Unfortunately, yes, sometimes the way aid is calculated at some schools, this happens. A parent playing with the NPC with one of the schools noticed the categories on one school. But....that doesn't mean that the school itself actually operates that way. It could have just calibrated the NPC that way.
With most awards, the amounts are slowly phased out so that a couple dollar increase over the threshhold only means a few dollars difference in aid amounts.
There are some schools that define merit within need that way, in that a student with $1 of need qualifes for merit awards that are only given to those kids with demonstrated financial need. Some of that aid is not given dollar to dollar towards need, but given to to those kids who make it into this "need" pool that the school most wants. So somoene could get an award greater than need by just qualifying for a bit of aid.