Preferential packaging is the practice of changing the type and amount of financial aid awarded to a student based on the desirability of the student relative to the applicant pool. This policy is common among private colleges but not by public institutions.
Since most colleges have a finite amount of aid available, they have to decide how much and in what form to distribute it. Financial aid can come in the form of gift aid such as scholarships or as self-help aid such as loans and work-study. Gift aid is preferential to money that must be repaid, therefore, the composition of a financial aid award indicates the preference a university has for the student.
Muhlenberg College is one of the few colleges to explain the use of preferential packaging in financial aid.
Students who are admitted but in the bottom half of the admitted student group will probably receive a package that is built from self-help up. That is, the college will award the student’s entitlements and work first, and then review how much grant money it will take to reach the student’s full need. The college may or may not decide to meet the student’s need in full.
Students least preferred will probably find a significant “gap” between their actual financial need recognized by the college and the amount of financial aid awarded.
While the preference doesn’t have to be academic qualifications, a survey by the National Association for College Admission Counseling found “Colleges that practice differential packaging offered preferential aid packages most frequently based on academic merit (93 percent), particular talents (50 percent), and income level (39 percent).” You can see an example of preferential packaging of three students at one university at Beware of Preferential Packaging.