What Is Need-Based Financial Aid for College?

Need-based financial aid for college is awarded based on your family’s financial situation. Examples include grants, scholarships, work-study and student loans.

Here’s what you need to know about need-based financial aid, how to qualify for it and what has to be repaid.

» MORE: NerdWallet's financial aid guide

Types of need-based financial aid

Need-based financial aid is awarded by the federal government, state governments and colleges. There are a few key types of need-based aid:

• Pell Grants. Get up to $7,395 per academic year with this grant from the federal government. 

• Work-study. Wages from an on-campus job that go toward tuition and other college expenses. 

• Subsidized federal student loans. Loans from the government that don’t accrue interest while you’re in school. Interest starts building after a six-month grace period. 

• Tuition waivers and discounts. Your school may offer a tuition waiver or discount if you have financial need. 

States and schools may also provide need-based aid in the form of scholarships and other grants.

» MORE: What is financial aid?

How to qualify for need-based financial aid

You must submit the Free Application for Federal Student Aid (FAFSA) ahead of each school year to qualify for any need-based aid. The information you include on the FAFSA is used to calculate your Student Aid Index, which will factor into your awards.

There’s no specific income cutoff to qualify for most types of need-based aid, since the Student Aid Index is determined by a number of other factors, like family size and assets. Use the Education Department’s Student Aid Estimator tool for an estimate of your federal financial aid package.

Some colleges may also require a separate financial aid form called the CSS Profile to determine eligibility for nonfederal financial aid. The CSS Profile, unlike the FAFSA, costs money to submit. It also gathers more detailed financial information than the FAFSA.

» MORE: CSS Profile vs. FAFSA: How are they different?

Just because you qualify for need-based aid doesn’t mean you’ll receive it. Colleges don't have to meet 100% of each student’s financial need. Some awards and institutional scholarships are often awarded on a first-come, first-served basis.

To increase the likelihood of getting need-based aid, submit your financial aid applications and college applications as early as possible. Each school has its own financial aid award letter that will arrive with your college acceptance letters. These will detail the types and amounts of financial aid you’ve been awarded.

Do you have to repay need-based aid?

Grants and scholarships aren't paid back.

With work-study, you earn money through campus-based jobs, so that money isn't repaid either.

Subsidized loans, like all loans, must be repaid. All federal student loans have a six-month grace period after you graduate, which means your first bill won't arrive until six months after you've left school.

» MORE: How to get a student loan

Need-based aid vs. merit-based aid

Unlike need-based aid, which considers your family’s income and assets, merit-based aid is typically based on abilities, talent or achievements related to things like academics, athletics, music or civic participation.

Merit-based aid includes scholarships, grants and tuition discounts.

Find out what type of merit-based aid your school offers by contacting the financial aid office. To maximize your chances of getting scholarship money, apply early and cast a wide net.

Take all free aid first, regardless of whether it’s need-based or merit-based. That means federal, state and school grants and scholarships, followed by federal work-study. If you need to take on loans, exhaust the subsidized direct loans offered to you before accepting unsubsidized direct loans.