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How Free Financial Aid Works

Merit-based and Other Grants

Merit-based grants resemble scholarships in that they require potential students to meet certain academic criteria. In fact, merit-based grants and scholarships are often so similar that the terms are used interchangeably, but there are differences. Unlike scholarships, for instance, merit-based grants are typically only rewarded by either federal and state governments or individual educational institutions.

Many such grants only require that students meet a certain set of requirements to qualify for aid. For instance, Georgia offers state residents a merit-based grant, known as the HOPE Grant, that covers students' tuition for public, in-state universities. To receive the grant, students must maintain a 3.0 grade point average (GPA) throughout high school, meaning that there is no set limit to the number of students who can receive the grant as long as they meet the criteria. The federal Academic Competitiveness Grant (ACG) works the same way, rewarding recent high school graduates who have completed a rigorous secondary-school program. Scholarships, on the other hand, are often limited in number and awarded to only the strongest applicants available. As with scholarships and need-based grants, completing a FAFSA is often a key component of the merit-based grant application process. For the previously mentioned HOPE Grant, for instance, both a FAFSA and an additional application are required.

In addition to merit-based grants, some federal grants are available specifically to students pursuing certain disciplines or careers. For instance, the conveniently named Teacher Education Assistance for College and Higher Education (TEACH) Grant is awarded to students who commit to teaching in low-income schools for a minimum of four years after graduation. The National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) is another example of a federal grant meant to encourage study in specific disciplines like engineering, science, technology and mathematics, among others. If you pursue a grant like TEACH or SMART, make sure to follow the grant requirements or risk losing the benefits. For instance, TEACH grant recipients who fail to teach the required four years out of college have their grant money converted into loans that then need to be paid back.