determine whether you will receive a Pell Grant. If your parents combined gross income is under $50,000, you probably qualify for a Pell Grant. If it is under $20,000, you automatically qualify for a Pell Grant.

The money for Pell Grants comes from the Federal government, which uses its own formula to determine how much to give each college. Most students receive less than the maximum funding.

State Government Scholarships & Grants for College

States also award financial aid including grants, tuition waivers, loans and work-study programs. More than 92% of state-awarded financial aid were grants and 70% of those were need based, although they may take into consideration race or performance as well. States spending on need-based grants rose to $7.8 billion in 2015, a 76% hike over the last decade.

Most states will determine your eligibility using your FAFSA, but some states have their own application. Your school’s financial aid office has information about state programs and should be able to direct you to the separate application, if needed.

Other Need Based Grants

There are three more government programs that offer need-based grants as well as many need-based grants available from corporations or organizations.

Students who receive Pell Grants, but have exceptional financial needs, also may qualify for the Federal Supplemental Educational Opportunity Grant (FSEOG). This program awards students between $100 and $4,000 a year, depending on their EFC and the college they expect to attend.

The government also awards grants of $750 to $1,300 to freshmen and sophomores from the Academic Competitiveness Grant. Juniors and seniors majoring in math and science could qualify for up to $4,000 a year in the National Science and Mathematics Access to Retail Talent (SMART) Grant.

There are several grants offered by businesses and organizations that are aimed at need-based students, but most have conditions attached.

For example, the Families of Freedom Scholarship Fund has handed out $115.9 million in need-based aid from 2002-2015, but you had to be a child, spouse or domestic partner of someone killed in the 9-11 tragedy.

The Jack Kent Cooke Foundation offers awards of up to $40,000 a year to need-based, high achieving students. The students must have limited family income, but show exceptional academic ability and achievement. They must have a 3.5 GPA or higher; a score of 1200 or above on the SAT; or a 26 and above on the ACT.

The Buick Achievers Scholarship Program offers a renewable $25,000 a year grant to 50 students a year who will study science, technology, engineering and math.

In other words, the old excuse that “I can’t afford to go to college,” isn’t valid anymore. There is money available for most everyone, regardless of your income level.

About The Author

Max Fay

Max Fay has been writing about personal finance for for the past five years. His expertise is in student loans, credit cards and mortgages. Max inherited a genetic predisposition to being tight with his money and free with financial advice. He was published in every major newspaper in Florida while working his way through Florida State University. He can be reached at [email protected].


  1. NASSGAP (2016) 46th Annual Survey Report on State-Sponsored Student Financial Aid. Retrieved from
  2. College Board (2016) Trends in College Pricing. Retrieved from
  3. College Board (2016) Trends in Student Aid. Retrieved from
  4. U.S. Department of Education (2016) 2016 Annual Report. Retrieved from