Need-based aid is awarded purely based on the results of your FAFSA and Profile applications. The amount of financial need to pay for education demonstrated by your family correlates with the amount of need-based aid you receive from a given school. Merit-based aid refers to anything you receive on the basis of an application process. This includes scholarships awarded on the basis of your normal application to the school, special scholarships you have to apply for, and oustide scholarships that require applications.