Merit Badges can be bound to keys and then by pressing the key Raz can do various activities, some of which are required to finish levels. Some Merit Badges are acquired by ranking up via finding PSI Challenge Markers in the world or making some using the machine. Rank up enough and Raz will get the gift of Pyrokinesis, Telekinesis, and Invisibility. Other Merit Badges are given to him by a staff members once he completes the courses in their mind. These are Basic Braining given by Coach Oleander, Marksmanship given by Sasha Nein, and Levitation given by Milla Vodello. The others Raz obtains while in the minds of Linda, Boyd and Edgar, as a way to get past certain obstacles. These are Shield given by the freedom fighters, Clairvoyance given by Boyd, and Confusion given by Dingo.
There are 8 total badges to collect:
|Marksmanship||Shoots a psychic beam at enemies and uses ammo|
|Levitation||Summons a ball of psychic energy that Razputin rides on, and lets him jump higher and float|
|Telekinesis||Lets Raz move certain objects or enemies|
|Pyrokinesis||Lets Raz set certain objects and enemies on fire|
|Invisibility||Turns Raz invisible for a small amount of time|
|Shield||Protects Raz from attacks and can bounce back some attacks|
|Confusion||Makes enemies turn on their allies|
|Clairvoyance||Lets Raz see through the minds of others|
In addition to the main badges, there are a few badges that don't correspond to abilities but instead provide other benefits:
|Basic Braining||Allows access to the entire camp|
|Oarsman||Allows the use of canoes on the lake|
|Mental Magnet||Attracts mental items|
|Psychonaut||Awarded to cadets that have earned the rank of Psychonaut|
Merit Badges are now in a diamond shape on the HUD. Marksmanship, Levitation, Pyrokinesis, Invisibility, and another one that is blurred out was shown in the video "Psychonauts 2 Update #8 - Psychic Powers!" In the video it appears that Razputin's abilities all drain from a single psychic power pool shown on the HUD in the video. It also appears that it is possible to bind up to four abilities to keys.
- During the cutscene upon obtaining a merit badge in Psychonauts, the badge will always be signed "Ford Cruller," even though only five badges are actually obtained from Ford Cruller.