Since you may be unfamiliar with the terminology used in that post:
UN = unmet need
SL = student loan (federal direct loan)
SW = student work expectation or work study
SC = student contribution = SL + SW
IG = institutional grants (i.e. grants from the college)
PC = parent contribution expectation
Colleges commonly award need-based financial aid using this kind of procedure:
- Calculate PC (or EFC). This may be by the FAFSA method, but is commonly by the college's own method (sometimes using supplemental forms like CSS Profile) for colleges with better financial aid.
- "Need" is LP (list price cost of attendance) - PC.
- Award some combination of IG (free money) + SL (federal direct loan up to $5,500) + SW (or work study, typically up to $3,000 to $5,000) up to the amount of "need".
- If IG + SL + SW < "need", then UN (unmet need) = "need" - (IG + SL + SW).
- "Net price" = LP - IG = UN + SL + SW + PC.
- There are some adjustments to the above if the student receives government need-based grants (Pell grant or state grants that can be used at the college).
Basically, college policies that allow merit scholarships to replace more UN, SL, SW, and PC before IG are more favorable to the student. However, it appears uncommon to allow merit scholarships to replace PC before IG, although replacing UN, SL, and SW before IG seems reasonably common.