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A college degree is often necessary for learning essential skills and gainful employment, but it’s also pricey. American college students pay an average of $35,331 per year for tuition, books, supplies and living expenses.
Many students seek financial aid to offset costs — including need-based grants and scholarships — but not everyone qualifies. Instead, they can apply for merit-based scholarships regardless of their family’s ability to pay for school.
What makes a scholarship merit-based, and how do you apply? Here’s everything you need to know about merit scholarship opportunities.
What Is a Merit-Based Scholarship?
Need-based and merit-based scholarships are essentially free money toward a degree. However, these awards are given for high academic achievement and interests rather than demonstrated financial need.
Undergraduate and graduate students can apply for merit-based scholarships, which may cover their college education’s total or partial cost.
You can search for merit-based scholarships through a college or university. Some schools may even use them as a recruitment tool to bring in exceptional athletes or scholars for a specific degree program. For example, colleges may offer merit-based awards to women majoring in science, technology, engineering and mathematics (STEM) — a field with only a 27% female demographic, compared to 73% men.
You may also find merit-based scholarships through professional or academic organizations related to your intended major, from private companies or through the National Merit Scholarship Corporation (NMSC).
The NMSC is fiercely competitive, documenting 1,538,910 high school student applicants for the 2020 awards, according to its 2019-20 Annual Report. Entry requirements for NMSC scholarships rely heavily on Preliminary SAT/National Merit Scholarship Qualifying Test (PSAT/NMSQT) scores, so high school students should register to take their exams during their junior year.
How to Apply for a Merit-Based Scholarship
There aren’t any set rules for applying for merit scholarships. Students must review the issuing organization’s eligibility criteria and specifications beforehand, like all college-related applications and financial aid forms.
Qualifications are typically uncompromising, though. If eligibility demands a minimum grade point average (GPA) of 3.8 and you currently have a 3.7, you won’t be considered.
Of course, many offer awards annually. If you don’t qualify right away, take the time to improve your GPA for the following year. An academic adviser can help you determine whether you meet all the application requirements.
Some merit-based scholarships offer a certain award amount for one semester or academic school year. Others may pay for only specific college expenses such as tuition, room and board, or books. It may also be worth it to look for renewable merit scholarships to cover the entirety of your educational fees.
Common merit scholarship materials you may be asked to submit include:
- Most recent high school or college transcripts
- Current GPA
- Proof of financial need
- SAT, ACT or other test scores
- Resume detailing your academic achievements, awards, leadership roles, work experience and volunteer activities
- A portfolio, project or personal essay
- Letters of recommendation
For example, a graphic design or art student might submit their best work samples. Social science majors may need to demonstrate how they’ve impacted or improved their communities through volunteering.
Once your application is submitted, the issuing organization will let you know when it intends to announce the winners.
Are Merit-Based Scholarships Income Tax-Free?
Merit-based scholarships are tax-exempt in most situations. However, you or your parents may need to file in other instances.
Degree-seeking students using a merit-based award for tuition, books and supplies are not required to file with the Internal Revenue Service (IRS). However, your scholarship money may be taxable if you apply it toward your room and board or general living expenses.
The IRS lists additional provisions to ensure tax filers don’t take advantage of Education Tax Benefits. This is also known as “double-dipping” or including expenses paid for by scholarships, grants, fellowships, employer tuition assistance or other nontaxable funds.
Students and their parents should review the IRS website to determine if their merit scholarship is considered tax-free.
Merit-Based Scholarships Make College More Affordable
Students who apply for merit-based scholarships can ease the financial burden of paying for college and help reduce paying back substantial loans later on. You may not win every award you apply for, but you can only boost your chances by throwing your name in the ring.